14.

OTHER BANKING OPERATIONS Deposit business Neutral banking operations Guarantee operations Non-credit Non-classic operations Operations for own use
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B. Deposit banking business

Mobilization and concentration of financial resources
increasingly important segment of banks business policies, the most important source of deposit, optimal concentration of the funds in the bank.
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1. Short-term deposit business operations

deposit operations, rediscount operations, relombard operations, issuance of treasury bills, bonds and other short-term securities, short-term loans from other banks.
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2. Long-term deposit business operations

issuance of shares, issuance of bonds, and issuance of mortgage-backed securities?

Issuance of mortgage-backed securities Mortgage banks usually perform these operations. Mortgage loans and certain immovables (land, buildings, factories, certain assets etc.) are usually base for emission of mortage-backed securities. Its widespread in the countries with market economy. They are usually subject of stock exchange operations.
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C. Neutral banking operations

INTERMEDIATE: for account and on behalf of others:

payments in the country, foreign payment operations, various payments, collection (documentary collection operations).
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C. Neutral banking operations

COMMISSION: on its own behalf and for others account issuance of shares and other securities, letters of credit, issuance of guarantees, storage and management of securities, commissioning credit transactions, etc.
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Neutral short-term operations

payments in the country and abroad, short-term commission operations, documentary collection operations (collection) operations with letters of credit, currency and foreign exchange transactions, receiving depots and storage.
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Neutral long-term operations financial consulting, and asset management for client (custodial). Special segment of non-credit operations:

guarantee business

Guarantees
Performance guarantees:
Guarantee for tender (bidding) when an investor issues a public tender, each tenderer is required to have guarantee from his bank and bank guarantees that tenderer will conclude the contract if its offer was accepted. Guarantee for repayment of advance in cases where advance payment from customer is provided for delivery of goods or for fulfillment of works, bank guarantees to user of guarantee that orderer according to guarantee will do repayment part or whole of advance which user of guarantee paid, in case of default in performance of delivery or works. Guarantee for the quality of the works in case that company is contractor, investor needs a banks guarantee that orderer under the guarantee will do agreed works according to contract date and quality in accordance with contract.
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Performance guarantees:
Guarantee for the warranty period banks guarantee to user of guarantee that orderer under the guarantee will maintain quality of works at his own expense or eliminate any possible defects that may occur in contracted period. Customs guarantee banks guarantee in favor of the ITA (Indirect Taxation Authority) where is guaranteed that orderer under the guarantee will pay all customs duties or individual obligations from leasing, temporary import of goods, etc. Consignment guarantee if you represent a foreign company, while the imporatation of goods to consignment warehouse, guarantee is needed where bank guarantees to user of guarantee that orderer under the guarantee will pay goods or return goods from consignment warehouse. Guarantee for regular payment of the leasing bank guarantees to user of guarantee that orderer under the guarantee will properly settle obligations under the leases.
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Payment guarantees
Payment guarantee is issued for security of payment of delivered goods and its is the most common form of these guarantees. Payment guarantee may be used for repayment of financial loans where banks undertakes to pay the debt if the borrower do not perform the payment in agreed period.

Letter of intent
Not compulsory document where bank expresses intention to issue guarantee for the client on the basis of properly submitted documentation and in accordance with legal regulations of bank. 12

D. Non-credit, non-classic banking operations factoring, forfeiting, leasing, providing guarantee and acceptance of bills, participation in the stock exchange operations.
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Factoring
Represents purchase of short-term claims before the maturity date based on delivery of goods or services to customers in country and abroad (30 to 120 days) with taking of del credere risk and usually without right of recourse. Factor agrees that, in addition to mature claims, he buys, also, future claims from the seller. All claims must be executed in local currency because factor, by definition, does not take risks of exchange rates, currency and transfer risk.
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Participants in the business operation: seller, buyer, factor undertakes debt collection Open and closed (hidden)
Factor charges fee for its services which depends on the type of business, amount of claims, maturity date and risk assessment.
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Procedure:
First time only:

rating the creditworthiness of the company and its debtor, concluding the special contract with defined amount of purchased claims, commissions and discount rates, collateral...
Each purchase:

request for purchase with attached invoice/contract, receiving the confirmation of the debtor, signing the deal between bank and companies, payment of the discounted value of the purchased claims

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SELLER

1 2

BUYER

BANK FACTOR

6 7

FACTORING
1. sales contract 2. delivery of payment security instruments (PSI) 3. delivery of goods 4. sale of claims 5. payment of discounted value 6. presentation of PSI 7. collection of claims
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Forfeiting
Represents a method of export financing which is realized through the sale of export claims to the bank with presenting of documents which guarantee payment from the importer. Bank buys an export claim which exporter obtained from its foreign customer and bank renounces from any right of recourse from seller of claims ( in case the

claim under the maturity remain uncollected).

Forfeiter buyer, Forfeitist seller.

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Forfeiting
Claims are covered by guarantees or securities. Seller of claims guarantees for the claims and the validity of guarantee.
With sale of claims all economic and political risk are transferred to the forfeiter. Forfeiter becomes the owner of claims and he can trade with them.
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Forfeiting
With sale of claims seller receives liquid funds and frees up of risk of payment. The basis for determining the price is certain reference interest rate. Medium and long-term foreign trade (FT) transactions (3-7 years) are covered. They are secured by securities.
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EXPORTER
4 6 7

1 2

IMPORTER
10 11

BANK OF EXPORTER

BANK OF IMPORTER

FORFEITER BANK
1. sales contract 2. request for payment security instruments (PSI) 3. issuance of PSI 4. notification of PSI 5. delivery of goods

8 9

FORFEITING
6. sale of PSI 7. payment in cash 8. delivery of documents for payment 9. payments in line with maturity 10.information on payment 11.payments in line with maturity

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Advantages of export factoring IGA BiH for exporter:

liquidity (the advance billing of 80-90% of export invoice, rest

by collection of claims...),

no request for mortgage as collateral, favorable discount rates, support to growth of export sales, efficient collection of claims, administration of claims.
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Advantages of export factoring IGA BiH for bank:

participation in profit, good control of the exporters business connections, release of mortgage for other lines of loans, inflow assignment by factoring as an additional security, providing greater liquidity for exporter in order to pay other bank loans, increase of creditworthiness of the exporter, increase of competitiveness of exporter...
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Difference between factoring and forfeiting

FORFEITING
Main contractor : Maturity of claims which are sold: Business cooperations: Origin of claims: Price: Risk Right for recourse:
usually bank from 3 to 7 years
(medium and long-term)

FACTORING
other business entity from 30 to 120 days
(short-term)

only one claim Foreign Trade (FT)

expensive operation because it includes: interest, higher costs and bank fee higher because it takes claims from FT without right for recourse

long-term cooperation usually from domestic market

cheaper deal

lower risk, with or without right for 28 recourse

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Leasing
Renting or transferring certain items for temporary use by recipient of the lease.
User of the lease pays fee or rent, but he is, also, obliged to pay compensation in case of damage or destruction of an object of leasing.

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Leasing
Bank usually finances leasing company or leasing provider (producer) by leasing, and thus indirectly finances user of leasing. The leasing company is often owned by banks. Bank approves loan to leasing company by which it obtains asset and rents it to user of leasing.
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Advantages for providers of leasing:

safety (ownership of the equipment and the simple procedure

of return),

relatively simple documentation, less regulation (non-deposit institution), greater efficiency.

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Advantages for user of leasing:

without providing additional resources

(less than a traditional loan),

convenience and speed (ideally for a single day), flexibility (suitable for small and startup business, annuities
adjusted to needs of the client),

providing additional services through the leasing provider (eg. favorable maintenance of equipment).
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E. Operations for own use

Arbitration operations (earnings by the
difference in rates of securities on different stock exchanges)

Speculative stock exchange transactions

(purchase of securities on the stock exchange for later sale with higher rate),

Establishment of own companies or participating in other companies to maximize profits.

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Guarantee of a bill
Represents bill of guarantee of the bank.
The bank guarantees that someone of signatories of the bill will fulfill its obligation to the bill.

By signing the bill of guarantee, bank accepts the obligation that in case that debtor of the bill does not pay its obligation to the creditor bank will completely settle that obligation.
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Questions

?
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