Banking for a Multinational Essay - 275 Words

Banking for a Multinational (Essay Sample) Content: Name:Tutor:Course:Date of Submission:Banking for a MultinationalFluctuation of foreign exchange rates is a factor that Acme as a multinational ought to consider before choosing which bank to operate with. If the company is planning to invest in a country whose currency is inconsistent and weak, it would be best if the company banks with an American bank that provides international services (Howard 11).Acme as a multinational organization also ought to consider taxation based on the banking plan it chooses to subject to. Banking with local banks while operating abroad may attract a situation where there is double taxation (Howard 14). This is a situation where the company's earnings are taxed both in the country of operation and in the country of origin where they bank hence increasing the cost of capital (Mignolet 32). However, Acme should consider investing in a country that has favorable tax policies.Tax competition is a condition that somewhat arises to save the si tuation. In this case, local and foreign governments compete in and the effect is the reduction of taxes hence favoring the business operation conditions (Kumar). Considering this, it follows by intuition that the American government would be more flexible and accommodative than, say, a third world country in terms of tax reduction. Depending on the tax policies of various countries, it would be best to bank with an American bank that has multinational operations.Most American banks such as Bank of America, HSBC, and Citibank provide ready and easy access to funds in multinational operations. Citibank for instance provides services such as direct contact with foreign clients (Citibank). Basing argument on lending ability, it would be best if Acme banks with such banks rather than a bank in the foreign country where there would be inadequacy of funding hence increasing the cost of capital as the company would seek funds from another bank where it is not a client hence attracting more interests.The cost of capital for a multinational company may increase due to various factors. For the case of cost of debt, the company's cost of capital would increase when the interests charged for the loans from financial institutions are high (Kumar); this possibly the case in foreign countries. The risks posed by mult...