Bank instruments

Bank instruments

SBLC

 a SBLC (Stand by Letter of Credit) is a document issued by a bank, guaranteeing payment on behalf of a client. This is used as a “payment of last resort” if the client fails to fulfill a contractual commitment with a third party. In all reality, the SBLC is just a piece of paper with a “value” backed by the good credit of the bank, allowing clients use a “conditional collateral” if needed.

The SBLC (Stand by Letter of Credit) is commonly used when two parties enter into a contract calling for one party to arrange a L/C in favor of the other.  With any Stand by Letter of Credit, the agreement is the SBLC will NOT be “drawn” unless the owner defaults on the contract.  If the beneficiary was to monetize the SBLC without prior agreement, the owner could dispute the contract in court. The truth is, SBLC’s are rare and used MOSTLY in industrial or bulk commodity sales, serving as a “performance bond” of sorts.

LC

 Letters of credit are often used in international transactions to ensure that payment will be received. Due to the nature of international dealings including factors such as distance, differing laws in each country and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade. The bank also acts on behalf of the buyer (holder of letter of credit) by ensuring that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped.

Bank Draft

 A type of check where the payment is guaranteed to be available by issuing bank. Typically, banks will review the bank draft requester's account to see if sufficient funds are available for the check to clear. Once it has been confirmed that sufficient funds are available, the bank effectively sets aside the funds from the person's account to be given out when the bank draft is used.

Swift MT103

 Founded in Brussels in 1973, the Society for the Worldwide Interbank Financial Telecommunication (SWIFT) is a co-operative organisation dedicated to the promotion and development of standardized global interactivity for financial transactions.

 SWIFT MT-103’s are the most commonly used form of SWIFT communication, and are normally used to make payment to customers of another bank in another country.

Corporates often confuse the MT103 with the MT101, which they would use themselves when initiating a payment through SWIFT.

MT202

 This message is sent by or on behalf of the ordering institution directly, or through correspondent(s), to the financial institution of the beneficiary institution.

It is used to order the movement of funds to the beneficiary institution.

This message may also be sent to a financial institution servicing multiple accounts for the Sender to transfer funds between these accounts.

 

MT799 and MT760

 he global swift system is used by more than eight thousand financial institutions in sending and receiving various financial statements and letters. The most prominent letter used in this system is the mt760 swift and the mt799 swift. These two letters have a number of differences and similarities. The main similarity between the two types of swift messages is in how they are sent. Both letters are sent from one bank to another without necessarily consulting the client. Another similarity is that both letters are sent during a significantly large transaction between two individuals. In spite of these similarities, the two swift messages have numerous differences that individuals should be aware of.

 The main difference between the mt760 swift message and the mt799 swift message is in when they are sent. The mt799 is sent before the mt760 and is a prelude to the sending of the mt760. Hence, the role of the mt799 is merely to notify and nothing else. This document is sent days or weeks before the sending of the mt760. It is important to note that the mt799 has no impact on the financial situation of an individual. This is another big difference that exists between the two documents.

 The mt760 swift message will impact the financial condition of a client since it a verification of freezing of funds by one bank. The mt799 swift message will have no impact on the financial situation of an individual since it is sent before the funds are frozen. This is another difference between the two documents. Another difference between the two documents is that the mt760 swift is sent after the sending bank has set aside the required amount of money. The mt799 is sent before the sending bank freezes the required amount of money in the purchasing individual’s bank account.

MT110

 MT110 Drawing Advices are sent by a Financial Institution that has drawn a Cheque on its account-holding branch, and are received within a Bank. There, they are held on file and manually matched against the incoming Cheque as and when these are presented for payment, or the payment can be stopped if an MT 111 Stop Cheque Request is received.

  Link to all formats

 http://www.e-bookspdf.org/download/swift-mt-110.html

Leasing Instruments

Financial Instrument For Lease/Sale ( BG, SBLC, MTN)

We also provide a genuine lender from London, U.K who offer financial instrument lease and sale at a reasonable price with affordable procedure and condition. Our bank instrument lender offer Fresh Cut and Seasoned bank instrument such BG, SBLC, MTN and Confirmable Bank Draft (CBD), which can be engage into PPP Trading, Outright Discounting, signatory project(s) such as Aviation, Agriculture, Petroleum, Telecommunication, construction of Dams, Bridges, Real Estate and all kind of projects.

With our bank instrument you can establish line of credit with your bank or secure loan for your projects in which our bank instrument will serve a collateral in your bank to fund your project.

We deliver with time and precision as Sethforth in the agreement. Our terms and Conditions are reasonable. Below procedure its for BG/SBLC and MTN lease, other bank instrument procedure will be provided on request.

DESCRIPTION OF INSTRUMENT:

1. Instrument: Bank Guarantee {BG/SBLC}

2. Total Face Value: Eur 10M{Minimum} to Eur 10B{Maximum}

3. Issuing Bank: HSBC Bank Plc and Barclays Bank Plc {London, U.K}

4. Age: One Year and One Month

5. Leasing Price: 6%+2% =8%

6. Delivery: MT-760 {Bank-To-Bank Swift}

7. Payment: MT103/23

8. Hard Copy: Bonded Courier Service {within three banking days}

 

Bank Instruments

 

Understanding Bank Instruments, from Bank to End Investor

 

With so many people trying to broker private placement programs and bank instrument sales, we felt that it was critical to outline the entire process from instrument creation to maturity.

To truly understand the purpose and functions of bank instruments, we must first define what a bank instrument in fact is.  By definition, bank instruments are asset backed notes issued by a bank to an investor which mature over 5-10 years, collecting an annual coupon (“interest”) until it matures at its pre-defined value.

For those who don’t understand why debt instruments, bonds, or notes are created, let’s explain it all in 2 sentences:

Companies, or in our case banks, create paper notes (“IOU’s”) which they sell to investors, guaranteeing a certain annual interest and maturity value.  This allows the investor to collect their expected profit, while the bank accesses immediate cash to meet capital requirements for additional financing opportunities.

Unlike its boring cousins (bonds), the bank instrument is rather complex, and is typically referred to as a “hybrid note”.  Unique amongst most debit financing notes, bank instruments: collect high annual interest rates, are backed by top rated banks, and are issued ONLY in amounts of 50 Million EURO or greater. Though those are intriguing qualities, the key is: bank instruments can be purchased at a discount from face value, and traded to investors in the secondary market.

Since we understand this topic is rather complex, we created a 5 step summary to clarify the details of how bank instruments evolve. This will explain the relation of bank instruments to private placement programs, and the investment benefits to purchasing bank notes.

Bank Instrument Steps to Maturation

1. Once the investor or trader has been cleared through compliance, the issuing bank will “cut”/create an instrument (Medium Term Note or Bank Guarantee), naming the investor or trader as the sole beneficiary.  This instrument will have a predefined interest rate (0-7.5%/yr.), and a value on the date of its maturity. At this point, the purchaser would more than likely pay a discounted rate to the issuing bank, ranging from 60-90% of face value, depending on their relationships and the instrument’s size.

2. If the investor chooses to hold the note, they just collect interest and exercise the value upon maturity.  If the initial purchaser was a “trader”, they would have a pre-defined “exit buyer” to buy the note at a higher value (ex. Trader buy at 65, sell at 74).  As you can see with spreads like that, if the trader can consistently access instruments, they can organize a very profitable private placement program.

3. Once the first purchaser has purchased the note, they will usually resell it to another buyer at a higher price.  Though the buyer isn’t purchasing the note directly from the bank, many private placement programs are run by middlemen who fit right here in the process. Usually, they will purchase the note, and make a profit similar to what was made off of them (ex. Buy at 74, sell at 81). People in this position are usually high net worth individuals, large corporations, hedge funds, etc.

4. The final middle man repeats the process the others have done, but they look for a different type of buyer. In this case, the note has been traded several times, and is at a smaller discount than it originally was. For many that may not be appealing, but for for some that seems intriguing and less “risky”. Since everyone can verify the instrument has been owned by several companies (“seasoned”), institutional buyers such as pension funds, hedge funds, mutual funds, and other low risk ventures flock for security and higher yields.  As expected, the final middle man usually sells the note to an institutional buyer for a profit similar to what was made off of them (ex. Buy at 81, sell at 90).

5. The final purchaser holds the note, collecting the difference between the discount they paid vs. face value, and the annual interest until the time of its maturity.

Though the information above is accurate, the spreads per trade may vary depending upon a number of variables.  To state the obvious, different traders, banks, relationships, and strategies can make prices/profits fluctuate.