The document summarizes major developments in international financial management from 1944 to the present. It discusses the creation of the World Bank and IMF in 1944 and 1945 to provide loans and promote economic cooperation among member countries. It also covers the emergence of eurocurrency markets in the 1960s, where banks accepted deposits and made loans in foreign currencies outside their home country. Additionally, it outlines the formation of the OECD in 1961 and unprecedented changes in financial markets in the 1980s, including the integration of markets and liberalization of exchange controls. Major developments like the emergence of innovative financial instruments and flexible exchange rates are also summarized.

1. INTERNATIONAL FINANCIAL
MANAGEMENT
RECENT CHANGES
BY
V S SARMA ,PROF, MBA
VIDYA JYOTHI INSTITUTE OF TECHNOLOGY
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2. INTERNATIONAL FINANCIAL MANAGEMENT
1944: Creation of World bank:
 Created in July 1944 consequent on Breton
wood agreement
 Consists of 188 members (countries)
 Extends assistance to developing countries
 make loans to countries with current account
problems
 Extends long term capital to members with
BOP Problems
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3. INTERNATIONAL FINANCIAL MANAGEMENT
 1945: Creation of International Monetary
Fund (IMF)
 Functioning from 1-3-1947
 Has 182 members
 formed consequent on the Breton wood agreement
 Objective is to promote economic and Financial cooperation
among its members
 Promotes word trade
 sources of fund: from member countries as per established quotas
(special drawing Rights - SDRs)
 Offers medium term loans to its members
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4. INTERNATIONAL FINANCIAL MANAGEMENT
1960: Emergence of Euro markets (currency)
 Euro currency: Any freely convertible currency
deposited in a bank out side its(currency) origin
 Any currency can be called Eurocurrency if the
above condition satisfied(not necessarily euro
dollar)
 Euro currency market: consists of any bank which
accepts deposits and make loans in foreign
currencies
 Euro banks: Any bank accepting foreign deposits
 Euro bond: sold out side country in whose currency
it is denominated
Parallel money market
Dominant euro currency is US $
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5. INTERNATIONAL FINANCIAL MANAGEMENT
1960: Emergence of Euro markets (currency)
 Euro currency: Any freely convertible currency
deposited in a bank out side its(currency) origin
 Any currency can be called Eurocurrency if the
above condition satisfied(not necessarily euro
dollar)
 Euro currency market: consists of any bank which
accepts deposits and make loans in foreign
currencies
 Euro banks: Any bank accepting foreign deposits
 Euro bond: sold out side country in whose currency
it is denominated
Parallel money market
Dominant euro currency is US $
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6. INTERNATIONAL FINANCIAL MANAGEMENT
1961: Formation of Organization for Economic
co-operation and development (OECD)
 organization of 34 countries – USA, UK, Japan, Italy
 Founded in 30-9-1961
 objective is to stimulate economic progress and world
trade
 Head quarters : Paris, France
 1980: Unprecedented changes in Financial
Markets: e.g.
 Integration of Financial Markets
 Cross Boarder restrictions – reduced
 Financial System grows rapidly
 Significant role Of Banks increased
Increase in NRI borrowers to USA, Europe and Japan6

7. INTERNATIONAL FINANCIAL MANAGEMENT
1980: Unprecedented changes in Financial
Markets: ( Contd..)
 raise of Non resident Investment banks
 Banks gave assistance to (a) stock market (b)
National bonds in host countries
 Liberalization – lead to competition
 Raising exchange controls in France, UK and
Japan
 Opening of domestic markets to have an access
to foreign Financial Markets for both
 foreign borrowers
Domestic borrowers
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8. INTERNATIONAL FINANCIAL MANAGEMENT
1980 to 1991 Unprecedented changes in
Financial Markets: ( Contd..)
 1991 : Emergence of Economic Monetary Union
(EMU)
 in fInnovation financial instruments to reduce
FE fluctuations :
 swaps
Futures
Options
 Emergence of Flexible exchange Rate System
/Managed flout
 Singapore, Honking -free access to financial
markets
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9. INTERNATIONAL FINANCIAL MANAGEMENT
Unprecedented changes in Financial Markets: ( Contd..)
 Banks provide Innovative sources to meet needs
of borrowers/ investors
 Many countries are facing deficit current
account
Debt trap : Highly indebted countries like:
 Argentina
Brazil
 locked up in debt trap
 currency crisis during 1998-99 without
defaulting external debt
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10. INTERNATIONAL FINANCIAL MANAGEMENT
 Volatility in capital flows – currency crisis in
many countries

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