An empirical study of international correspondent banking in Australia

Author

Soon-Lim Chan, University of Wollongong

Year

2001

Degree Name

Doctor of Philosophy

Department

Department of Marketing

Recommended Citation

Chan, Soon-Lim, An empirical study of international correspondent banking in Australia, Doctor of Philosophy thesis, Department of Marketing, University of Wollongong, 2001. https://ro.uow.edu.au/theses/1476

Abstract

Correspondent banking (corbanking) is basically bank to bank business. With the changing banking environment, corbanking services enter a new phase, from the traditional way of reciprocal products and services received, to the modem way of using corbanking as a strategic tool. Corbanks can offer their clients solutions that cross individual product boundaries and span multiple currencies and geography. Corbanking is therefore identified as a good altemative for boosting profit and share price targets of banks. Corbanking has been neglected in the banking literaUire and many research problems and questions have not been tackled and remain unresolved. This thesis aims at prof ling intemational corbanking practices, operations and management in Australia, leading to answer two questions: why banks choose to enter into corbanking relationships and how they select individual correspondents. Substantial background information derived from chapters of corbanking developments, Australian banking and payment systems, literature reviews and methodology opened the way for original work on a case study of the Commonwealth Bank of Australia (CBA) and an empirical survey of the intemational corbanking industry. Eighteen determinant factors of intemational corbanking relationships and nineteen selection criteria of international correspondents were identified from literature reviews and an exploratory survey. Empirical surveys on forty three corbanking function units of all banking groups in Australia and further categorizing of the ten banking groups were carried out by questionnaires and single or group interviews. The corbanking prof les of CBA and banks in Australia were thereby determined. The results of the survey were used in regression modelling of determinant factors and selection criteria. Simple models of one or two explanatory variables determinant factors and number of correspondents for selection criteria were also concluded for each bank group of the ten banking groups. The most signifícant factor explaining corbanking relationships for all banks was bank size. In addition for Australian banks a significant explanatory factor was "location not physically present." The most signifîcant criterion for all banks to select correspondents was formal banking presence and less important criteria were operational capabilities and reliability of supply for Australian banks and locations for foreign banks.