金融专业英语课件-2

PartⅡFinancialInstitutions

andTheirOperationsChapter5CommercialBankingChapter6InvestmentBankingChapter7InsuranceChapter8SecuritiesChapter5CommercialBanking5.1IntermediaryServicesFunctionsperformedbycommercialbanksare:1) creationofmoneythroughlendingandinvestingactivities;2) holdingofthedeposits;3) provisionofamechanismforpaymentandtransferoffunds.IntermediaryservicesofcommercialbankscoverInternationalSettlement,TrustServices,LeaseandFactoring.5.1.1RelationshipbetweenBanksandCustomers1.Debtor-CreditorRelationshipItarisesoutofthefactthatthebankholdsmoneythatbelongstothecustomer.Themoneyhastoberepaidatsometime,andthereforethebankisthedebtor,whilethecustomeristhecreditor.Asforthebank’sintermediaryservices,itisnotreferringtothoselendingandborrowingactivities,i.e.,therelationshipbetweenabankeranditscustomersisnotdebtor-creditorone.Therelationshipbetweenabankeranditsclientasintermediaryservicesisaprincipal-agentone,i.e.thebankisactingasanagentforitsclient.2.Principal-AgentRelationshipAbank,whendealingwithitscustomerdirectly,hasadebtor-creditorrelationship.Butwhereathirdpartyisinvolvedtherelationshipbecomesoneofthatbetweenaprincipalandanagent.Agreement:oneparty(agent)agreestoactonbehalfoftheotherparty(principal).Agentshavetheauthoritytoperformlegalactsfortheprincipalwiththeagencyagreement.Principal’sobligations:1)compensatetheagentaccordingtotheagreement;2)reimbursetheagentforreasonableexpenses;3)indemnifytheagentagainstlossorliabilityfordutiesperformedonbehalfoftheprincipaland4)informtheagentofrisks.Agent’sobligations:1)actinthebestinterestoftheprincipalandwithcompleteloyalty;2)carryouttheinstructionoftheprincipalwithreasonablecareandskills;3)accounttotheprincipal;4)indemnifytheprincipalfordamageswrongfullycausedtotheprincipaland5)provideinformationtotheprincipal.5.1.2ItemsofIntermediaryServices1.SettlementSettlementisthestrikingofabalancebetweentwoormorepartieshavingdealingswithoneanother.Theevolutionofthesettlementgoesthroughthreestages:Cash-based，Paper-basedandElectronic-based.Also,NegotiableInstrumentssuchasBillsofExchange,ChequesandPromissoryNotesarewildlyusedasinstrumentsintheinternationalsettlement.Theyrepresentarighttopayment.Arightisapromiseandnotatangiblepieceofproperty.So,theyareclassifiedaschoosesinaction.2.TrustServicesIndividualsorcorporationsmaydesireareliableoutsideentitytoadministertheirassets.Banksoffertrustservicestomeetthislneed.TrustService:isafiduciaryrelationshipinwhichonepersonistrustedbytheholderofthelegaltitletoproperty,subjecttoanobligationtokeeporusethepropertyforthebenefitoftheholder.TherearethreepartiesinvolvingintheoperationofTrustService:a.thetrustor,b.thebeneficiary,c.thetrustee.3.LeaseItisacontractgrantingthepossessionoflands,tenements,buildings,office,machineryorotherchattelsforaspecifiedfixedperiod.Sincethepossessionanduseofthepropertyisconveyedbyownertotheuserinalease,thepropertyrevertstotheownerattheendoftheterm.4.FactoringFactoringisshort-termfinancingfromthenonrecoursesaleofaccountsreceivabletoathirdparty.5.2InternationalSettlement5.2.1RemittanceRemittancereferstothetransferoffundsfromonepartytoanotheramongdifferentcountriesthroughbanks.Attherequestofitscustomer,abanktransfersacertainsumofmoneytoitsoverseasbranchesorcorrespondentbanksandinstructsthemtopayanamedpersonorcorporationinthatcountry.1.MeansorInstrumentsofRemittanceTheremittancewillbedonebyseveralmeansorinstrumentssuchasmailtransfer,demanddraftandtelegraphictransfer.Theinstrumentsmentionedabovebeartheircharacteristics,whichwillbediscussedlater.2.MailTransfer(M/T)Amailtransferistotransferfundsbymeansofapaymentorderoramailadvice,orsometimesadebitadviceissuedbyaremittingbank,attherequestofaremitter.Eitherofapaymentorder,mailadviceordebitadvicemustbeauthenticatedwithtestedkeyortheauthorizedsignaturesoftheremittingbank.Itinstructsthepayingbanktopayacertainsumofmoneytothebeneficiary.Uponreceiptofthepaymentorder,thepayingbankverifiesthetestedkeyortheauthorizedsignature,notifiesthebeneficiary,paystohimandclaimsreimbursementfromtheremittingbank.Inpractice,theremittingbankcreditstheaccountforthepayingbankintheremittingbank.3.DemandDraft(D/D)Draftdemandisoftenusedwhenthecustomerwantstotransferthefundstohisbeneficiarybyhimself.Theremitterwillmakeawrittenrequestofissuancetotheremittingbank.Thentheremittingbankdebitstheremitter’saccount,issuesabankdraftandforwardsittotheremitterwhomaysendorcarryitabroadtothepayee.Uponreceiptofthedraft,thepayeecaneitherpresentitforpaymenttothedrawee’sbankorsellittohisownbankcreditinghisaccount.Thedrawee’sbankverifiesthesignature,paysthedraftandclaimsbacktheamountpaidinaccordancewithitsagencyarrangementwiththeremittingbank.4.TelegraphicTransfer(T/T)TelegraphictransferreferstoremittancebySwift.Itisexactlythesameasamailtransfer,exceptthatinstructionfromtheremittingbanktothepayingbankistransmittedbycable/telex/Swiftinsteadofbymail.Therefore,itisfaster,butmoreexpensivethanthemailtransfer.Itisoftenusedwhentheremittanceamountislargeandthetransferoffundsissubjecttoatimelimit.Thus90%remittanceisdonethroughT/T.5.2.2DocumentaryCollections1.ProceduresAdocumentarycollectionisanoperationinwhichabankcollectspaymentonbehalfoftheseller(theprincipal)bydeliveringdocumentstothebuyer.Documentarycollectionsareverysuitableincaseswheretheexporterisreluctanttosupplythegoodsonanopenaccountbasisbutdoesnotneedthedegreeofsecurityprovidedbyadocumentarycredit.Adocumentarycollectiongivesgreatersecuritythansettlementonopenaccount,becausetheimportercannottakepossessionofthegoodswithouteithermakingpaymentoracceptingabillofexchange.Thebanksconcernedareundernoobligationtopay.Inadocumentarycollectiontheexportercannotbesureatthetimeofdispatchofthegoodsthatthebuyerwillactuallypaythesumowed.Thisformofsettlementisthereforemostappropriateinthefollowingcases:iftheexporterhasnodoubtaboutthebuyer’swillingnessandabilitytopay;ifthepolitical,economicandlegalenvironmentintheimportingcountryisconsideredtobestable;ifthebuyer’scountryhasplacednorestrictionsonimports(e.g.exchangecontrols)orhasissuedallthenecessaryauthorizations.2.StagesofaDocumentaryCollectionThewholeprocess,extendingfromthefirstcontactbetweentheimporterandexportertothecompletionofthetransaction,caninvolvemanyseparatesteps.Basically,however,adocumentarycollectionhasthreestages:STAGE1EstablishingthetermsofcollectionTheexporterstipulatesthetermsofpaymentinhisofferoragreesthemwiththebuyerinthecontractofsale.STAGE2CollectionorderandtransmissionofdocumentsAfterthecontractofsalehasbeensigned,theexporterdispatchesthegoodsdirecttothebuyer.Atthesametime,heassemblesallthenecessarydocuments(invoice,billoflading,insurancecertificate,certificateoforigin,etc.)andsendsthemtohisownbank(theremittingbank)togetherwiththecollectionorder.Theremittingbankthensendsthedocuments,togetherwiththenecessaryinstructions,tothecollectingbank.STAGE3PresentationofdocumentsandsettlementThecollectingbankinformsthebuyerofthearrivalofthedocumentsandnotifieshimofthetermsoftheirrelease.Thebuyermakespayment,oracceptsofexchange,andinreturnreceivesthedocuments.Thecollectingbankthentransfersthecollectedamounttotheremittingbank,whichcreditsittotheexporter’saccount.3.ParticipantsThereareusuallyfourpartiestoadocumentarycollectionoperation:exporter(seller,principal)remittingbankcollectingbank;theterm‘collectingbank’isappliedtoanybank,whichisinvolvedintheexecutionofthecollectionorder,anditpresentsthedocumentstotheimporter.importer(buyer,drawee)4.EstablishingtheTermsofCollectionAnexporterhasbeeninvitedbyaprospectiveforeignbuyertosubmitanofferforthesupplyofgoods.A.Documentsagainstpayment(D/P)Thepresentingbankisauthorizedtoreleasethedocumentstothedraweeonlyagainstimmediatepayment.Ininternationalusage,‘immediate’means‘nolaterthanthearrivalofthegoods’.B.Documentsagainstacceptance(D/A)Thepresentingbankreleasesthedocumentstotheimporteragainsthisacceptanceofabillofexchange,whichisusuallypayable30-180daysaftersightoratafixedfuturedate.5.CollectionOrderWhenmakingoutthecollectionorder,specialattentionshouldbepaidtothefollowingpoints:Buyer’saddress,Typeofcollection,Documents,Nameandaddressofpresentingbank,Billofexchange,Commissionsandexpenses,Case-of-need,Specialremarks,BankaccountandSignature.6.ForwardingtheDocumentstotheCollectingBankTheremittingbanksendsthedocuments,togetherwiththenecessaryinstructions,toabankinthebuyer’scountry.Costsofcollectionarelowandthecustomergetsgoodvalueformoney.Thebankplacesathisdisposalnotonlytheservicesofitsownexperiencedspecialistsbutalsoaworldwidenetworkofcontacts,whichensuresthatpayments,documentsandinformationaretransmittedsafelyandreliablyeveninexceptionalsituations.5.2.3DocumentaryCredit1.PrinciplesandCharacteristicsTheletterofcredithasbeencreatedinordertoprovideaninstrumenttointernationaltradeofferingsecuritytotheexporter,asfaraspaymentisconcerned,andsecuritytotheimporterenablinghimtopayagainstdocumentswhichcanprovethatthegoodsorderedhavebeenshippedingoodorderandinconformitytothecommercialcontract.TheUniformCustomsandPracticesprovidesomebasicprinciples:theautonomyofthedocumentarycreditandthedocumentarycreditdealswithdocuments,notwithgoods.2.OperationofDocumentaryCreditAccordingtoUCPrulesbanksdealinginlettersofcreditonlydealwithdocumentsandnotwithgoods.Thereforebanksshouldonlyconsiderdocumentsbeinginconformitywithcredittermsontheirface.Thismeansasitsaysthatbanksshouldscrutinizedocumentswithreasonablecareandlookforanydiscrepancybetweendocumentsandletterofcreditaswellasbetweendocumentsamongstthemselves.L/Cbusinessisinthefirstplaceaninterbankbusinesswheretheadvising/confirmingbankreliesonthestandingoftheirrevocableandunconditionalundertakingoftheissuingbank.Thisalsoincludestheprofessionalskillsoftheissuingbank.Itisobviousthattheissuingbankhasthesameprofessionalexpectationsoftheadvising/confirmingbank.Otherwiseitwouldhavechosenanotherbanktochannelitscredits.ByissuingaL/Cthebankengagesitselftowardsacolleaguebytakingacreditriskontheapplicant.Onceissueditdoesnotmattertheevolutionofthecreditworthinessoftheapplicantorthestateorthepriceevolutionofgoods.Theundertakingisanindependentandfinalone.Assaidbeforethereasonforrefusingdocumentsbecauseofminordiscrepanciesisveryofteninspiredbythebuyerwantingtocontrolthegoodsbeforepaymentorbecausethebuyeralreadyreceivedthegoodsandexperiencedthemasnotbeinginconformitywiththeorder.OfcoursethemoredetaileddocumentsareprescribedintheL/C,themorediscrepanciescanoccurbypresentingnonconformdocuments.Bankersshould,basedontheirexperience,advisethecustomerabouttherightwaytochoosethedocumentsandhowtoprescribethem.ExaminingdocumentswithareasonablecareisnotonlythedutyofthebankstoprotecttheircustomerbutisalsotheirdutyagainsttheirpartnerbankerintheL/C.Byexaminingdocumentsanddrawingtheattentionoftheissuingbankondiscrepancies,advising/confirmingbanksmaypreventpaymentsbytheformermisleadbythewording“conformdocumentspresented”.Indeedwhenafterwarddocumentsarrivingattheissuingbankpresentdiscrepancieswhichhavenotbeeninformed,theissuingbankand/orapplicantmighthavetroublestorecoverthemoneyalreadypaid.Itmightalsobethatthebuyer/applicantwillnothaveanyrecourseanymore.Finally,anybankhastodrawtheimmediateattentionofhispartnerbankerintheL/Ciftheirisanysuspicionoffraudorfraudulentactivitywhichmightlimittheotherparty’srights.Whenfindingdiscrepanciestheissuingbankshouldnotfailtoinformtheremittingbankwithinareasonabletime.InthenewUCPthismeanswithin7workingdays.Inotherwords,theissuingbankshouldsendamessagetotheremittingbanktheseventhworkingdayatthelatestinformingaboutthediscrepanciesandtellingdocumentsareheldatthedisposaloftheremittingbankpendingfurtherinstructions.Oneshouldalsobearinmindthatalldiscrepanciesfoundbementionedatthesametimeandthatitisunacceptabletomentionadditionaldiscrepancieslateronbyafollowingmessage.3.FraudinDocumentaryCreditBothcharacteristicsofdocumentarycredits,theautonomyandthedocumentarybase,canalsobeusedincriminalactions.Astheinternationalbusinessmanusesdocumentarycreditsassecuritytoreceivepaymentagainstpresentationonlyofconformdocumentsandastheissuingbankundertakestopayagainstpresentationonlyofconformdocuments,withouthavingtobeinvolvedintheexecutionoftheunderlyingcontract,somecriminalshavesetupsystemstofraudagainstinnocentbusinessmenandbanks.Theyturnedthedocumentarycreditintoaninstrumentofmakingmoneyeasily.Fakedocumentscanbepresentedunderrealcredits.Fakedocumentarycreditscanbeissuedinfavourofinnocentbeneficiaries.Fantasticdraftsofdocumentarycredits.Allsystemsmightbeusedtocommitfraudand/orinviewofmoneylaundering.Theymayalsoappearascommercialdocumentarycreditorasstand-letterofcredit.Falsedocumentstenderedunderrealdocumentarycreditsarerarebutdifficulttodiscover.Mostcriminalsinthisbusinessarerealspecialistsandwilltenderperfectlyfalsifieddocuments.Fraudismostlydiscoveredbyskilledbankstaffthroughexecutingsomebasiccrosschecks.Beawareofunknownbeneficiariespresentingperfectdocumentsunderdocumentarycreditsforlargeamountsandaskingforimmediatepayment.Fakedocumentarycreditsareeasiertodiscover.TheymainlyseemtohavebeenissuedinAfricancountriesbutmoreandmoresomeareappearingcomingEastern-Europeancountriesornon-existingcountries.Theylooklikeoriginalsandcanonlybediscoveredbylookingintoverysmalldetails.Ifabeneficiaryreceivesadocumentarycreditstraightfromanissuingbank,withoutbeingadvisedbyalocalbankthereisadoubtaboutfraud.Firstofallheshouldgoandseehisbankerandasktochecktheauthenticitybeforestartingtomanufactureordispatchanything.Heshouldcertainlynotstarttoissueguarantees.Thetechniqueisoftenusedtoattractinnocentpeoplelookingintohighyieldinvestmentsandwhowillloosetheirmoneyasneverbeingreimbursedandsimultaneouslythiskindoflettersofcreditwillbeusedformoneylaundering.Onceagainfraudoftentrytohavethenamesoffirstclassbanksinvolvedtoattractotherinnocentinvestorsorbankers.5.2.4Guarantees1.TypesofGuaranteesThereareseveraltypesofguaranteeswhichthesellermaybecalledupontoprovideinfavourofthebuyer.Themostcommontypesare:(1) BidbondsortenderguaranteesSellersareoftenrequiredtosubmitaguaranteewiththeirtenderforacontract,commonlyforanamountbetween2%and5%oftheofferedprice.Thepurposeofatenderguaranteeistopromisepaymentincasethebeneficiarystatedthatthetenderhaschangedtheconditionsofhistenderorhaswithdrawnhistenderduringthebindingperiodorthathedidnotsignthecontractalthoughhegottheaward.(2) PerformanceguaranteesTheyarethemostcommonlyusedtypesofguaranteesandmayberequiredeventhoughnoothertypeofguaranteeisnecessary.Performanceguaranteesusuallycontainanundertakingtopayacertainsum,commonlybetween5%and10%ofthecontractvalue,ifthebuyerclaimsthatthesellerhasfailedtoperformthetermsofthecontract.Itwouldbenormalforaperformanceguaranteetoreplaceanytenderguaranteewhichmayhavebeenissuedinordertogetthecontract.Incasetheunderlyingcontractprescribessomeobligationstobesecuredbyaguaranteee.g.delivery,warrant,erection,etc.,theperformanceguaranteemayberestrictedaccordingly.(3) DownoradvancepaymentguaranteesUnderthetermsofthecontractanadvancepaymentisofferedtomeetthesellersmobilizationorotherinitialcosts.Thistypeofguaranteeisnormallyrequiredassecurityfortherepaymentincaseofnoncontractualdelivery.Theamountofanadvancepaymentiscommonlybetween10%and20%ofthecontractpriceanditisdesirablefortheseguaranteesifpossibletobewritteninaformthatmakesthemeffectiveonlyuponreceiptbythesellerofagreedadvancepayment.Itisalsoquitecommonfortheseguaranteestocontainareducesprorataofdeliveredgoodsuponpresentationtothebankofcopiesofshippingdocuments.Anotherreductioncanbeformulatedforthecasecompletionofworkonsite,tobeevidencedbypresentationtothebankofspecifiedcompletioncertificates.Itismostimportantthatthetermsoftheguaranteemakeclearhowreductionsinliabilityaretobeeffected.(4) RetentionmoneyguaranteesSomecontractsprovideforapercentageofeachpaymentupto10%tobewithhelduntiltheprojecthasbeencompletedandacceptedbythebuyer,alternativelytheretentioncanbepaidtosellersagainstaretentionmoneyguarantee.Thatguaranteesecuresseller’scompliancewithhiswarrantyobligationsandenablesthebuyertoreleasetheretainedamountbeforeterminationofthewarrantyperiod.(5) MaintenanceguaranteesMaintenanceguaranteesarenormallyrequestedinconnectionwithconstructioncontracts.Thepurposeofamaintenanceguaranteeistosecuretheconstructor’sobligationsduringthemaintenanceperiodoncetheconstructionhasbeencompleted.Suchguaranteesmayalsobeissuedinlieuofretainingmoneyforthemaintenanceperiod.2.FirstDemandBankGuaranteesFirstdemandbankguaranteesarelegallyboundbyobligationsonthebankforwhichthebankwillneedtobeindemnifiedbytheseller.Theymayprovideforpaymentonfirstdemandagainstbeneficiary’sstatementofnonfulfillmentofaspecifiedcontractualliability.Ontheotherhandthatguaranteesmaypromisepaymentuponfirstdemand,plusbeneficiary’sstatementandpresentationofdocumentsreferredtointheguarantee.Thismeansthat,ifabankreceivesademandwhichonitsfacecompliedwiththetermsoftheguaranteethebankmustpayandwillpaywithoutanyobjectionsofitscustomer.Guaranteescallingforindependentlyproduceddocumentse.g.certificateofanarbitrationawardoracopyofforwardingagentscertificateofreceiptmayberegardedas“ConditionalGuarantee”.Nowadays,thenecessaryindependenceofthebankguaranteefromtheunderlyingtransactionisemphasizedworld-widebyusingtheclause“topayonfirstdemand”.Thisclausecoversthewaiverofallprotestsandobjectionsinconnectionwiththattransaction.Impropercallsupontheguarantorcanbepreventedbymakingtimelyarrangements,i.e.inthepurchasecontract,thatfurtherdocumentaryevidenceofthedefaultistobepresentedwhencallingupontheguarantor.Certificatesfrompublicauthorities,independentexpertopinions,declarationssignedbyboththeimporterandexporter,arbitrationawardsandsimilardocumentswouldbeacceptable.Itisimportantthatoneofthesedocumentsbedescribedinasmuchdetailasforadocumentarycredit,clearlyshowingreferencetothatcontractforwhichtheguaranteehasbeenissued.Theabstractnatureoftheguaranteeisnotjeopardizedbythemerestipulationthatthebeneficiary,whenclaimingpayments,mustpresentdocumentswhichareadequatelyandunambiguouslydefinedintheguarantee.3.DirectGuaranteesExporter’sbankissuesitsdeclarationinfavouroftheforeignbeneficiarytowhomthedeedwillbesentbytheguarantor,bytheclientoncollectionbasisorunderletterofcredit.Incaseofimplementationthebeneficiaryisaskedtolodgehisclaimviahisbankersinordertohavethemapprovethecorrectnessofsignaturesappearingontheclaim.4.IndirectGuaranteesExporter’sbankinstructsaforeigncorrespondentbanktoissuetherespectiveguaranteeinfavourofabeneficiaryunderitscounterguaranteebywhichexporter’sbankstandssuretytowardstheforeignbank.Normallyacounterguaranteeispayableonfirstdemandoftheforeignbankstatingthatithasbeenrequestedbybeneficiariestomakepaymentunderitsguarantee.Naturally,theindirectguaranteeismoreproblematicthanthedirectoneasaforeignbankisaddedtothechainofpartiesinvolvedintheguarantee.Theforeignbank’sguaranteeissubjecttothelawinforceatthelieuofissueandallconsequencesarisingthereofaretobebornbytheinstructingbankanditscustomers.5.2.5StandbyLetterofCreditA“standbyletterofcredit”,isaninstrumentsimilartoaguarantee,bymeansofwhichpayment(s)and/orperformanceareguaranteed,e.g.repaymentofaloanorthedeliveryofgoodsaccordingtocontractorfulfillmentofworks/contracts.Thestandbyletterofcreditisdesignedtoindemnifythebeneficiaryintheeventofopeningbank’sclienttofailincomplyingwithhiscommitmentsarisingoutoftheunderlyingcontract.Standbylettersofcreditmayinclude(1)performancebondguarantees,inwhichabankguaranteesthatabuildingorotherprojectwillbecompletedontime,or(2)defaultguarantees,underwhichabankpledgestherepaymentofdefaultedcorporatenotesandstateandlocalgovernmentbondswhentheborrowerscannotpay.Thesestandbylettersenableborrowingcustomerstogetthecredittheyrequireatlowercostandonmoreflexibleterms.Inordertoselltheseguaranteessuccessfully,however,thebankmusthaveahighercreditratingthanitscustomer.BecausemanyU.S.bankshaveexperienceddeclinesintheircreditratingsinrecentyears,theircompetitors(includingforeignbanksandinsurancecompanies)haverecentlymovedintocapturealargeshareofthecreditguaranteemarket.Astandbycreditlettersisacontingentobligationoftheletter’sissuer.Theissuingbankornon-bankfirm,inreturnforafee,agreestoguaranteethecreditofitscustomerortoguaranteethefulfillmentofacontractmadebyitscustomerwithathirdparty.Thekeyadvantagestoabankissuingstandbysarethefollowing:(1) Letterofcreditearnthebankafeeforprovidingtheservice(usuallyaround0.5percentto1percentoftheamountofcreditinvolved).(2) Theyaidacustomer,whocanusuallyborrowmorecheaplywhenarmedwiththebank’sguarantee,withoutusingupthebank’sscarcereserves.(3) Suchguaranteesusuallycanbeissuedatrelativelylowcostbecausetheissuingbankmayalreadyknowthefinancialconditionofitsstandbycreditcustomer(e.g.,whenthatcustomerappliedforhisorherlastloan).(4) Theprobabilityislowthattheissuerofthecreditguaranteewilleverbecalledupontopay.5.3CreditLoan5.3.1CommercialLoansBymaturity,loanscanbedividedintotwobroadcategories.Thosewithmaturityofoneyearorlessarecalledshort-termloanswhilethesewithmaturityexceedingoneyearcalledmediumorlong-termloans.Short-termloansareoftenusedtosatisfyworkingcapitalneedswhereasmediumandlong-termloansareoftenusedtofinancefixedassetinvestment.Loanscanalsobecategorizedaccordingtothenatureofcontractualarrangementaswellasintendeduse.5.3.2SpecialCredit1.ExportCreditExportCreditisgovernment(governmentexportcreditagencies)guaranteelendingchanneledthoughacommercialbanktosupportexport.Therearetwokindsofexportcredit:buyercreditandsuppliercredit.Inbuyercredit,exporter’sbankprovidesloanstotheimporter(importer’sbankguarantees)ortoimporter’sbank,whichon-lendstheloantotheimporter.Importerscanobtainloantomeettheirneedsofpurchasingexporters’goods.Abuyercreditusuallyincludesthefollowingtermsandconditions:Loanisarrangedinsupportofasupplycontractforcapitalgoodsandrelatedservicemainlyfromthecountrytoprovideloan.Valueoffinancingisavailablefor85%oftheeligiblecontractvalue.Thebalancemustbepaidincashorwithacommercialloan.Periodoffinancingvarieswitheachcontractconsideredtobeeligibleandapprovedforfinancing,normallybetween5and10years.Paymentoffinancingshouldbeinequalhalfyearlyinstallmentofprinciplecommencingfromatimedeterminedbytheexportcreditagencyorthescopesofthesupplycontract.InterestrateisfixedinaccordancewithOECDmonthlyaccordingtomarketinterestratesandreturnratesoftreasurybills.Commitmentfeeatarateperannumiscalculatedfromthedateofsigningoftheloanagreementuntilthedateoffulldisbursementoftheloanthereunderontheamountofloannotdisbursedfromtimetotime.Managementfeeiscalculatedatflatontheamountoftheloan.Creditinsurancepremiumsasdeterminedbyagenciesarepayablebytheborroworaddedtothesupplycontractvalueandrefinancedunderthetermoftheexportcreditloan.Theprocedureofbuyercreditvariesdependingonwhethertheimporter’sbankprovidesguaranteeoron-lendsitwhentheloanisprovidedtotheimporter.Inthefirstcase,thefollowproceduresarefollowed:Exporter’sbankandimporter’sbankconcludeageneralagreement(frameagreement)of