presentation about bank induction 2012

PRESENTATION ABOUT BANIKNG PRESENTATION ABOUT BANIKNG OPERATIONS & INTERNATIONAL OPERATIONS & INTERNATIONAL

TRADETRADE..

Prepared ByPrepared By-:-:TRADE FINANCE OPS TRADE FINANCE OPS

TEAMTEAM,, BARCLAYS BANK – BARCLAYS BANK –

EGYPTEGYPT..

11

Generic meaning of word“ BANK “

THE BANK

BANK OPERATIONS

INVESTORSDEPOSITORS

22

Chapter One..

•Traditional and Non-Traditional Bank’s services, including Principles of lending.

33

What are types of banking operationsWhat are types of banking operations??

Traditional Bank’s

Services

Non- Traditional

Bank’s Services

Accept Deposits

Grant credits

investment

Financial leasing

Logistics

Hire purchase

Other support services-:

Legal Dept.

H.R.

Finance Dept.

Compliance.

I.T.support.

Information.Agricultural mortgage

Auto loan

Insurance services44

Non-Traditional Bank Non-Traditional Bank ServicesServices• Logistics definition has its origin in the Greek word ‘ logistiki’ Logistics definition has its origin in the Greek word ‘ logistiki’

which means financial organization, but in France it has the which means financial organization, but in France it has the meaning of channel to transport goods from one location to other.meaning of channel to transport goods from one location to other.

• the logistics definition is the combination of packing, material the logistics definition is the combination of packing, material handling, inventory, warehousing, transportation, security and handling, inventory, warehousing, transportation, security and information.information.

• It controls the sequence of supply which is important for the It controls the sequence of supply which is important for the utilization of location and time.utilization of location and time.

• It determines the path of transporting goods and many important It determines the path of transporting goods and many important information between the consumer point and the production or information between the consumer point and the production or source point.source point.

• It has the special term production logistics which gives the It has the special term production logistics which gives the assurance of the supply of the high quality product in time, with assurance of the supply of the high quality product in time, with security.security.

55

NON- TRADITIONAL BANK SERVICES..

• Financial leasing..• If you do not wish to purchase an asset by means of installments

credit. you may decide to lease the asset only by paying a rental charges

over an agreed period of time ,Then you will have the exclusive use of this asset but the asset itself

is still belonging under the ownership of the bank.There is NO option to purchase this asset under a financial lease

arrangement.At the end of the initial leasing period you may have the option to

renew the agreement at a much reduced rate .The bank is responsible for maintenance of the asset, but the

customer must insure this asset against fire, theft, and any other normal business risk.

What the customer does not have to bear is the problem of the asset becoming obsolete.

66

NON- TRADITIONAL BANK SERVICES..

•Hire Purchase..

•Hire purchase is an agreement to hire an item for a given period plus an option to purchase after the last installment has been paid.

•Until the balance is paid, the bank owns the title of this asset.

77

Principles of Lending.

• Before you have had the opportunity to develop judgment and experience, there are some basic considerations which can help you to reach your decision.

• One easy way to help you to remember is by using a credit technique assessment like C.A.M.P.A.R.I.

• Which stand for : Character, Ability, Margin, Purpose, Amount, Repayment, and Insurance.

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• CHARACTER..1) Age / health. the sole source of repayment for lending to personal customers is

often earnings, which normally rely on the continued good health and employment of the customer.

2) Personal stability. evidence of the customer ‘s residential status whether the

customer is an owner, tenant, or perhaps living with parents, and how long the customer has lived at that address these information may provide some indication of personal stability.

likewise, marital status and whether there are any or many dependants, are also indicator,

likewise, the type of occupation could be important to your decision, and how long has the customer been in that employment and what position do they hold, how secure is the job.

99


• CHARACTER..• 3) integrity and honesty, whether we feel that we can trust the customer

depends upon our own subjective view also any previous dealings with our bank or other banks can help to identify how honest and trustworthy of the customer has been in the past.

4) Personal resources, reasonable indicators can be found by a visit to

the customer’s home or place of business and also during conversation.

1010


• CHARACTER..• 5) outgoings, what type of life-style does a customer

enjoy and how much does it cost in regular expenditure.

6) connections, to check whether it might be a strong

family connections or not , we must only bear in mind these connections in mind and never lend if repayment is doubtful.

1111


•ABILILTY..

•Providing that the individual has the legal capacity to borrow funds, that they are over 18, then we need to check that they have the ability to manage their financial affairs effectively and will succeed in their aims or not.

1212


• Margin ..

• You must decide what return you can expect for the type of borrowing requested.

• The greater the risk, the higher the interest rate to be charged.

• Commission and fees.

• Cross- selling.

• Business development opportunity.

1313


• PURPOSE..• We need first of all to ensure that the purpose for which the

money will be used is legal not immoral and that there are NO government restrictions on lending.

• It may be bank ‘ s policy from time to time to reduce the availability of funds for certain types of lending ex., weapons trading.

• Therefore, at this stage we must think carefully about the following questions,

• Why is loan needed?• Does it in the customer’s best interest ?• Does it against bank’s policy or any government

regulations?

1414


• AMOUNT..

• With regard to personal loans for customer durables, ex., carpets, furniture, videos, TVs, weddings, holidays, guidelines are laid down to help you determine minimum and maximum amounts for certain types of lending.

• Therefore, you will need to establish whether the amount required is correct, reasonable, enough, suitable.

1515


• REPAYMENT..• Technically, most bank lending on overdraft and loan is

repayable on demand.• However, it would be unrealistic to expect such immediate

response from a customer and usually agreement is reached on the timescale for repayment.

• Ex. Customer needs one million USD, repayment after five years, purpose to spend one month holiday in Australia - - the expected answer that you will never see this customer again.

• Therefore we must think carefully about the source of repayment ex., sale of assets, cash generation, profits, other customer’s income, can repayments be met without strain.

• Finally we must check whether the repayment amount ( principle amount + interest + fees + charges ) Vs. period of timescale are both within guidelines.

1616

Principle of Lending..

• INSURANCE..• If the proposition does not seem appropriate without taking

security, which should have to be realized on the failure of the debtor, then you should not lend in the first place.

• Security should be considered only as a safety net, not as a prime point of consideration in whether to lend.

• Security is merely an insurance against unforeseen events that adversely affect what would otherwise have been a good proposition , for ex., civil war, strikes, or any similar kind of FORCE MAJUIRE.

• In addition you might need to consider whether life insurance or similar insurance against unemployment or sickness might be helpful for both the customer’s as well as the bank ‘s benefits.

• Any security taken should be :-• Easy to take \ realize.• Easy to value.• Easy to charge ( for the bank to obtain a good title).

1717

Chapter Two..

• International & Local Trade,

• generic meaning of the word Guarantee.

1818

International / Local Trade Finance• Local Trade represents the exchange operations

of Goods / Services between people located within same country.

• International Trade represents the exchange operations of Goods / Services between people located in different countries.

• The most important factors for the existence of trade operations are:-

• 1) the rareness of natural resources.• 2) the new technology.

1919

Formula of Trade Transaction.

•Document + Goods/ Services = Payment.

•Seller:-

•Delivers Goods / or Provides Services accompanied by relevant Document (s).

•Buyer:-

•Receives Goods / or Services against payment.

2020

International & Local Trade

•There are three probabilities :-

•1) Goods Vs. Goods = Barter.

•2) Goods Vs. Service = Performance.

•3) Goods Vs. Money = Payment.

•And the vise is the versa.

2121

External factors that may affect International Trade Markets.

• P.E.S.T.E.L. • The PESTEL model is• A well-known tool that is often• Used to assess the impact of• External factors that affect • A business and the market in which • it operates.• In other words, the bigger issues • and factors that affect two countries • when they decide to trade with each other.

Political.

Economic.

Social.

Technology.

Environment.

Legal.

2222

TRADE FINANCE.

• The concept of trade cycle.• It can be defined as the time period

between the start of,• The supply chain,• The ordering of goods,• Prepare / purchasing raw materials,

processing, packing, delivery.• And the receipt of payment for the sales of

finishing goods/ products.

2323

SHORT – TERM TRADE FINANCE.

• Short trade finance is provided and repaid within two years,

• This covers the purchase and sale of consumer goods such as:-

• Overdraft, • Invoice Discounting,• Factoring,• Avalized Bill of Exchange.• Negotiation under L/Cs.• Counter Trade.

2424

MEDIUM / LONG –TERM TRADE FINANCE.

• Finance provided over two years up-to five years is considered medium – term finance,

• And above five years is considered as long-term finance.

• Both of them are mostly suited to the sale and purchase of the capital and semi-capital goods such as :-

• Buyer’s credit facilities,• supplier’s credit facilities• Lines of credit,• Forfeiting• Eurobonds.

2525

OPERATIONS / PRODUCTS.

Trade Products.

Guarantees

Doc. Collections under Import or Export

Transactions.

Import Letters of Credit

Export Letters of Credit

International Payments

Clean Collections

Screening Unit

Inward transfers Outward transfer

2626

Possible ways for settlement any trade transactions.

•For the successful execution of this formula, banks intervene by applying one of the following concepts or may apply both concepts at the same time:-Guarantee

against performance in case of default

Methods of Payment

O/ Account Cash in Advance

Doc. Collection.

Letters of Credit

AVALIZATION

Surety Bond Stand By L/C

Letters of Guarantee 2727

GUARANTEES

AVALIZATION Letters of Guarantee Indemnities Stand By L/C

THE GENERIC MEANING OF THE WORD (GUARANTEES ) AS AN INSTRUMENT USED IN TRADE.

2828

GUARANTEESGUARANTEES....

• In fact, the term In fact, the term ‘‘ GUARANTEE GUARANTEE ‘‘ has NO precise has NO precise definition in the International law.definition in the International law.

• It is frequently used to mean any transaction in which It is frequently used to mean any transaction in which one person offers security for anotherone person offers security for another’’s obligations.s obligations.

• In other words, the basis function of a guarantee is to In other words, the basis function of a guarantee is to provide security.provide security.

• This includes not only surety bonds & promises of This includes not only surety bonds & promises of payment but also some other devices such as a Letter payment but also some other devices such as a Letter of Comfort, which are morally binding only.of Comfort, which are morally binding only.

2929

INDEPENDENT LETTER OF INDEPENDENT LETTER OF GUARANTEEGUARANTEE....

• The Independence of Undertaking :-The Independence of Undertaking :-

• An undertaking is Independent where An undertaking is Independent where the Guarantor / Issuerthe Guarantor / Issuer’’s obligations to s obligations to the beneficiary are not dependent the beneficiary are not dependent upon the existence or validity of any upon the existence or validity of any underlying transaction ( Contract ) or underlying transaction ( Contract ) or upon any other undertaking.upon any other undertaking.

3030

DEFINITIONDEFINITION

• The Letter of Guarantee is a written The Letter of Guarantee is a written undertaken issued from the bank upon the undertaken issued from the bank upon the request of a person called the remitter request of a person called the remitter (applicant, principal, contractor, supplier, or (applicant, principal, contractor, supplier, or exporter) to pay an amount, specified or exporter) to pay an amount, specified or liable to be specified to another person liable to be specified to another person called the beneficiary( purchaser, buyer, or called the beneficiary( purchaser, buyer, or importer) if he asks the bank to do so, importer) if he asks the bank to do so, within the period determined in the letter of within the period determined in the letter of guarantee and without any objection guarantee and without any objection whatsoever.whatsoever.

3131

L/GL/G’’S NATURES NATURE

• Letters of Guarantee by their nature Letters of Guarantee by their nature are separate transaction from the are separate transaction from the contracts or tender conditions on which contracts or tender conditions on which they may be based, and L/Gthey may be based, and L/G’’s are in NO s are in NO way concerned with or bound by such way concerned with or bound by such contracts or tender conditions, despite contracts or tender conditions, despite the inclusion of a reference to such the inclusion of a reference to such contracts in the L/Gcontracts in the L/G’’s text.s text.

3232

L/GL/G’’s Deeds Deed....

• Date : / /2xxx.Date : / /2xxx.

• Messrs. ( BeneficiaryMessrs. ( Beneficiary’’s Name & Address).s Name & Address).

• L/GL/G’’s type ------- & Ref.----s type ------- & Ref.----

• We hereby guarantee / ApplicantWe hereby guarantee / Applicant’’s Name.s Name.

• For the extent of/ amount & Currency.For the extent of/ amount & Currency.

• In respect of :--------( legal purpose).In respect of :--------( legal purpose).

• We undertake to pay you any sum or sums within the above mentioned We undertake to pay you any sum or sums within the above mentioned extent without any contestation from any party whatsoever.extent without any contestation from any party whatsoever.

• This L/G valid until : --/ -- / -----.This L/G valid until : --/ -- / -----.

• Therefore, any claim for payment must reach us on or before that date Therefore, any claim for payment must reach us on or before that date at the latest, otherwise you are NO longer entitled to such claim and at the latest, otherwise you are NO longer entitled to such claim and the present L/G will be definitely as null and void without the need of the present L/G will be definitely as null and void without the need of any advice whatsoever.any advice whatsoever.

• This L/G is personal to you and is not assignable.This L/G is personal to you and is not assignable.

3333

BANKBANK’’S DUTYS DUTY

• The duty of a guarantor ( the bank ) The duty of a guarantor ( the bank ) under L/Gs is merely to pay the sum under L/Gs is merely to pay the sum or sums therein stated on the or sums therein stated on the presentation of a written demand for presentation of a written demand for payment and other documents payment and other documents specified in the L/Gspecified in the L/G’’s text which s text which appear on their face to be in appear on their face to be in accordance with the terms of the L/G.accordance with the terms of the L/G.

3434

Types of L/GTypes of L/G’’s s

• From the Legal From the Legal Point of view are :-Point of view are :-

FINAL

PROVISIONAL

3535

TYPES OF L/GsTYPES OF L/Gs

• From the From the Operational Point Operational Point of view are:-of view are:-

Local

Foreign

3636

L/GL/G’’s Partiess Parties

• For Local L/GsFor Local L/Gs

.

.

.

3737

L/GL/G’’s Partiess Parties

• For Foreign L/Gs :-For Foreign L/Gs :-

3838

From the Technical point of From the Technical point of view view

All Types

Customs L/G’s

Goods for transit only

Customs Duty

Travel Carnet

Contracts

L/G’s

Bid-bond /

TenderMoney

Retention

Performance Maintenance

Advance Payment

Warranty

Financial L/G’s

Facility Open Acc.

Tax Duty Payment Installments

Profession Related

Payment L/G

Temporary import of Goods Demurrage

Handling containers

3939

L/GL/G’’S LIFE CYCLES LIFE CYCLE..

DECREASE

INCREASE

ALTERATION CANCELLATION

RE-ISSUE

RENEWAL

EXTENSION

ISSUANCE

4040

Question for the Day OneQuestion for the Day One....

• What is the core different between What is the core different between the word the word ““ GUARANTEE GUARANTEE ““ and the and the word word ““SECURITYSECURITY”” ? ?

4141

Chapter Three..

•Most Important Document used in Trade.

•Commercial Documents & Financial Documents.

4242

DOCUMENTS USED IN TRADE.

• Any documents can be classified into two categories:-

• First Category is : Financial Documents,• Such as,• Bills of Exchange.• Promissory Notes.• Cheques.• Or• Any other similar instruments used for

obtaining the payment of money.

4343

DOCUMENTS USED IN TRADE.

• Second Category is : Commercial Documents such as :• Commercial Invoice.• Bill of Lading.• Air Way Bill.• Certificate of Origin.• EURO 1 – Certificate.• Insurance policy.• Packing List.• Weight List.• Inspection Certificate.• Health Certificate.• Analysis Certificate.• Fumigation Certificate.

4444

Financial Documents..

• Bill of Exchange• Definition :-• A bill of exchange is an unconditional order

in writing, addressed by one person to another, signed by the person who giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to a specified person or to the order of a specified person or to bearer.

4545


•Cheques,

•The legal structure of a cheque is similar to that of a bill of exchange.

•Unlike the bill of exchange , a cheque must be drawn on a bank and it is payable upon presentation to that bank.

4646


• Promissory note,• It also has most of the same features as a

bill of exchange.• The essential differences is that it is not an

order to another party to pay, but it is a direct promise of payment by the party who signs the promissory note.

• In the way as the bill of exchange, it must be drawn up in unconditional terms.

4747

What are the commercial documents?

•There are a lot types of commercial documents,

•Such as …………………….

4848

COMMERCIAL INVOICE.

•Must appear to have been issued by the beneficiary, and it needs not to be signed.

•Must be made out in the name of the applicant.

• It includes full description of goods as stated in the credit, such as quantity, quality, item price, and total price.

4949

BILL OF LADING.

• A bill of lading however named must appear to indicate the name of the carrier and be signed by the carrier or his agent,

• Or by the master or his agent.• It indicates that, the goods have been

shipped on board a named vessel from the port of loading to the port of discharge.

• Transshipment means, unloading from one vessel and reloading to another vessel during the carriage.

5050

AIR WAY BILL.

• An air transport document however named, must appear to indicate the name of carrier and be signed by the carrier or his agent.

• Indicates the air port of departure and the air port of destination stated in the credit.

• Transshipment means, unloading from one aircraft and reloading to another aircraft during the carriage from the airport of departure to the airport of destination.

5151

CERTIFICATE OF ORIGIN.

• Basic requirements:-• Be dated and signed.• Stated the origin of the goods ( i.e

produced by which country).• Indicates the description of the goods in

general terms not identical as the credit.• The exporter’ s name or the manufacturer’

s name.• The applicant’ s name.

5252

EUR 1 – CERTIFICATE.

• EUR 1, is the name of the form which is used in international commodity traffic.

• It is based on application of various multilateral agreements within the European Union Association Agreement.

• In the trade free agreements, goods are defined which apply to cheaper rates of duty or to be completely duty-free introduced, under the condition that, they were completely manufactured in a member country.

• EUR 1, must be handed over to the competent authority in order to enjoy with the preferential rate during a customs clearance.

• EUR 1 certificate, is recognized also as a certificate of origin in the external trade in legal sense.

5353

INSURANCE POLICY AND / OR CERTIFICATE.

• An insurance document such as insurance policy, or insurance certificate must appear to be signed by an insurance company, or their agents.

• The insurance policy must indicate that, risks are covered at least between the place of shipment and the place of final destination.

• It will include the applicant’s name, the beneficiary’ name, place of shipment, and final place of destination.

5454

INSURANCE POLICY.

• Based on the London code, the general cargo are available at three levels of coverage:-

• Clause “ A “ will cover loss due to,• 1) Problems with the carrying vessel or train – such

as collision, explosion, fire, sinking, running aground, washed overboard, lost on loading or unloading.

• 2) it covers events such as volcanic activity and earthquakes.

• 3) it covers costs incurred due to theft and non-delivery.

• Clause “ B “ will cover all risks under (1) & (2) only.• Clause “ C “ will cover all risks under (1) only.

5555

INSURANCE POLICY.

• Additional cover can be obtained by purchasing insurance with one of the standard institute cargo clauses for wars or strikes.

• The insured is not covered for :-• Misconduct by the insured.• Poor packing.• Any inherent of the cargo such as a

tendency to deteriorate over time.• Insolvency of the carrier.• An unseaworthy vessel.

5656

Chapter Four..

•Methods of Payments used in Trade:-

•Open Account.

•Advance Payments.

•Documentary Collections.

•Export & Import Letters of Credit.

5757

Methods of Payment in Local & International Trade.

O/Acc

Cash in Advance

Documentary Collections

Letters of Credit / Documentary Credits

5858

OPEN ACCOUNT.

Open account trading is most commonly used in situations in which the two companies concerned know each other well and have a long established trading relationships.

How do it operate?

5959

Open Account.

• When business is conducted between seller and buyer on open account terms:-

• 1) the sellers dispatches goods to the buyer and at the same time sends to the buyer an invoice together with other appropriate documents.

• 2) the buyer makes arrangements to pay on the relevant date according to the terms of the agreement, and he may use any payment method such as an international bank transfer or cheque.

6060

Open Account.

• This system is particularly attractive to buyer because it affords them the opportunity of examining the goods before they have to make payment.

• On the other hand, seller using open account methods obtain NO security for payment and have to rely on the creditworthiness and good faith of the buyer.

6161

CASH IN ADVANCE.

• A buyer may make payment in advance, before the goods are shipped.

• The reasons for using this methods may be due to:-

• 1) seller may not have finance with which to buy raw materials or prepare the goods for shipment.

• 2) seller may be unwilling to ship goods to the country of the buyer for reasons of contry risk.

• 3) buyer may wish to encourage the seller into long term trade relationship.

• 4) buyer feels comfortable with its relationship with the seller and wish to enjoy with a good discount for goods’ value.

6262

DOCUMENTRY COLLECTIONS.

• Seller will dispatch the goods or services to the buyer’s country.

• The seller will send all the relative documents to his bank ( usually known as Remitting bank) for collecting his money.

• The seller’s bank, will forward such documents to the collecting bank (usually in buyer’s country) in order to obtain payment from the buyer under certain conditions.

• The collecting bank will deliver these documents to the buyer to obtain payment in accordance with collection instruction received from the remitting bank.

6363

DOCUMENTARY COLLECTIONS

•System mechanism first phase:-

The seller

Remitting bank

The buyer

Collecting bank

Dispatch goods

Forward documents

Send docs. For collection

Deliver docs. Against payment

6464


•System mechanism second phase:-

The seller

Remitting bank

The buyer

Collecting bankPayment or acceptance

Transfer money

Credit his account

Information of shipment details

6565

DOCUMENTARY COLLECTIONS.

• Under this procedures, the banks channel the documents but they do NOT themselves give any payment undertaking.

• This solution offers less security than a documentary credit but in return the costs are lower.

• The seller’s interest is best served where the buyer is not able to obtain possession of the goods without presentation of shipping documents that are sent through the banking system by the seller.

6666


•Definition of Collection:-• Collection means the handling by banks of documents, in

accordance with instructions received in order to :-

• 1) obtain payment and / or acceptance.

• OR

• 2) deliver documents against payment and / or acceptance.

• 2/A) C.A.D. ( Cash Against Document)

• 2/B) D / P (Deliver Against Payment)

• OR

• 3) deliver documents on other terms and conditions.

6767

DOCUMENTARY COLLECTIONS• Avalization procedures:-• If the seller has agreed to supply the goods on a

short-term credit it can stipulate that the documents be handed over against the buyer’s acceptance of a bill of exchange or signature on a promissory note.

• Then the bank can add its avalization to such instrument in order to become guaranteed for payment by the bank.

• The seller may be able to discount the bill or note in return for an immediate payment or he may wait to present this instrument on its maturity date to get his money.

6868

DOCUMENTARY COLLECTION.

• Collection Instruction:-• All documents sent for collection must be

accompanied by a collection instruction indicating that the collection is subject to URC 522 and must give a complete and precise instruction.

• Banks are only permitted to act upon the instruction given in such collection instruction.

• Banks will not examine documents in order to obtain instructions.

6969

DOCUMENTARY COLLECTIONS• Collection instructions should contain at least the

following items of information:-• 1) details of the bank from which the collection

was received including full name, postal code , swift code, telephone number, fax number and related reference number.

• 2) details of the principal ( seller) including full name, postal address, telephone and fax number.

• 3) details of the drawee ( buyer ) including full name, postal address or domicile at which presentation is to be made and if applicable telephone or fax number.

7070

DOCUMENTARY COLLECTIONS• 4) Details of the presenting bank including full name, postal

code, swift code, postal address, and telephone or fax number.

• 5) Amount (s) and currency to be collected.• 6) List of all documents enclosed.• 7) Terms and conditions upon which payment and / or

acceptance is to be obtained.• 8) Terms of delivery of documents whether :• - Cash against Document.• Or• - Delivery against Acceptance.• Or• - any other terms & conditions.

7171

DOCUMENTARY COLLECTIONS• Disclaimer on effectiveness of documents:• Banks assume NO liability or responsibility

for the form, sufficiency, accuracy, falsification or legal effect of any document or for the general and / or particular conditions stipulated in the document.

• Also banks assume NO liability or responsibility for the description, quantity, weight, quality, conditions, packing, delivery terms, value or existence of the goods represented by any document.

7272

LETTER OF CREDIT.

• DEFINITION.• Letter of credit means any arrangement however named or

described, that is irrevocable and thereby constitute a definite undertaking of the issuing bank to honor a complying presentation.

• Complying presentation means a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of the UCP rules and the international standard banking practices.

• The Uniform Customs and Practice for documentary credit, 2007 Revision, ICC publication number 600, (UCP) are rules that apply to any documentary credit when the text of the credit expressly indicates that it is subject to these rules.

• They are binding on all parties thereto unless expressly modified or excluded by the credit.

7373

DOCUMENTARY COLLECTIONS•Advice of acceptance / or non-

acceptance.•The collecting bank must send without

delay an advice of acceptance or non-acceptance to the bank from which the collection instruction was received.

•On this stage, the whole documentary collection’s process will be closed.

7474

Letter of Credit

• Documents V. Goods, Services & Performance.

• Banks deal with Documents only and not with Goods, Services or performance to which the documents may relate.

• A credit by its nature is a separate transaction from the sale or order contract on which it may be based.

• Banks are in NO way concerned with or bound by such contract even if any reference to it is included in the credit.

7575

LETTER OF CREDIT.

•All parties concerned are :-

Seller / beneficiary/exp

orter

Nominating bank Issuing

bank

Buyer/ applica

nt/ importe

r

Issue swift700ADVICE DOCS

Advic

e L

/C’s

SHIP. GOODS

SIGN APPLICATION

Pre

senta

tion-D

ocs

FORWARD DOCS

SEND PROFORMA INVOICE

7676

FLOW CHART OF ALL BANKS ROLE UNDER DOC. CREDIT.

EXPORTER IMPORTER

ISSUING BANK

NOMINATED BANK

CONFIRMING BANK

ADVISING BANK

7777

ADVISING BANK.

•An advising bank advises the credit and any amendment to the beneficiary without any undertaking to honor.

•The advising bank must signify that it has satisfied itself as to the apparent authenticity of the credit or its amendment.

7878

ISSUING BANK.

•An issuing bank is irrevocably bound to honor as of the time it issues the credit.

•An issuing bank undertakes to reimburse a nominated bank that has honored or negotiate a complying presentation and forwarded the documents to the issuing bank.

7979

NOMINATED BANK.

•Any authorization issued from the issuing bank to the nominated bank in order to honor a complying presentation, does not impose any obligations on that nominated bank to honor, except when expressly agreed to by that nominated bank and so communicated to the beneficiary.

8080

CONFIRMING BANK.

• Confirming bank means the bank that, adds its confirmation to a credit upon the issuing bank’s authorization or request.

• A confirming bank is irrevocably bound to honor a complying presentation as of the time it adds its confirmation to the credit.

• A confirming bank undertakes to reimburse another nominated bank that has honored a complying presentation and forwarded the documents to the confirming bank.

8181

LETTER OF CREDIT.

• A BASIC DOCUMENTARY CREDIT TRANSACTION WILL BE ESTABLISHED IN ACCORDANCE WITH THE FOLLOWING STEPS:-

• 1) often, the seller sends to the buyer a pro forma invoice, indicating details of the Goods and their unit prices, quantity, quality, terms of payment, before conclusion the transaction.

8282

LETTER OF CREDIT.

•2) agreement,

• In this situation seller and buyer frequently maintain their own set of standard conditions of sale and purchase setting out the terms on which they normally conduct business.

8383

LETTER OF CREDIT.

• 3) Application format,

• The buyer completes & signs a standard documentary credit application form made available by banks, requesting that the bank to issue a documentary credit in favor of the seller.

• This application form should specify the documents that are to be presented and all required terms & conditions to be complied with.

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LETTER OF CREDIT.

• 4) Issuing L/C :

• The issuing bank will check customer’s position before taking any action, and may seek proper approval in case of there is NO credit line facility available to issue this L/C.

• After getting all proper approval, the issuing bank will issue this L/C by sending a SWIFT message M.T 700 to the nominating bank.

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LETTER OF CREDIT.

•6) Goods & Docs:-•The seller will dispatch the Goods

directly to the buyer as per L/C’s terms.•Then send to the buyer (by Fax)

Shipment details and copies of some docs.

•Presents all the required documents to the counters of the nominating bank with time frame for presentation.

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LETTER OF CREDIT.

•5) Advising L/C :-

•The nominating bank will be responsible to advice the seller with this L/C’s terms & conditions without any delay.

•The seller will review all terms & conditions and may seek any amendments before shipping the Goods.

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LETTER OF CREDIT.

•7) Docs Examination:

•The nominating bank will examine all documents presented to make sure that they are complied with L/C’s terms and conditions.

•Then, forward these documents to the issuing bank’s counter.

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LETTER OF CREDIT.

•8) Issuing bank’ Role:-

•Examine these documents again in order to make sure that there is NO discrepancies in such docs.

• Inform the buyer to receive the docs.

•Make payment to the nominating bank in accordance with L/C’s terms.

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LETTER OF CREDIT.

•Terms of payment will be one of the following methods:-

•First : AT SIGHT PAYMENT.

•Means that payment should be made on demand upon presentation of complied docs.

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LETTER OF CREDIT.

•Third : by ACCEPTANCE:

• It means that the payment is not immediate.

•Drafts are required to be presented and payment is on the maturity date of the draft.

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LETTER OF CREDIT.

•Second : by DEFERRED PAYMENT.

•Means that, payment is not immediate.

•Payment is a time in the future determinable in accordance with the documentary credit.

•A draft is NOT required to be presented.

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LETTER OF CREDIT.

• Fourth : By NEGOTIATION,• Payment may or may not be immediately.• Drafts may or may not be required for

presentation.• It means the purchase by the nominated

bank of documents and / or drafts under a complying presentation by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank.

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Chapter Five..

•Delivery terms,

• International commercial terms.

• INCO TERMS 2010.

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INCO TERMS 2010. ( DELIVER TERMS)

• In order for trade to prosper, buyers and sellers must be clear as to where their responsibilities under commercial contracts begin and end.

• Consequently, buyers and sellers will need to know who is responsible for the payment of carriage, insurance, loading, unloading costs, import / export taxes and other related expenses.

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INCO TERMS 2010.

•As a result,•The International Chamber of

Commerce in Paris ( ICC ) designed an international commercial terms ( INCO TERMS) which were first published in 1936,

•There are now the accepted international standard for trade terms referred in commercial contracts.

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INCO TERMS 2010.

• Failure to establish transparently the parameters of these responsibilities within the commercial contracts would make it difficult for sellers to price their goods accurately and for buyers to calculate the full purchase costs.

• Such failure would also increase the number of contractual disputes between buyers and sellers, which would have to be resolved by arbitration or through the courts.

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INCO TERMS 2010.

1) EX. Works,• Means that, the seller delivers when he

places the goods at the disposal of the buyer at the seller’s premises or another named place such as work, factory, or warehouse, not loaded on any collecting vehicle, and at the agreed date / period.

• If the buyer fails to give notice for delivery to the seller then the buyer bears all risks of loss or damage to the goods from the agreed date or the expiry date of the agreed period of delivery.

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INCO TERMS 2010.

• 2) FCA: Free Carrier:• This INCOTERM can be used for any mode of

transport and may be also used where more than one mode of transport is used.

• Means that the seller delivers the goods cleared for export to the carrier named by the buyer at the seller’s premises, seller will be responsible for loading

• or • at another named place ( seller will not be

responsible for loading).

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INCO TERMS 2010.

•3) FAS : Free Alongside Ship,

•Means that the seller delivers when the goods are placed alongside the vessel, on a quay or in a lash barge cleared for export at the named port of shipment.

• In case of containers, then the point will be at the container yard.

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INCO TERMS 2010.

• 4) FOB .. Free On Board,

• Means that, the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment.

• The buyer has to bear all costs and risks of loss or damage to the goods from that point.

• This term can only be used for sea or inland waterway transport.

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INCO TERMS 2010.

•5) CFR .. Cost and Freight,

•Means that, the seller delivers when the goods are placed on board the vessel.

•The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

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INCO TERMS 2010.

•6) CIF .. Cost, Insurance & Freight,

•Same as above, but the seller also has to produce marine insurance against the buyer’s risk of loss or damages.

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INCO TERMS 2010.

•7) CPT .. Carriage Paid to,•Can be used for any mode of

transport and may be used also where more than one mode of transport is used.

•The seller delivers the goods to the carrier nominated by him and pays the freight of carriage the goods to the named destination.

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INCO TERMS 2010.

• 8) CIP.. Carriage & Insurance Paid To,• Same as above, but the seller will contract

for insurance cover against risk of loss or damage for the goods during the carriage.

• However, the seller is required to obtain a minimum cover only.

• If the buyer needs more risks to be covered he must either agree with the seller for such additional risks or arrange to obtain himself for such insurance.

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INCO TERMS 2010.

• 9) DAT - - DELIVERED AT TERMINAL.• This rule is available for any mode of

transportation.• The seller delivers when the goods once

unloaded from the arriving means of transport, and placed at the disposal of the buyer at a named terminal at the named port or place of destination such as ‘ terminal, quay, warehouse, container yard, or road, rail or air cargo terminal.

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INCO TERMS 2010.

10 ) DAP – DELIVERED AT PLACE.This rule can be used for any mode of transport.The seller must deliver the goods by placing them at the

disposal of the buyer on the arriving means of transport ready for unloading at the agreed point or at the named place of destination on the agreed date or within the agreed period.

The seller bear all risks of loss or damage to the goods until they have been delivered to the buyer.

Except,If the buyer fails to fulfill is obligations in obtaining the import

license or other official authorizations required to carry out all customs formalities for the importation of the goods.

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INCO TERMS 2010.

• 11) DDP.. DELIVERED DUTY PAID.• This term is available for any mode of

transportation.• Same as No. (10) DDP,• But, in this case the seller is responsible for not

only for delivering the goods cleared for export, but also cleared for import.

• Which means that, the seller is responsible to pay any duty for both export and import in order to carry out all customs formalities.

• This term represents the maimum obligations on the seller.

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Chapter Six..

• International Payments & SWIFT mechanism.

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S.W.I.F.TS.W.I.F.T..

These initials stand for:-These initials stand for:-

The Society for The Society for Worldwide Inter-bank Worldwide Inter-bank Financial Financial Telecommunication.Telecommunication.

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• It is an international organization.It is an international organization.• The membership of which consists of The membership of which consists of

more than 3000 bank and financial more than 3000 bank and financial institutions located in 72 country.institutions located in 72 country.

• The society which was created under The society which was created under Belgian law, is based in Brussels, but Belgian law, is based in Brussels, but has representative offices worldwide, has representative offices worldwide, particularly in the major financial particularly in the major financial centers. centers.

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• It was formed to accelerate the transfer of It was formed to accelerate the transfer of funds and other messages between funds and other messages between member institutions.member institutions.

• By mid 1991, the society was handling 1.5 By mid 1991, the society was handling 1.5 million messages a day.million messages a day.

• The system works by means of a The system works by means of a telecommunications link between the telecommunications link between the computer systems of the members that computer systems of the members that allows the rapid transmission of messages.allows the rapid transmission of messages.

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• It is used to execute telegraphic It is used to execute telegraphic transfers previously sent by cable or transfers previously sent by cable or telegraph and may also be used for telegraph and may also be used for international payment orders / air international payment orders / air mail transfers at the discretion of the mail transfers at the discretion of the member institution, making for a member institution, making for a much faster execution of the much faster execution of the customercustomer’’s instructions. s instructions.

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International Payment Transactions..

Clean Collections

Outward Transfer

Screening Unit

Inward Transfer

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THANKS FOR YOUR THANKS FOR YOUR ATTENTIONATTENTION..

• TRADE FINANCE OPS TEAM.TRADE FINANCE OPS TEAM.

Barclays Bank, Egypt.Barclays Bank, Egypt.

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presentation about bank induction 2012

Economy & Finance