30. International banks: transactions and risks.

31. Monetary policy: purpose, types, tools.

32. International credit: notion, functions, forms, tendencies.

International credit. International credit – credit granted by the governments, banks, firms, other legal entities and physical persons of the one country to the government, banks, firms of other country. This is one of the form of cash and tangible assets movement in the process of the international economic relations development.

Functions: 1) Redistributing function. Under market conditions the market of loan capitals plays a role of a “pump”, which pumps out the temporarily spare capital from one economic activity and directs them into other spheres, which provide higher profit. 2) Distribution costs economy. Not only the surplus, but also the lack of bankroll determines time gap between cash assets receipt and expenditure. That is why, an overdraft, which is used by all categories of the borrowers and provides the significant capital turnover acceleration and ,as a consequence, economy of total distribution cost, proliferated. 3) Aggregation of capital acceleration. The process of aggregation of capital is a requisition of economics development stability and a main goal for any economics. Loan capital helps to expand the scale of production and thus provides the extra profit. 4) Commodity turnover service. Credit actively influences the acceleration of not only commodity, but also cash turnover displacing, for example, cash. Credit introduces such instruments as bills, checks, plastic cards, etc into the sphere of currency and provides the replacing of payment in cash by cashless transactions, that facilitates and accelerates the mechanism of economic relations in the domestic and international markets.

Principles: 1)Repayment. This principle shows the necessity of timely repayment of received financial resources. 2)Term principle. 3) Principle of solvency. 4) Security 5) Character 6) Differentiation.

Forms of international credit. Forms can be classified in the following way: A) Resources : internal; external; mixed; foreign trade crediting B) Purpose: commercial credits (directly connected with foreign trade and services); financial credits (including direct investments) – building, investment projects, securities purchase, foreign liabilities redemption; “intermediate” credits – aimed for mixed forms of capital, goods and services export C) Loan currency D) Terms: super short-term - up to 3 months; short-term – up to 1 year; medium-term – from 1 up to 5 years; long-term – more than 5 years; E) from the point of view of security: secured; blank F) Loan Technique: cash; acceptance credit; certificate of deposit; bond loans; consolidated credits.

Presently, the following forms of credit are widely used: i) Roll-over credit – a loan in which the borrower has the option to renew the loan upon maturity. ii) Commercial credit – loan granted by a firm (usually – exporter) of one country to the importer of the other country in the form of delay of payment. iii) Acceptance credit – under this credit a borrower settles with creditor via bill of exchange, iv) Current account credit – is Debit side of this account is used for all client’s payments and other side – for crediting the profit and other payments to an account in favor of enterprise. Credit balance shows that enterprise possesses monetary resources and debit balance reflects borrowed current assets for which bank collects interests. v) Credit to the buyer – bank of the exporter directly grants credit to the foreign buyer, i.e. firms of country-importer and its banks. Thereby importer purchases necessary goods at the expense of creditor’s assets with attribution of the indebtedness to the bank of the buyer. vi) Reimbursement credit – based on combination of acceptance of exporter’s bills of exchange by the bank of the third country with reimbursing of BE amount to the bank-acceptant. vii) Broker loan – intermediate form between commercial and bank credits. Broker commission varies from 1/50 up to 1/32 from the bargain amount. viii) Export credit (trade financing) – credit granted by the bank of country-importer for realization of goods delivery ix) Project financing – long-term crediting of the project x) Special form of the credit relation is a leasing. xi) Factoring – is an also a form of international credit. The selling of a company's accounts receivable, at a discount, to a factor, who then assumes the credit risk of the account debtors and receives cash as the debtors settle their accounts.

International credit is the movement of loan funds in the sphere of international economic relations, which is connected with the monetary and commodity resource allocation on terms of repayment, maturity, loan collateral and interest payment.

Functions:

• redistribution of loan funds between the states in order to satisfy the requirements on expanded reproduction

• costs reduction by means of credit funds employment (such as bills of exchange, promissory notes, cheques, money transfers, etc. ), development and acceleration of payments on the clearing basis. (безналичный платеж)

• acceleration of capital centralization and concentration due to the foreign credit exposure

• economy regulation

International credit plays both negative and positive role in production development. On one side, it helps the production going and its expansion. It contributes to the development of the internationalization of the production and exchange, as well as to the international division of labor. On the other hand, international credit strengthens the disproportion of social reproduction, stimulating uneven development of the profitable branches; hinders the development of sectors of economy that lack international financing. International credit is used to strengthen the position of foreign creditors in the competitive struggle.

The dual role of the international credit under the conditions of the market economy becomes evident by means of mutually beneficial cooperation as well as competitive struggle.

Classification of forms of international credit:

1. by function:

commercial credits that provide service to international trade; financial credits used to finance investment projects, extinguish external debts, carry-out of currency intervention by the CB;

2. by type:

commodity credit (export of goods with indulgency);

currency credit (in money terms);

3. by mode of granting a credit:

cash credit

acceptance credit - in the form of draft acceptance by the bank or importer;

deposit certificates, bond loans

4. by credit currency:

international credits in debtor-country currency or in creditor-county currency or in international unit of currency (SDR –special drawings rights)

5. by terms:

short-term credits (less than a year)

medium-term credits (from 1 year to 5)

long-term loans (more than 5 years)

6. by collateral:

secured loans (commodities can be used as collaterals, financial and commercial documents, securities, real estate, sometimes gold)

unsecured credit (is issued under obligation of a debtor to extinguish it at maturity date)

International credits can be in the following forms:

• private loans bank loans

• brokers’ credits

• governmental

• mixed credits (both for private business and government)

• interstate credit of International Financial Institutions