Explore BrainMass
Share

Acquisition of a Bank in a Developing Nation: risks, issues, limits, profitability

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

This short paper should describe the issues and risks involved with a financial institution acquiring a bank in an emerging market. It discusses the limits on foreign investors, expropriation risk, default risk and profitability issues.

© BrainMass Inc. brainmass.com October 24, 2018, 6:21 pm ad1c9bdddf
https://brainmass.com/business/mergers-and-acquisitions/38750

Solution Preview

Acquisition of a Bank in a Developing Nation

Acquiring a bank in a developing nation is a risky proposition for any business and there are many questions which must be addressed before committing to such a move. Firstly, the investor must consider any limitations that will be placed upon a foreign operator in the country. Secondly, the investor must consider the risk of being expropriated by the government and take steps to guard against this. Also, the bank must consider the risk inherent in the operation, such as a high risk of defaulting on loans, and what institutional protection is offered in the country. Finally, as with any other business, the bank must consider its business model and the demand for its services in a country where per capita income is low in order to determine that there is potential to operate profitably.

Limitations on Foreign Operators:
Often, developing nations will impose limitations on foreign operators, particularly in the banking sector. There may be a limit on the number of foreign owned operators or a limit to the percentage of any bank which may be owned by a foreign business. Furthermore, ...

Solution Summary

In a 743 word solution, the response gives us a good set of explanations about the issues and risks of buying a bank in an emerging market.

$2.19
See Also This Related BrainMass Solution

You are the treasury department for a multinational firm and have been asked to raise $20 million.

SAMPLE QUESTION 1

You are the treasury department for a multinational firm and have been asked to raise $20 million. Discuss what options are available to raise this money and decide what financial instruments you will use. Which financial instruments will you use to raise the $20 million? What financial intermediaries will you use? What regulatory agencies will you need approvals from to raise the funds? What are the pros and cons of each choice? Have you considered the exchange rate risks?

SAMPLE QUESTION 2

What is meant by foreign exchange risk? What specific problems does foreign exchange present in an organization? How could an organization needing Euros in six months protect itself from currency fluctuations?

SAMPLE QUESTION 3

What is globalization? Why has globalization become such an important issue over the last ten years? How will globalization change financial management in the years ahead?

View Full Posting Details