2. Tutorial:Business Academy Topic: Financial Market and Banks Prepared by: Ing. Ingrid Ilčíková Projekt Anglicky v odborných předmětech, CZ.1.07/1.3.09/04.0002 je spolufinancován Evropským sociálním fondem a státním rozpočtem České republiky.

3. BANKING TRANSACTIONS

4.  Self service offered by the bank, usually provided for remuneration  active – the bank acts as a lender; credit banking products  passive – the bank is in the debtor´s position; liabilities, deposit banking products occur  neutral – the bank is neither the creditor nor the debtor; it provides guarantee, issues a letter of credit; those are reported under the balance

5. ACTIVE The bank provides loans, is in the position of a lender  it has 2 objectives – profitability of the loan – here it earns; however the interest must be acceptable for the clients  return – hedging against possible risk of default The contract must contain:  the amount, frequency and duration of payments  interest  APR  other costs and fees APR – annual percentage rate of charge  often given in a month period  it is not just the interest on the loan, but also other costs associated with the loan (counselling, selection, account management, changes, early repayment,…)

6. TYPES OF LOANS loan short-term medium-term and long-term special

7. SHORT-TERM LOANS  overdraft – a current account and the possibility to utilize a loan under the credit framework  discount – purchasing bills before maturity; the bank deducts a discount  acceptance – the bank does not provide money, accepts a foreign bill, is the principal debtor, the client receives a quality payment instrument – he must pay the bank a commission and also the value of the bill of exchange before the maturity of the bill; an offer for the best proven creditworthy clients  revolving – taking out a loan repeatedly; a new contract is not necessary, however the previous loan must be repaid  lombard – a loan secured by a quality movable property

8. MEDIUM-TERM AND LONG-TERM LOANS  mortgage – purpose loan to finance the aquisition of real estate; guaranteed by pledge property  emission – connected with long-term securities (corporate bonds)  consumer loans to citizens

9. SPECIAL FORMS OF LOANS  factoring – purchase of short-term receivables before their maturity; the bank passes the risk of default (Transfinance a. s. Prague); if banks are not willing to lend money by „credit crunch“ – growing importance of factoring  forfaiting – purchase of long-term receivables before the date of maturity, the company pays the client the amount of receivables deducted of a discount; it assumes the risk of non-payment

10. PROVIDING LOANS Return on loan The bank verifies  the borrower / debtor  credit rating  business plan  liquidity Requires certain guarantees  pledge of property  pledge of chattel  Pay attention to the conditions in the credit agreement, such as a commitment that the client will maintain both the movable and immovable property, which guarantees the loan, in good condition. Often the conditions are linked to a heavy fine.  guarantors  immobilization of deposit (blocking the debtor´s deposit on the account in favour of the creditor – in the case the loan is not repaid)  assignment of receivables

11. CREDIT REGISTER  standard tool in banking and finance of the EU and the world  in the CR since 2002; there are the following credit registers:  Client Information Bank Register, the Central Credit Register, Non- banking Client Information Register, negative SOLUS register  through a credit register the banks share information concerning creditworthiness and credibility of their clients. Credit registry speeds up the examination of applications for loans in individual banks  in the credit register there are collected both positive and negative credit information on all the clients of the member banks, who are in the credit relationship with the bank, i.e. they have a loan, a credit card and a released overdraft from it

12. ACTIVITIES:  Give 3 ways of securing a mortgage loan.  Use a calculator (idnes.cz) to calculate the APR; you want a consumer credit in the amount of CZK 100 thousand.

13. RESOURCES:  Klínský, P. Ekonomika 3. Praha: FORTUNA, 2004. ISBN 80- 7168-826-6.  Synek, M. a kol. Podniková ekonomika. Praha: C.H.Beck,1999. ISBN 80-7179-228-4.  Švarcová, J. a kol. Ekonomie – stručný přehled. Zlín: CEED, 2008. ISBN 978-80-903433-7-5.  Available on: http://kalkulacky.idnes.cz/cr_spotrebitelsky- uver-rpsn.phphttp://kalkulacky.idnes.cz/cr_spotrebitelsky- uver-rpsn.php  Available on: http://www.uspory.cz/clanky/novinky/jak-na- uverovy-registr