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Merchant banking was indeed quite similar to hawala, and came out of very similar needs. Correspondent banking is an outgrowth of merchant banking, and essentia
by patio11 5y ago
Merchant banking was indeed quite similar to hawala, and came out of very similar needs. Correspondent banking is an outgrowth of merchant banking, and essentially allows trust chains to expand.
SWIFT is a messaging system which those trust chains use to communicate.
(Simplified because on phone, etc.)
- fmajid 5y agoThe messaging system is orthogonal to the trust relationship between banks in different countries. In the old days, this trust came from family bonds, e.g. the various arms of the Fuggers or the Rothschilds. Nowadays, it's... more complicated. The US government spent billions on making foreign banks like BNP Paribas whole on contracts they had with AIG because it could not bail Goldman Sachs without also bailing them out, at least not without destroying the basis of trust in the international financial system. That's the part where compliance, risk management and AML-KYC intervenes, along with government employees installed directly inside the key banks to monitor it.
- htrp 5y agoswift is literally the TCP/IP of global finance