International finance

International finance (국제금융/國際金融) means in general financing carried out cross the border between two or more financial institutions and/or government agencies.

International finance is concerned about the dynamics of the global financial system, international monetary systems, balance of payments, exchange rates, foreign direct investment, and how these topics relate to international trade. Sometimes referred to as multinational finance, international finance is additionally concerned with matters of international financial management. Investors and multinational corporations must assess and manage international risks such as political risk and exchange rate risk, including transaction exposure, economic exposure, and translation exposure.

Key words
foreign capital, foreign exchange, financial institutions, ISDA, loan, bond issue

History of International Finance in Korea
International finance has been carried out in Korea by the following four phases:

First Phase (1945-1960)
At first just after its liberation from the Japanese occupation in 1945, it was not international finance but grant from the United States. The U.S. relief goods and agricultural supluses pursuant to Public Law 480 helped Korean people survive the Korean War. But the U.S. aid was not sufficient to make Korean economy stand on its own feet.

Second Phase (1960-1988)
For the successful implementation of the series of economic development plans, the Korean government had to borrow foreign capital as far as it could. The foreing capital was invested to build import substitution industries such as steel mills and oil refineries. The Korea Development Bank (KDB) was one of the pipelines to induce the necessary foreign funds from the international financial institutions like the World Bank and the Asian Development Bank as well as commercial banks worldwide. Finally Korea graduated from the public loan program of the Asian Development Bank in 1988. It was excluded from the concessional loan recipients list of the World Bank in 1995.

Third Phase (1989-1997)
The Seoul Olympic Games in 1988 boosted Korean people to make a turnaround from a borrower to a lender with the increasing foreign exchange surpluses.

Fourth Phase (1998-present)
The Korean economy got through the so-called IMF Crisis and started again as a potential player in the international financial markets.

Legal Background
Most legal documents on international finance have been standardized by influential international financial market players. For instance, the International Swaps and Derivatives Association (ISDA) has established standard forms on swaps and other derivative transactions. The style and content of loan agreements are almost same. So such provisions as governing law, jurisdiction, service of process, notice, etc. are called as "Boilerplate clauses". Most of international financial transactions are governed by the Engish law or the New York State law on a contactual basis.

The borrowing of foreign funds and bond issues conducted by Korean banks and corporations is subject to the Foreign Exchange Transactions Act and the relevant regulations thereof.

Various Types of International Finance
Take an example of a K-Company doing business globally. K-Company may finance its global business by the following methods:
 * Borrowing an international loan or syndicated loan;
 * Issuing international bonds or foreign bonds;
 * Employing structured finance such as asset-backed securitization, asset-based lending and/or project finance, as the case may be fit for the project; and
 * Taking advantage of financial derivatives such as swaps, options and credit derivatives in the course of regular financing.