金融英语复习题

Intermediary Services

1、Can you list some functions of commercial banks？
The 3 main functions of commercial banks:
the creation of money accomplished through lending and investing activities
the holding of deposits
the provision of a mechanism for payments and transfers of funds
They all relate to the bank’s critical role in the overall management of the flow of money and
credit through the economy.
2、Why do we need negotiable instruments when making payments?
Paying large sums of money in cash is inconvenient and risky.
Negotiable Instruments such as Bills of Exchange, Cheques and Promissory Notes are wildly used
as instruments in the international settlement. They represent a right to payment. A right is a
promise and not a tangible piece of property.
汇票和支票的区别
1、Bills of exchange：require the drawee to pay on demand
Cheques：require the bank to pay on demand
2、a cheque is never accepted by the bank on which it is drawn
3、few cheques are ever negotiated
4、In certain circumstances,an order cheque bearing a forged or anun authorized endorsemend
is
discharged by the bank on which it is drawn
5、The rules relating to crossings are confined to cheques

区别：cheques：not the same person
支票、银行汇票
Bank drafts:The drawer and drawee are the same person
区别：bills of exchange:is in the form of an order
汇票和本票
Promissory notes：1、is a promises to pay
2、The drawer and drawee are the same person
3、is never accepted
4、The maker of promissory note is always the party
primarily liable for
payment
5、They are issued for certain fixed amounts,always payable to the better
and on
demond
资本租赁
Capital lease：noncancelable
The parchase of an asset and incurrence of a liability
经营租赁
Operating lease:cancelable lleases is a lease written for a short period than the economic life of the
leased asset
杠杆租赁
Leverage lease: is a three-party lease involving a lessee ,a lessor,and a long-term creditor

The long-term creditor provides nonrecourse financing to the lessor
Factor:is a short-term financing from the nonrecourse sale of accounts
receivable to a third
party,known as a factor
Discount factoring: in which the factor pays a discounted price for the receivables prior
to
the maturity date
Maturity factoring where factor pays the client the purchase price of the factored
accounts
at maturity
Factoring:is normally done without recourse
Accounts receivable financing : carried out on a recourse basis
is a form of collateralited lending in which accounts
receivables are
the collateral 抵押

International settement（国际结算）
1、remittance(汇款) 2、collection(托收) 3、documentary credit（跟单信用证）
（一）Remittance
accounts(往账)：is our bank's account in the book of an overseas bank.
accounts(来账)：is an overseas bank's account in our bank.




Trust Services
1、There are 3 parties involving in the operation of Trust Service:
the trustor, or party creates the trust, is also know as the settlor, grantor, or donor.
the beneficiary, an individual or charitable organization, for whose benefit the fund is established.
A beneficiary may have an interest in the trust income, corpus or both; and a present interest,
commencing with the trust creation, or a future interest, commencing when a specified event
occurs, or both
the trustee, who is charged with the management and preservation of the property constituting the
trust estate.
2、What is a factoring in substance?
Factoring is short-term financing from the nonrecourse sale of accounts receivable to a third party,
know as the factor, usually a bank- holding company or the bank itself.
Factoring is normally done without recourse, meaning that the factor does the credit evaluation
before credit is extended and assumes the risk of nonpayment.

结算
1、Can you list any means of international settlement that you know？
The three most- commonly used means of international settlement:
remittance
collection
documentary credit
The other two means: standby LC & bonds
2、Bookkeeping for Transfers of Funds

There are two ways for bookkeeping for transfers of funds:
One is to debit the customer’s account with the amount to transfer, plus banking charges, and
credit the account of the overseas bank under advice to it. This is a _____ account from the
customer’s bank’s point of view.
On receipt of the advice, the overseas bank will withdraw the account from the ____ account, and
credit the beneficiary’s account, less its charges.
The other is to debit the customer’s account with the amount to transfer, plus banking charges,
and credit the currency to the ____ account for reconciliation.
Advise the overseas bank that it can debit the ____ account with the requisite account and credit
the funds to the account of the beneficiary.

Collection
1、There are usually four parties to a documentary collection operation:
exporter (seller, principal)
remitting bank: the principal’s bank
collecting bank; the term ‘collecting bank’ is applied to any bank, which is involved in the
execution of the collection order, and it presents the documents to the importer.
importer (buyer, drawee)


2、Stages of a Documentary Collection
The whole process, extending from the first contact between the importer and exporter to the
completion of the transaction, can involve many separate steps.
Basically, a documentary collection has three stages:
STAGE 1 Establishing the terms of collection
The exporter stipulates the terms of payment in his offer or agrees them with the buyer in the
contract of sale.
STAGE 2 Collection order and transmission of documents
STAGE 3 Presentation of documents and settlement

3、Can the exporter be sure at the time of dispatch of the goods that the buyer will actually pay the
sum owed?
No.
So this form of settlement is therefore most appropriate in the following cases:
if the exporter has no doubt about the buyer’s willingness and ability to pay;
if the political, economic and legal environment in the importing country is considered to be
stable;
if the buyer’s country has placed no restrictions on imports (e.g. exchange controls) or has issued
all the necessary authorizations.

4、Clean Collection: a draft or cheque unsupported by documents
Documentary Collectioin: documents with or without a draft
Q: The disadvantages of clean collection
LC
1、In practice, 6 parties may involved in a documentary LC.
Applicant: the party at whose request of for whose account a LC is issued. debtor
Beneficiary: the party who is entitled to have its complying presentation honored. exporter
Issuing Bank: the bank that issues a LC in favor of the beneficiary. creditor
Advising Bank: a bank who, at the request of an issuing bank, a confirming bank, or another
advising bank, notifies or requests another advising bank to notify the beneficiary that a LC has
been issued, confirmed, of amended.
Confirming Bank: a nominated bank who undertakes, at the request or with the consent of the
issuing bank, to honor a presentation
Nominated Bank: the bank whom the issuing bank designates or authorizes to pay, accept ,
negotiates, or otherwise give value under a LC or undertakes by agreement or custom and
practices to reimburse.

2、The differences between them primarily lie in 4 aspects as follows:
Whether there are banker’s credit involved in.
Which party is the principal.
When does the exporter ship goods.
Which party is the drawee of the draft.
Can you list any others?

3、 Four Types of Documentary LC
Payment Credit:
Characteristics: the nominated bank will pay the beneficiary on receipt of the specified documents
and on fulfillment of all the terms of the credit.
Negotiation Credit:
The issuing bank will nominate the advising bank to negotiate a credit, or it may even make it

freely negotiable, in which case any bank may be a nominated bank.

Acceptance Credit:
It is also referred to as a “term credit” or “usance credit”, which means that the seller draws
a draft on the nominated bank demanding payment at some determinable future date, e.g., at 30
days sight instead of at sight.
Can the seller receive payment immediately after presenting the complying documents?
In practice, this means that instead of receiving immediate payment on presentation of the
documents (at sight), the seller’s draft is returned to him accepted on face by the nominated bank.

Deferred Payment Credit:
In deferred payment credit, there is no need for the exporter to draw a BE. The issuing bank
simply guarantees that payment will be made on a fixed or determinable future date, provided the
other conditions have been fulfilled.
Although the exporter does not draw a BE, in practice some banks will negotiate the documents
provided.
One distinct benefit of deferred credits: they avoid the need for payment of stamp duty on BEs.
And in some countries stamp duties are really high.

5、Transferable Credit: under UCP a credit is only transferable if it is expressly designated
transferable by the issuing bank.
On what conditions can a transferable be used?
When the supplier of goods sells them through a middleman and does not deal directly with the
ultimate buyer.
Parties:
the first beneficiary of the credit: middleman
the second beneficiary: the original supplier

6、What’s the contrast between negotiation and comfirmation?
Negotiation advances are with recourse, so that if payment is not ultimately forthcoming from the
issuing bank, the negotiating bank will be able to claim repayment from the beneficiary of the
advance, plus interest. Confirmation advances are without recourse.

7、Why there is a need for a first beneficiary and a second beneficiary?
The middleman may not wish to arrange a documentary LC by himself, or his banker may not be
willing to issue a credit on his behalf. Thus the middleman will approach the ultimate buyer and
ask him to arrange a transferable credit in the middleman’s favor, which entitles the middleman as
the first beneficiary.
This transferable credit will allow the first beneficiary to request the bank authorized to pay, incur
a deferred payment undertaking, accept or negotiate, or in the case of a freely negotiable credit,
the bank specifically authorized as the transferring bank to make the credit available to one or
more third parties known as “second beneficiaries”

8、What are the similarities and differences between transferable and back-to-back LC?

They are used in the same situations when the supplier of the goods and the ultimate buyer deal
through a middleman, but the rights and obligations of the parties differ between them.

9、When does the “back-to-back” aspect comes into play?
The middleman applies to his bankers to issue one documentary credit on his behalf, but his
bankers are not satisfied with his creditworthiness and insist that the middleman obtain a
documentary credit in his favor from the ultimate buyer as security for one which the middleman
has applied for in favor of the original seller.

10、Revocable LC vs. Irrevocable LC
In contrast, an irrevocable credit gives the beneficiary greater assurance of payment, for it cannot
be cancelled or modified without express consent of the issuing bank, the confirming bank (if any)
and the beneficiary.

11、A Double Assurance of Payment:
Why can the beneficiary obtain a double assurance of payments under a confirmed credit?
Because a confirmed credit represents the undertaking of both the issuing bank and the confirming
bank.
12、On what condition does the beneficiary require a confirmed credit?
If the classification of the credit and the financial standing of the issuing bank are not satisfactory
to the beneficiary, he may desire the credit confirmed by another bank.
Standby LC
1、The similarities and differences between standby LCs and commercial LCs:
Similarities:
They are both promises by the issuer to honor the beneficiary’s presentation of the document or
documents specified in the LC.
Differences:
Commercial LCs are used as a payment mechanism, which means it is a method of payment that
anticipates a positive event, the consummation of the underlying transaction.
Standby LCs anticipates the possibility that something will go wrong or a negative event will
occur, such as the failure of the applicant to perform a monetary obligation, so the issuer is merely
“standing by”, just in the case that the obligation in the underlying transaction is not performed
by the obligor.

2、Types of Bonds ：Bid bonds or tender guarantees，Performance guarantees，Down or advance
payment guarantees，Retention money guarantees，Maintenance guarantees