Banking Operations: A Comprehensive Guide
Housing Savings Account
A housing savings account is designed to establish a savings fund for acquiring, expanding, rehabilitating, or constructing a residence. It’s formalized through a passbook and offers a higher interest rate than standard savings accounts.
The appeal of this account lies in its interest rate and the tax relief it provides on personal income tax (PIT). The account has a maximum duration of four years, as tax regulations mandate allocating the savings fund to housing-related purposes within four years of its opening. Failure to meet this deadline or using the funds for other purposes results in the loss of tax benefits.
Fixed-Term Deposits and Certificates of Deposit
Fixed-term deposits are contracts where customers agree to keep a specific amount of money in the bank until maturity. They are documented in passbooks, which are non-transferable and registered under the depositor’s name. The deposit term can range from one month to any agreed-upon time. Interest rates are higher than those of savings accounts due to the limited availability of funds. Accrued interest is credited to the customer’s checking or savings account.
Upon maturity, customers can extend the deposit for another period equal to the initial one or cancel it. Certificates of deposit are transferable documents or receipts that represent time deposits issued by banks. These certificates state the amount, maturity date, interest rate, and payment terms.
Active Operations
The most common asset operations are:
- Discounting of commercial paper
- Loans
- Credit
- Bank guarantees
From a financial perspective, active operations are classified based on their maturity:
- Short-term operations: Discounting, credit facilities, advances, credit cards, etc.
- Long-term operations: Loans (finance loans, mortgages, etc.)
Discounting of Trade Bills
Trade bills, such as bills of exchange and promissory notes, are documents that represent a debt arising from commercial transactions (sales, services, etc.). Companies issue these documents to defer payments from their clients. These documents serve as a commitment to debt repayment and a guarantee of payment at maturity. In case of default, legal action can be taken to recover the debt.
These documents can be easily converted into cash through trade discounts.
The trade discount of bills is an active operation where a bank advances the amount of the bill minus interest, commissions, and other costs.
Discounted Cash Settlement
Discounted cash settlement involves calculating the total cost of discount operations. This cost consists of:
- The discount or interest itself
- The banking commission
- Postage
Dc = nx i/360 Cnx
Personal Loans
Personal loans are granted after ensuring the client’s financial solvency (sufficient regular income) and/or the creditworthiness of guarantors. Guarantors are individuals who commit to repaying the loan if the borrower defaults.
Individuals use personal loans for consumer purchases, cars, home improvements, etc. Legal entities typically use them to finance current assets. The repayment period is usually between one and five years.
Banking institutions follow these guidelines when granting personal loans:
- Verify the applicant’s income and current and future payment obligations.
- For employees: Review pay slips and bank statements.
- For businesses: Analyze profit and loss accounts.
- Check the applicant’s credit history with the bank.
- Obtain reports from reliable sources.
- Determine employment length and company prospects.
- Establish a logical correlation between the loan amount and repayment terms.
- Assess the assets of the applicant and guarantors, if applicable.
Personal loans are formalized through a loan policy document. A broker witnesses the signing of the contract, making the policy a public document.
Mortgage Loans
Mortgage loans require real estate or property as collateral. They are granted based on a mortgage on real property (buildings and land) owned by the customer. If the client defaults, the bank can seize the property and sell it at auction to recover the debt.
Mortgage loans require a public document drafted and signed by a notary, the bank, and the customer. This document must be registered with the Land Registry.
Mortgage loans are granted to individuals and legal entities. Repayment is long-term, typically between 10 and 40 years. Interest rates vary depending on the loan type, duration, and guarantees provided.
Current interest rates are approximately 8-10% for personal loans, around 6% for fixed-rate mortgages, and around 3.5% for variable-rate mortgages.
Overdrafts
Overdrafts occur when a checking or savings account has a negative balance. Legally, it’s considered an overdraft when the bank allows customers to withdraw more than their available balance without a credit policy in place.
Nc = balance * Days / 100
Interest = n/364/i
Commission = % of personal income tax