Products and Bank

7/31/2019 Products and Bank

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HOANG VIET THANH 2011

Products and bank's services* The banking business consists :- Credits

- Services- Managing of deposits and savingI/ Managing of deposits and saving- Definition : A monetary deposit given to a lender, seller or landlord as proof of intent. Security deposits can be either refundable or nonrefundable, depending onthe terms of the transaction. As the name implies, the deposit is intended as ameasure of security for the recipient.- Landlords generally apply security deposits as rent from tenants who cannototherwise pay or use them to repair damage caused by tenants.

Security deposits are not considered taxable income. Local laws often treatsecurity deposits as trust funds. Security deposits that are used as final rentpayments must be claimed as advance rent and are taxable when paid.


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II/ Services- Managing of financial flows (No credit risk, paid by fees)+ Check the account balance+ Exchange money+ Fill out a withdraw slip+ Open a checking account+ Saving accounts+ Order checks+ Pay off a loan+ Pay bills online+ Rent a safety deposit box+ Take out a loan+ Review bank statement+ Transfer money

- Advising (No fee, but with risk for the bank's name): Try to talk with bank manager to know what you should to do .III/ Credits ( Financail trustworthy)


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- Definition : Credit is the trust which allows one party to provide resources toanother party where that second party does not reimburse the first partyimmediately (thereby generating a debt), but instead arranges either to repay orreturn those resources (or other materials of equal value) at a later date. Theresources provided may be financial (e.g. granting a loan) , or they may consistof goods or services (e.g. consumer credit ). Credit encompasses any form of deferred payment. Credit is extended by a creditor, also known as a lender, toa debtor, also known as aborrower. - Interest is the compensation that the creditor damands for the use of money.Money has the time value so creditor losses the time value of that money.- Credit risk is an investor's risk of loss arising from a borrower who does notmake payments as promised. Such an event is called a default . Other terms forcredit risk are default risk and counterparty risk .

( Credit risk is the potential that a bbank borrower or a counterparty will fail tomeet its obligation in accordance will agreed terms)
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- Minor risks (Investor losses include lost principal and interest, decreased cashflow, and increased collection costs )+ Fixed assets or immobilization risk + Rate of exchange+ Treasury risk (in case of late repayment)+ Interest+ No payment+ Political risk ( A consumer does not make a payment due on a mortgage loan, credit card, lineof credit, or other loan

A business does not make a payment due on a mortgage, credit card, line of credit,or other loan

A business or consumer does not pay a trade invoice when due

A business does not pay an employee's earned wages when due A business or government bond issuer does not make a payment on a coupon or principal payment when due An insolvent insurance company does not pay a policy obligation An insolvent bank won't return funds to a depositor A government grants bankruptcy protection to an insolvent consumer or business )- Assessing credit risk, an stitution considers 3 issues:+ Default probability (DP) - Xc su t v n : The probability of default (alsocall Expected default frequency) is the likelihood that a loan will not be repaid andwill fall into default. PD is calculated for each client who has a loan (for wholesalebanking) or for a portfolio of clients with similar attributes (for retail banking ). Thecredit history of the counterparty / portfolio and nature of the investment are takeninto account to calculate the PD.(There are many alternatives for estimating the probability of default. Default

probabilities may be estimated from a historical data base of actual defaults usingmodern techniques like logistic regression. Default probabilities may also beestimated from the observable prices of credit default swaps, bonds, and options on common stock. The simplest approach, taken by many banks, is touse external ratings agencies such as Standard and Poors, Fitch or Moody's

Investors Service for estimating PDs from historical default experience. For smallbusiness default probability estimation, logistic regression is again the most common technique for estimating the drivers of default for a small business based on a historical data base of defaults. These models are both developed internallyand supplied by third parties. A similar approach is taken to retail default, usingthe term "credit score" as a euphemism for the default probability which is the true

focus of the lender.)+ Credit exposure (CE) : The total amount of credit extended to a borrower by alender. The magnitude of credit exposure indicates the extent to which the lender isexposed to the risk of loss in the event of the borrower's default. Credit exposure
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can be minimized through purchasing credit default swaps or other types of financial instruments.For example, if a bank has made short-term and long-term loans totaling $100million to company A, its credit exposure to company A is $100 million .

In general, a bank will seek to have greater credit exposure to its customers withthe highest credit rating, and less exposure to clients with a lower credit rating. If a customer encounters unexpected financial problems, the bank may seek to reduceits credit exposure in order to mitigate the risk of loss arising from a potentialdefault.+ Recovery rate (RR) :

Amount recovered through foreclosure or bankruptcy procedures in event of a default, expressed as a percentage of face value

The rate determined in advance for al lcost centers for allocating fixed

costs and variable costs (together or separately) to the output, in an accounting period. EX: If a business has $100000They also has 50% DF, 100%CE -> 1/2 lose 100000. Or 60%DF, 50% CE -> 6/10lose 500000.

A/ Personal credits
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- An overdraft ( Th u chi ) occurs when money is withdrawn froma bank account and the available balance goes below zero. In this situation theaccount is said to be " overdrawn ". If there is a prior agreement with the accountprovider for an overdraft, and the amount overdrawn is within the authorizedoverdraft limit, then interest is normally charged at the agreed rate. If the negativebalance exceeds the agreed terms, then additional fees may be charged and higher

interest rates may apply.- Consumer credits (Tn d ng tiu dng) : A debt that someone incurs for thepurpose of purchasing a good or service. This includes purchases made on creditcards, lines of credit and some loans. Also referred to as "consumer debt".

Consumer credit is basically the amount of credit used by consumers to purchase non-investment goods or services that are consumed and whosevalue depreciates quickly. This includes automobiles, recreational vehicles (RVs),education, boat and trailer loans but excludes debts taken out to purchase realestate or margin on investment accounts. For example, a mortgage for purchasinga house is not consumer credit. However, the 52 inch television you put on your
http://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Balance_(accounting)http://en.wikipedia.org/wiki/Interest_(finance)http://en.wikipedia.org/wiki/Bank_chargeshttp://en.wikipedia.org/wiki/Bank_chargeshttp://en.wikipedia.org/wiki/Interest_(finance)http://en.wikipedia.org/wiki/Balance_(accounting)http://en.wikipedia.org/wiki/Bank


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credit card is - Bridge loan ( Vay b c cu ) A short-term loan that is used until a person orcompany secures permanent financing or removes an existing obligation. This typeof financing allows the user to meet current obligations by providing immediatecash flow. The loans are short-term (up to one year) with relatively high interestrates and are backed by some form of collateral such as real estate or inventory.

Also known as "interim financing", "gap financing" or a "swing loan".- Investment credits : A tax credit that is given to a company for making a certaintype of investment. The investment may be in building a new plant, purchasingcertain equipment, or undertaking other investments that the government wants toencourage.B/ Corporate credits-

Risk analysis is a technique to identify and assess factors that may jeopardize thesuccess of a project or achieving a goal. This technique also helps to definepreventive measures to reduce the probability of these factors from occurring andidentify countermeasures to successfully deal with these constraints when theydevelop to avert possible negative effects on the competitiveness of thecompany. Reference class forecasting was developed to increase accuracy in risk analysis.+ Financial structure, balance sheet analysis

Increase in assets and decline in default barriers can reduce the vulnerability todistress, reduce spread on debts, and reduce the value and the deltas of put option .The financial framework shows how changes in the value of assets relate tochanges in values of liabilities .Thus, it provides a natural framwork for analysis of mismaches, such as currency, maturity mismaches on the balance sheet. Policiesand actions that reduce these mismaches will help to reduce risk and vulnerability.+ Share holding, comitment+ Business, surrounding, future+ Market products, market share, competition+ Commercial dynamism+ Management knowledge

+ Organization+ Committement track record+ Which credit facilities, type, amount, duration
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Credit by signature :1. Import letter of credit: Designation given by the importer (and his or her bank)to the commercial letter of credit (L/C) established in favor of an exporter. The same L/C is called 'export letter of credit' by the exporter (and all other banks ).2. Bank acceptance : is a promised future payment, or time draft, which is acceptedand guaranteed by a bank and drawn on a deposit at the bank. The banker'sacceptance specifies the amount of money, the date, and the person to which thepayment is due. After acceptance, the draft becomes an unconditional liability of the bank. But the holder of the draft can sell (exchange) it for cash at a discount toa buyer who is willing to wait until the maturity date for the funds in the deposit.

3. A bid bond is issued as part of a bidding process by the surety to the projectowner, to guarantee that the winning bidder will undertake the contract under theterms at which they bid .[1]

The cash deposit is subject to full or partial forfeiture if the winning contractorfails to either execute the contract or provide the required performance and/orpayment bonds .[2] The bid bond assures and guarantees that should the bidder besuccessful, the bidder will execute the contract and provide the required suretybonds.

4. Guarantees : A guarantee is a promise to answer 'for the debt, default ormiscarriage of another', if that person fails to meet the obligation.

- A guarantee must be evidenced by a written note or memorandum signed by theguarantors or their agent. Without such written evidence, a guarantee isunenforceable. Bank guarantees are, of course, always written contracts.

- Bank guarantee forms are, in fact, dual purpose documents. They operate asguarantees where the borrowing is enforceable against the principal debtor - theguarantor by definition incurring secondary liability - but as indemnities where it isnot.

Corporate short term credits- Trade financial facility: A Trade Finance Facility provides a mix of normalcommercial lending with specific Trade Finance under the one lending facility.+This allows you to choose the most appropriate and cost effective borrowingmechanism in light of your payment terms with your buyers and suppliers.+ It is suitable for any client who imports or exports raw materials or finishedgoods.- Import facility : All of things that the company import before the production.
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- Receivables financing: Receivable financing is a tremendous source of immediatecapital for your business. It is a great solution for solving cash flow problems witha business, and also has tons of distinct advantages over more traditional optionslike a standard business loan or a small business line of credit. With receivablefinancing you sell your accounts receivables to a third party company that will payyou for the invoices. This gives your business instant cash instead of having to waitto receive payment which is why many businesses run into cash flow issues.- Export credit insurance facility :

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