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Could you benefit from banking globally?

Bank
Highlights
  • Some global banks with U.S. offices offer large ATM networks.
  • FDIC insurance covers the U.S. accounts of global banks, making them safe.
  • Global banks rarely offer exceptional service unless you're a VIP.

By banking globally, affluent frequent travelers have more options than they may think.

Some global banks with U.S. offices offer large ATM networks and easier access to foreign markets. European banks headquartered in the U.K., France and Germany house the five largest banks in the world. (View a gallery of those banks at the bottom of this article.)

"Banking is more concentrated there," says Jonathan MacDonald, lead retail banking practice analyst at Datamonitor. "Lots of European banks have more global presence, a throwback to colonial times."

Anyone who travels a lot to a foreign country or owns a second home there can benefit from banking with global banks with strong foreign ties. And aside from Citibank, most other banks in the U.S. are much less global, adds MacDonald. For example, Bank of America has no branches or ATMs of its own in Europe, Asia or China.

By contrast, U.K.-based HSBC has a global presence in 85 countries, including the U.S. You can usually find a local HSBC branch that can assist you, adds MacDonald. For example, HSBC is the biggest international bank in China with 100 branches, says Al Natale, premier relationship manager at a subsidiary HSBC Bank USA.

Also, some U.S. subsidiaries are owned by big foreign banks. Bank of the West is owned by France-based BNP Paribas, one of the world's largest banks. Its private banking clients can set up accounts with BNP Paribas and then use its large footprint, says Bank of the West, member of BNP Paribas, spokeswoman Susan Forman. BNP Paribas has over 5,000 ATMs in France, versus 825 for Citibank in all of Europe.

FDIC insurance covers the U.S. accounts of global banks, making them safe. And most countries have their own versions of deposit insurance guaranteeing accounts, adds MacDonald. "The limit depends on the country in question," he says.

Given their benefits, global banks offer convenient ways to bank overseas. Here are the pros and cons.

Pros

Access to lots of ATMs. For example, HSBC has 2,700 ATMs in Asia and 5,000 ATMs in Europe. "There's an ease in doing business across borders," says MacDonald. HSBC also offers an Internet tool that tracks your finances worldwide and moves money between countries. Besides its big ATM network in France, BNP Paribas also has nearly 1,500 ATMs in Italy.

Easier account opening in other countries. U.S. banking clients of some global banks can easily open accounts in other countries through its country branches. Global banks make the process easier, says Robert Vokes, managing director at Novantas LLC, which provides management consultant and information services to financial institutions.

For example, Vokes opened an account in Canada through HSBC. "It was an easy process," says Vokes. It's just a matter of filling out paperwork at an HSBC office in the U.S. and takes three days to complete, according to HSBC.

Otherwise travelers find the process daunting at smaller foreign banks outside the U.S. "You'll need a letter from your banker or a respected individual," says Vokes. You'll also need documents, such as your passport and proof of income.

Cons

Disclosing foreign bank accounts. You'll need to disclose a foreign bank account on your tax return, says Bert Ely, a banking consultant in Alexandria, Va. "And, it draws attention to your return and yourself."

Foreign currency exchange risks. Using foreign currency can be a drawback, due to fluctuations, so it's best not to search out higher-yield products in other countries. "You're better off using EverBank's currency CDs," says Vokes. "Otherwise it's too much work."

Of course, global banks also rarely offer exceptional service unless you're a VIP. "You're put through to call centers," says MacDonald.

MacDonald's solution: having two accounts. One is local and the other with a big global institution so that when you're traveling you can "take advantage of low costs and larger ATM networks," he says.

What are the 5 largest banks in the world?
Sometimes it pays to bank globally, and it just so happens that the five largest banks are all headquartered outside the U.S. Could it benefit you to bank globally? Click on a picture to learn more. 

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