Overseas banking Featured

5:55am EDT October 29, 2006
Receiving and depositing a check from a customer across town is a simple process. However, as a firm grows and its business moves offshore, banking becomes more complicated.

“Any good local bank can provide any service that a New York bank can provide,” says Christina Moinette, head of international services for First Merit Bank. “We provide personalized, one-on-one service. We service the small customer as well as the large customer. We have the ability to facilitate any need the customer may have.”

Smart Business asked Moinette what kinds of international services a business owner should expect a local bank to provide to the business.

What are the typical services an international banker provides?
A bank’s International Services Department will provide the following products: letters of credit, including those for standby, export and import; escrow; international collections, both bank-to-bank incoming and bank-to-bank outgoing; international check collections and encashment; international bank notes, both buying and selling; international wire transfers, both incoming and outgoing; as well as forward contracts. All of this is in addition to the usual currency exchange services.

How do letters of credit work?
When you purchase goods oversees, the seller may request you to provide a commercial letter of credit. The letter of credit provides the seller with assurance that payment will be made against compliance with terms of the letter of credit. The issuing bank substitutes its creditworthiness for that of the buyer.

We issue the letter of credit to an advising bank in the seller’s country. The advising bank then forwards the letter of credit to the seller. The seller determines his compliance with the letter of credit, ships the goods, prepares proper documentation and then presents them to the advising bank. The advising bank then forwards documentation to your bank. If documents comply with the terms of the letter of credit, payment is made to the seller immediately (sight draft) or at a future date (time draft). One of the big benefits of a letter of credit is that your bank substitutes its credit for that of the buyer. Letters of credit are readily accepted by overseas sellers and they assure payment to the seller.

How about letters of credit received here in the States?
Many banks can advise or confirm a letter of credit being received by you. After you prepare your documentation and present it to the bank, it will verify your documents against the terms of the letter of credit and forward them to the issuing bank for payment. Your account is usually credited when payment is received.

Should I expect my banker to provide language skills, as well?
Most good international banking operations can provide an interpreter or have documents translated for the customer if required. However, it is standard that most contracts involving U.S. companies, both originating in the United States and those originating abroad, be written in English. So in many cases, translation of a contract is a moot point on this side of the exchange.

How does EFT (electronic funds transfer) work?
A bank provides international funds transfer services for expediting overseas payment requirements. Funds may be transferred by draft or electronically (EFT). Drafts are drawn on foreign banks in U.S. dollars or a variety of foreign currencies. Wire transfers may also be made in U.S. dollars or a variety of foreign currencies to foreign banks in favor of parties abroad. Payments are made in a variety of foreign currencies.

This may provide you advantages when purchasing items overseas in the seller’s currency. The ability to issue travelers checks and banknotes in foreign currencies is also a benefit, as is the option to order and accept delivery of necessary foreign currency.

Couldn’t a big bank in New York do a better job with international work?
Any good local bank can provide any service that a New York bank can provide: personalized, one-on-one service.

In addition, some local banks with international services usually offer an automated letter of credit and international collection system that customers can access via the Web. Those are real conveniences for the executive who travels a great deal.

If I do a lot of business, say in England or France, should I have a banker in London or Paris, too?
Maybe in years past that was a consideration. However, it is not necessary in today’s environment. Local banks have accounts available in various currencies to meet the needs of the customer globally.

CHRISTINA MOINETTE is head of international services for FirstMerit Bank. Located in Akron, she brings over 20 years of international banking experience to customers throughout Northeast Ohio. Reach her at (330) 384-7178 or christina.moinette@firstmerit.com.