Unit 12 Flashcards
Define Credit institutions
Authorized business entitites whose activity consists of receiving deposits and granting loans on their own account
Describe the activity of the Credit Institutions
They obtain credit from their clients through “liabilities Operations”; and grant credits to their clients through “Asset Operations”
Define Banking Contracts
Agreements at creating, modifying, regulating or extinguishing a banking legal relationship, understanding as such that which is included in the activity of indirect credit intermediation
Describe the Asset Transactions VS Liability Transactions
Passive banking operations:
(term deposits, at sight deposits,…)
customers make contributions of funds to credit institutions
Obtaining some sort of remuneration (REM. 1)
Active Banking operations:
(loans, credit, discount…)
with the funds received from passive banking operations the bank grants financing to its customers whom in exchange will pay a Remunation (REM. 2) to the bank
REM. 2 > REM. 1 –> Bank Intermediaion margin (profit)
Define and state the Obligations of a Bank Current Account Contract
DEFINITION:
A contract for the provision of a cash service, by virtue of which the banking entity undertakes to execute customer orders through payments and charges to the account, in exchange for commission
OBLIGATIONS:
-Bank assumes the obligation of material and direcr management of the account
-Bank periodically informs the client about the progress of the account
-The client must make the timely provision of funds to the bank to meet the current account management fees
Define the bank savings account contract
-The bank is limited to receiving funds
-It does not carry out the cash service analogous to the current account
Define the Money Bank Deposit
Agreement by which the credit institution receives a sum of money from its clients, o which it becomes the owner, and which it undertakes to repay in full in the same currency and in the agreed manner increased, where appropriate, for the interests
Define At Sight Deposit (liability banking contracts)
The depositor deposits money in the entity, being obliged to return it at any time requested, including without prior notice; ususally linked to a bank current account contract
Define Term Bank Deposit (liability banking contracts)
teh depositor delivers an amount of maoney to a credut institutions during a period of determined time. After this period, the entity returns it together with the remuneration agreed
What are the obligations and the economic functions of Liability banking contracts?
OBLIGATIONS (only for credit institutions)
-Refund the same amount of money that was provided to it
-To pay the agreed interest
ECONOMIC FUNCTION:
-Money Deposit Contracts:
provide immediate liquidity to the depositors
-Bank Current Account Contract:
Facilitates payment services for efficient transactions and treasury management.
Define Asset Banking contracts and state the different types
Those operations that correspond to the contracts that provide financing to the banking entity’s customers
(The determination of the financing modality is not subject to legal regulations, but to economic and financial reasonableness based on the needs to be met)
Types:
- Bank loan agreement
- Credit opening agreement (credit policy)
-Bank discount contracts
-Letter of credit
Describe Loan agreement, state its requirements, its obligations and its nature and economic function
DESCRIPTION
through the loan contracts, one of the parties delivers to the other money (or something else fungible), with the condition of repaying the sum
REQUIREMENTS (commercial Loan):
-one of the contracting partie is an entrepreneur
-the things borrowed are used for acts of commerce
NATURE:
-regime of business obligations
-consensual: it is perfected with the agreement of the amount, terms and interests
OBLIGATIONS:
-LENDER: delivery of amount at the agreed time
-BORROWER: payment of interest and repayment at the time and in the agreed manner
ECONOMIC FUNCTION:
finance non-current assets (investment goods) financial amortization in coherence with the economic amortization of the investment good acquired
Define the Credit opening Agreement, its nature, obligations
DEFINITION:
agreement where a credit institution makes available to a client a certain capital for a certain period of time, in form of a maximum limit which will have to be returned by the client in accordance with the agreed terms, applying an interest rate on the amounts actually disposed of.
NOT A LOAN
(it is no translational of the domain of the limit amount granted)
NATURE:
-commercial
-consensual
-atypical
-as a general rule B2B
OBLIGATIONS:
-LENDER
Initial Phase:
make a maximum amount of money available to the client
Executive Phase:
attend to the client’s orders for the withdrawal of funds
-BORROWER:
Initial Phase:
-pay the opening commissions
Executive Phase:
-refund the balance that results from changes at the time of its cancellation; satisfy accrued interests
ECONOMIC FUNCTION:
finance temporary cash needs as a consequence of the evolution of working capital adjusting the available credit to fluctuations of the collection and payment frequencies
Describe Bank Discount Contracts, the nature, obligations and economic function
DEFINITION:
contract by which a credit institution advances to a client the amount of unexprired pecuniary credit that has against others with a deduction of interest
ECONOMIC FUNCTION:
financing working capital, allowing immediate liquidity of deferred sales to customers without having to wait for credits to mature
NATURE:
-commercial
-consensual
-B2B (as a general rule)
OBLIGATIONS:
- Discounting Entity (Bank): Deliver or make available to the client the amount of the credits discounted with the corresponding deduction of the agreed interest
(duty of diligence: try to collect, when due, the credit discounted)
-Client: transmit the ownership of the credit hold against the third party.
Restitution of the advance amount if the third party does not pay whe the transmitted credit expires
Define Letter of Credit and state its economic Fuction
A payment mandate that the importer issues thorugh its financial entity to pay the exported the amount of the operation
Economic Function:
reduce commercial risks in the traffic of goods between different places and facilitate financing
