bg thu tin thuong mai chapter 8 5643

CHAPTER 8: BankingBanks in the UK; commercial bank facilities current accounts, deposit accounts, credit cards, standing orders, loans and overdrafts; international banking, bills of ex

CHAPTER 8: Banking

Banks in the UK; commercial bank facilities (current accounts, deposit accounts, credit cards, standing orders, loans and overdrafts); international banking, bills of

exchange; documentary credits.

• specialize in areas of international trade and

finance, discounting bills, confirming credit

status of overseas customers through

confirming houses, acting in the new issue

market, and in the bullion and Euro-bond

market

• Be involved in shipping, insurance, and foreign

exchange markets.

commercial banks

• Be particularly interested in private customers’

accounts, encouraging them to use their current account, deposit account, savings account, and credit facilities.

• lend money, against securities, in the forms of overdrafts and loans, pay accounts regularly by standing orders, and transfer credits through the bank Giro system.

• Be available to customers with their numerous

branches throughout the UK, their low

charges, and the laws which govern the way each organization handles its affairs.

Commercial bank facilities in the UK

Current accounts Deposit accounts Credit cards Standing orders

and direct debits

Loans and overdrafts

Current accounts

• be used by anyone in the UK provided they can supply a reference or references

• Its advantage: cheque payments

• when paying by cheque, it is required to provide a cheque card, which makes the

banks responsible for the cheque passed, up to the limit stated on the card

• The card also acts a cash card allowing money to be drawn from cash dispensers even when the bank is closed

• When depositing cash or cheques, a paying-in slip is used to record the deposit, its

counter foil, with the bank’s stamp and cashier’s initials, being proof that the deposit

was made

Deposit accounts

• Pay interest to a maximum established by the bank

• The customer can be asked to give notice of withdrawal, and can only withdraw on a

withdrawal slip handed in at the branch where the account is kept

• There are numerous savings accounts on which interest is paid according to the

credit balance in the account and the period it is left for

• With some of these accounts there are penalties for withdrawing money before the agreed date

Standing orders and direct debits

• Customers making regular payments, such as rent, or mortgage repayments, can ask the bank to transfer the money to the payee on a particular day every month

Loans and overdrafts

• Loans and overdrafts for large amounts are usually allowed on a formal agreement

• A loan will usually be covered by a negotiable security, e.g shares, with repayment

specified on the agreement The money for a loan is immediately deposited in the customer’s account

• With an overdraft, the customer is given permission to overdraw an account up to a certain limit

• In addition, there is a wide range of other financial and investment services the bank offer

• The other services the banks offer include acting as trustees and executors, offering insurance, foreign exchange, and discounting services, and negotiating documents

Specimen letters

Administrative letters

A Opening a current account

Specimen letters

Administrative letters

Specimen letters

Administrative letters

Specimen letters

Administrative letters

cheque

stamp the counterfoil and return it to me.

Yours sincerely,

Specimen letters

Advice of an overdrawn account

Specimen letters

Reply to advice

of an overdrawn

account

Specimen letters

Request for

an overdraft or loan

Specimen letters

Grant of a loan

Specimen letters

Refusal of

an overdraft

• The bill can be paid to a bank named by the drawer, or the drawee can name a bank

he wants to use to clear the bill, if this is the case, the bill will be kept in the drawer’s bank until it is to be paid When the bill is due it is presented to be paying bank Such

bills are said to be domiciled with the bank holding them.

Bills of exchange

• A sight draft or sight bill is paid on presentation In a documents against payment( D/P)

transaction, the sight draft is presented to the importer with the shipping

documents, and the importer pays immediately, i.e ‘on presentation’ or ‘at sight’

• A bill paid ‘after date’ or ‘after sight’ can be paid on or within the number of days specified on the bill Therefore, ’30 days after sight’ means that the bill can

be paid 30 days after it has been presented Overseas bills in the UK are known

as foreign bills, and those used within the UK as inland bills A clean bill is one that

is not accompanied by shipping documents

Bills of exchange

• The advantage for the exporter of payment by bill is that the draft can be

discounted, i.e sold, to a bank at a percentage less than its value, the percentage

being decided by the current market rates of discounting So even if the bill is marked 90 days, the exporter can get his money immediately

• The advantage for the importer is that he is given credit, provided the bill is not

a sight draft The bank, however, will only discount a bill if the buyer has a good reputation

• It is possible to send the bill direct to the importer, or if not, to his bank which will hand it to him with the documents for either acceptance or payment

• A dishonoured bill is one that is not paid on the due date In this case the exporter will protest the bill, i.e he will go to a notary, a lawyer, who will, after a warning,

take legal action to recover the debt

• The abbreviations B/E for bill of exchange and d/s for days after sight are often used And you are are now familiar with D/P, documents against payment and D/A documents against acceptance

Specimen letters and form:

bill of exchange

transactions

Letter advising

despatch of a bill

Specimen letters and form: bill of exchange

transactions

Bill of exchange

Specimen letters and form: bill of exchange

transactions

Letter advising despatch

of a sight draft

Specimen letters and form: bill of exchange

transactions

Request to a

bank

to forward a bill

Specimen letters and form: bill of exchange

transactions

Request to a

bank

to accept a bill

Specimen letters and form: bill of exchange

transactions

Non-payment of a bill

Documentary credits

• Letters of credit (L/C) have been used for centuries in one form or another to enable

travelers to obtain money from overseas banks

• The process begins with the traveler asking his bank to open a letter of credit in his favour, i.e for a specific amount which is debited to his account The bank then

drafts a letter which will allow him to draw money on overseas banks with whom the home bank has agreement The foreign banks will then draw on the home bank to recover their payments

• This method of obtaining money has now generally been replaced by Euro cheques,

traveller’s cheques, and credit cards But documentary credits-letters of credit

accompanied by documents-are wildly used in the import/export trade.

Two types of documentary credit: revocable and irrevocable

1. The importer agrees to pay by documentary

credit, and tell his bank that he will do so by

completing an application form which names the

exporter and states: the amount to be paid; the

documents concerned; what the consignment

consist of: whether the shipment is c.i.f, f.o.b., etc.:

details of dispatch and any other documents

involved, e.g certificate of origin, consular invoice,

certificate of quality; and the length of time the

credit will be available The availability of the credit

should take account of how much time it will take

to prepare and ship the goods.

2 The importer’s bank will then select a bank in the

exporter’s country to act as its agent, and will notify

them that the credit has been opened.

3 The agent bank will notify the exporter the credit

has been opened, and they may add their own

confirmation, i.e they will promise to see that the

conditions of payment against the documents will

be fulfilled If they confirm the letter, the L/C is

known as a confirmed credit and the agent bank as the

confirming bank

• 4 The exporter ships the goods before

the credit expires and sends the shipping documents (bill of lading, insurance

certificate, invoice, etc.) to the agent bank

who check the documents against the conditions and pay him; or they may have asked him to draw a bill of exchange on them, and will discount the bill for him so

he can get his money immediately.

• 5 The agent bank will then send the

documents and debit the importer’s bank with the cost and charges, which are calculated as a percentage of the total amount of the invoice, plus an extra charge if the letter is confirmed

• 6 The importer’s bank then checks the

documents, pays the agent bank, and sends the documents to the importer so that he can claim the goods.

Specimen letters and forms: a documentary credit transaction

From the importer

to his bank

Specimen letters and forms: a documentary credit transaction

Application form for documentary credit

Specimen letters and forms: a documentary credit transaction

From the importer

to the exporter

Specimen letters and forms: a documentary credit transaction

From the agent bank to the exporter

Specimen letters and forms:

a documentary credit

transaction

Notification of documentary

credit

Specimen letters and forms:

a documentary credit

transaction

From the exporter

to the agent bank

Specimen letters and forms:

a documentary credit

transaction

From the importer’s bank to the importer

Specimen letters: a documentary credit transaction (2)

From the importer

to the exporter

Specimen letters: a documentary credit transaction (2)

From the exporter

to the importer

Points to remember

1 Merchant banks and commercial banks in the UK offer similar services, but commercial banks

encourage private account holders to use their facilities, as well as commercial concerns

2 Commercial bank facilities include current accounts, deposit accounts, credit cards, standing

orders, loans and overdrafts

3 The two main methods used in settling overseas accounts-bills of exchange and documentary

credits-involve banks at home and abroad.

4 Bills of exchange can be at sight, i.e payable on presentation, or after sight, payable at a

stipulated date in the future The exporter can send the bill to the importer direct or to his bank with the documents and will obtain either payment on presentation, or acceptance against the bill The advantage of a bill is that the bill can be cancelled, or not paid on the due date

5 a confirmed irrevocable documentary credit cannot be cancelled (unlike a revocable credit) and the

importer’s bank and its agent can guarantee payment The importer is protected by the bank checking documents and can get a certificate of quality to ensure that the goods are up to

standard The exporter is assured of payment, and, with discounting facilities, does not have to wait for his money if the bank agrees that he can draw against the credit.