Unit 12

Question 1

Activity of Financial institutions

Answer 1

indirect intermediation in the credit → Obtain credit from their clients through “passive operations” and grants credits to their clients through “active operations”

Question 2

Banking agreement

Answer 2

Any agreement establishsing, amending, regulating or cancelling a legal relationship between a banking entity and a client whose aim is a banking transaction

Question 3

legal elements of banking contracts

Answer 3

• They are considered an act of commerce (commercial contracts)
  
  • Paid financial service: accrual of interest and/or commission for service provided
  • Usual recourse to general clauses: adhesion contract
  • Essentially atypical: no specific legislation in place
  • They include clauses imposed by law (pre-contractual information, transparency)
  • Case law orientation: In favor of demanding special diligence from credit institutions in the fulfillment of their contractual obligations

Question 4

Bank Loans

Answer 4

-long term
-(lender) gives the (borrower) a certain amount of money on condition that it pays back the same amount plus agreed interest

Question 5

Bilateral agreement

Answer 5

• Bank has the obligation to lend the money and the client must reimburse the amount plus interest
• Bank loses property over the money and receives a credit right

Question 6

Types pursuant of the guarantee loans

Answer 6

• Simple loan
  
  • With mortgage (assets material) (collateral)
  • With personal warantee (personal guarantee)

Question 7

Credits (Line of credit)

Answer 7

-opening of a credit policy, is an agreement by which a credit institution (lender) undertakes to make a certain amount of money available to a client (borrower) for a certain period of time.
-financing tool to cover short- term needs

Question 8

Important note on lines of credit

Answer 8

Opening a line of credit does not consist of a loan and does not transfer the ownership of the financing funds. The credit policy is characterised by making the funds available to the client

Question 9

Obligations credit institution (lines of credit)

Answer 9

-Initial phase: create credit availability for the customer by making available up to a certain maximum amount of funds
-Executive phase: The financial institution is also obliged to comply with the drawdown orders transmitted by the customer

Question 10

Obligations client (lines of credit)

Answer 10

-Initial phase: Pay the opening commission
-Executive phase: Refund the balance that results from charges at the time of its cancellation; satisfy accrued interest

Question 11

Discount

Answer 11

A financing instrument whose purpose is to advance the amount a client has pending for collection and for which the client has a bill of exchange with a specific maturity date

Question 12

Obligations (Discounting entity)

Answer 12

-Financial institution first provides the advance payment.
-If the third-party debtor doesn’t pay, the client must return the uncollected amount.
-“Subject to payment” ensures the bank keeps funds unless the bill is successfully collected by the legitimate holder.

Question 13

Obligations (Client)(Disount)

Answer 13

-Transfer credit to the bank for collection from a third party.
-Pay upfront interest on the advanced amount, deducted from the credit’s nominal value.

Question 14

Letter of credit

Answer 14

-due to risk of misinformation honesty…
-The letter of credit involves financial institutions, ensuring legal and economic security by verifying documents that confirm the successful transaction.

Question 15

Triangular Relationship:/letter of Credit)

Answer 15

-The buyer (originator) forms an agreement with its bank (issuer) to open a letter of credit.
-This creates a triangular relationship involving the buyer, the bank, and the seller.

Question 16

Payment Assurance: (letter of credit)

Answer 16

• The issuing bank pledges to make the payment for the L/C if the seller submits the specified documents.
• These documents, outlined in the L/C, are typically agreed upon in the initial sales contract.

Question 17

deposit

Answer 17

-bank holds customer funds, providing reimbursement with interest.
-Deposits fuel banking transactions
-Types include Deposit at sight “to the call” (withdrawable anytime) and term deposits (held for agreed periods).
-Deposit guarantee fund covers up to €100,000 per client and bank.