For example, a trust and investment company is headquartered in the Bahamas, but its business activities are to absorb US dollar funds from European residents or other non-US residents, and then invest these funds in European residents or non-US residents. The company is engaged in offshore financial activities. Bahamas is an offshore financial center.
Strictly speaking, offshore finance is also financing that is not regulated by the domestic banking law of the authorities, regardless of whether these activities are carried out in China or abroad. For example, the international banking facility (IBF) in the United States and the business activities in the offshore financial market in Tokyo belong to offshore finance.
Offshore banks, also known as offshore units, are banks or other financial organizations located in offshore financial centers. Its business is limited to contacts with other overseas banking units or overseas institutions, and it is not allowed to conduct business in the domestic market.
Offshore financial market is also called offshore financial market. Take the form of isolation from the domestic financial market, so that non-residents can carry out financing and capital utilization without being affected by the taxation, foreign exchange control and domestic financial regulations of the host country, and can conduct free transactions.
The development of offshore financial business began in the 1960s. At that time, in order to avoid domestic restrictions on bank development and financing, some multinational banks began to operate deposits in currencies other than local currencies in specific international financial centers. In the 1970s, offshore deposits denominated in dollars increased sharply. In 1980s, with the establishment of Tokyo International Banking Facility and offshore financial market, offshore financial business also included local currency. The difference is that this kind of monetary deposit is limited to non-residents.
The main reasons for the rapid development of offshore financial business are: offshore banks do not need to hold reserves, and their operating costs are lower than those of domestic banks; Offshore banks are not bound by the interest rate ceiling, that is, the interest rate paid to depositors can be higher than that paid by banks to domestic depositors, and they can pay interest on demand deposits; Offshore finance enjoys tax incentives.
Offshore financial centers have developed rapidly since 1970s, extending from Europe such as London, Paris, Frankfurt, Zurich and Luxembourg to Singapore, Panama, Bahamas and Nassau. Since 1980s, new offshore financial centers have appeared in new york and Tokyo, and by 1990s, offshore financial centers have spread all over the world.
Types According to the nature, there are roughly three types of offshore financial centers:
London type belongs to the "naturally formed" market. The offshore market in London began in the late 1950s. It is engaged in both banking and securities business. Non-residents do not need to pay the statutory reserve for their deposits, but they are allowed to operate various foreign exchange and financial businesses freely. In the past, due to foreign exchange control and other restrictions, this market business was completely separated from domestic business. However, since the abolition of foreign exchange control in June 1979 and 10, the management of foreign exchange financial business has been treated equally with domestic financial business, and the meaning of "offshore" itself has changed. In fact, the offshore market in London has become an "internal and external integration" financial market, with both domestic and offshore business. Since 1972 abolished foreign exchange control, Hong Kong has gradually evolved into a major London-style offshore market in the Asia-Pacific region.
The biggest feature of new york model is "artificial creation" and "internal and external separation", and there is no securities transaction. 198 1 1 In February, 2008, after the Federal Reserve agreed to establish an international banking facility (also known as an international banking facility), the offshore financial business in New York State developed rapidly. Its main trading object is non-residents. Financing can only absorb deposits from foreign residents, foreign banks and companies, but it is not limited to the establishment of international banking facilities by foreign banks. Any American deposit institution, "Aichi Law" company and branches of foreign banks in the United States can apply for establishment. Deposits are not restricted by the reserve ratio and deposit ratio in the domestic banking regulations of the United States. Loans must be used outside the United States. "Loans" can be denominated in any currency, including US dollars. Since the US dollar is the most important international currency, and the main transaction currency in the offshore market is also the euro, new york's offshore market uses its own currency as the main transaction currency. The offshore market in Tokyo opened by 1986 also belongs to this type.
The offshore financial center of the Bahamas with bookkeeping but no substantive business, also called "tax evasion" offshore market, is actually a "tax evasion port". Because the financial business in some countries or regions can avoid bank profit tax and business tax, and the cost and expenses of opening branches in these places are much lower than those in London, offshore financial markets have been opened in these places. Nassau, Cayman Islands and Bahrain all belong to this category.
The development of offshore financial business and the rapid expansion of offshore financial centers have promoted the development of international banks and the growth of international credit and international financing. However, because offshore deposits are not restricted by domestic laws and regulations, it has certain influence on the money supply, bank control and the implementation of monetary policy in the country where the deposits are located.
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From "Ghosts" Answer