国际结算理论与实务（ Theories and Practices of International Settlements ）主讲人：李颖山东大学经济学院金融系联系方式： [email protected]

国际结算理论与实务（ Theories and Practices of Inter

national Settlements ）主讲人：李颖山东大学经济学院金融系联系方式： [email protected]

Reference books《国际结算》第四版，苏宗祥， 2009 ，中国

金融出版社；《国际结算》，秦定， 2010 ，清华大学出版

社；《国际结算：理论 · 实务 · 案例》，蒋琴， 2007 ，

清华大学出版社。

Examination

Exercises in class （ 20% ）

Final tests In English （ 80% ）

International Settlement

Overview

Chapter1: Introduction On Fundamentals In International Settlements

Chapter2: Banks’ Clearing System In international Settlements


Core

part

Chapter3: Financial Instruments used in International Settlements

Chapter4: Mercantile documents used In International Settlements

Chapter5: International Settlement Methods


extension

Chapter6: L/G and Stand-by L/C

Chapter7: Financing methods In International Settlements.

Chapter8: Bank Letters in International Settlement

Chapter 1 Introduction on Fundamentals in International

Settlements

Definition International payments or international settlements are

financial activities conducted among different countries in which payments are effected or funds are transferred from one country to another in order to settle accounts, debts, etc., emerged in the course of political, economic or cultural contacts among them.

spot payment—— payment between different cities—— international payment.


contents

International trade ：visible trade and invisible trade

Financial transactions

Payment between governments


Objectives

Characteristics of evolution: cash settlement to transfer settlement and transaction of

documents; Banks became the center in the international settlement at

the end of 18th century; From payments under simple price terms to payments

under more complex price terms;

safe quick convenient

Chapter 1 Introductions on Fundamentals in International Settlements

computerization

SFNB,1996, USA;

Entrium Direct Bankers,1990,1998


Communication

means

Mail:Letter, registered letter, express delivery letter

Cable or Telex

Network: SWIFT


SWIFT: society for worldwide interbank financial telecommunications, a computerized international telecommunications system that, through standardized formatted messages, rapidly processes and transmits financial transactions and information among its members around the world.


Services provided by SWIFT:– FIN (Financial Application)– IFT (Interbank File Transfer)

Procedures of message flow:– An appropriate SWIFT message type is selected,

prepared, addressed and released by the sender to the SWIFT network via the bank’s SWIFT interface;

– The message is then sent to the sender’s local SWIFT Regional Processor;


– The input Regional Processor forwards the SWIFT message to a Slice Processor;

– If the message is properly formatted, it is sent to the Receiver’s local SWIFT Regional Processor;

– The output Regional Processor then sends the message to the receiver.


Types of messages: 10 types Characteristics of SWIFT:– Quick and cheap;– Secure and reliable;– Standardized forms.

Signatures

Credit instruments

Mercantile documents

Chapter 1 Introductions on Fundamentals in International

Settlements

Classification of settlement methods基于商业信用的结算（ Settlement on co

mmercial credit ）——汇款（ Remittance ），对应着预付货款（ payment in advance ）和赊销（ open account ， O/A ）；托收（ Collection ）

基于银行信用的结算（ Settlement on bank credit ）——信用证（ letter of credit ， L/C ）；银行保函（ bank guarantee ）

Chapter 1 Introductions on Fundamentals in International

Settlements

payment in advance: provides greatest security for the seller and greatest risk for the buyer; requires that the buyer have a high level of confidence in the ability and willingness of the seller to deliver the goods as ordered.

open account, O/A ， provides the least risk for the buyer and the greatest risk for the seller.

Chapter 2 Banks’ Clearing System In International Settlements

1. Reasons for the establishment of banks’ clearing system

objective reasons subjective reasons 2. components (1) global business web system

branches correspondent bank: a bank having direct connection or friendly

service relations with another bank.


Bank letter ： a sampleAgency agreements: a sample

control documents: Ⅰ lists of specimen of authorized signatures: for authentication of the messages, letters, remittances, letters of credit, etc. Ⅱ telegraphic test keys: code arrangements that enable the banks to receive cables from other banks to verify the authenticity of cables or telexes. Ⅲ SWIFT authentic key: for authenticating messages transmitted through SWIFT; Ⅳ terms and conditions.


Services provided by correspondents: Collecting checks, drafts, and other credit

instruments; Making loan or investments as agents for their

customer banks; Making credit investigation of firms that borrow in

the open market; Providing banks with foreign exchange facilities,

including commercial and traveler’s checks; Providing banks with funds/loans in case of need.


(2) global foreign exchange transferring systemnostro account: due from account, the foreign currenc

y account of a major bank with the foreign banks abroad to facilitate international payments and settlements.

Vostro account: due to account, the account held by a bank on behalf of a correspondent bank.


From the point of view of a Chinese bank, a nostro account is our bank’s account in the book of an overseas bank denominated in foreign currency; and a vostro account is an overseas bank’s account with our bank denominated in RMB.


Ⅰ funds transferring system in ChinaIntra-city transfer between different banks;Intra-bank transfer between different cities;Inter-bank transfers between different cities. Ⅱ USD foreign exchange system:– FEDWIRE: a fund transfer system operated

nationwide in the USA by the Federal Reserve System to transfer funds from one financial institution to another with an account balance held with the Fed.


Real-time gross settlement system: usually operated by central banks, in which each payment order is settled immediately upon its entry into the system in its entire (gross) amount.


Procedures of Fed Wire: A payer gives an instruction to a bank in which the

payer has an available balance;

The paying bank passes instructions on to the Fed to move value from the bank’s reserve balance account to the reserve balance account of another bank in which the payee has an account;


The Fed credits the reserve account of the payee’s bank and debits the reserve account of the payer’s bank. The Fed Wire provides a confirmation number to the payer so that the transaction can be traced;

When a bank receives an incoming wire, the receiving firm is given notification that value has been received.


– CHIPS( Clearing House Interbank Payment System): a netting system operated by the New York

Clearing House Association. A netting payment system: payment orders debiting

the accounts of participants are collected for a certain time period, and then at the end of that time the net position is calculated and cleared for each participant on the basis of the payment orders sent and received.


Advantages of netting payment system: lower liquidity requirement that banks need in

order to settle payments of a specific value (only the difference between the value of an individual bank’s incoming and outgoing payments is settled by transferring funds) ;

netting systems are more efficient from the point of view of the communications and processing capacity employed.


Disadvantages of netting payment system:

These systems expose participants to a settlement risk, as they are implicitly giving each other unsecured credit on the basis of payments that are not immediately settled in final terms.

Components of CHIPS: Chips participation (CP) and chips

universal identifier (CH)


Procedures of CHIPS (P299): member banks send instructions to CHIPS

regarding transfers that they wish to make to other banks in New York City;

At the end of the business day CHIPS reports to the Federal Reserve Bank of New York the net amounts to debit and credit at each of CP.


Ⅲ Euro foreign exchange system TARGET: Trans-Europe Automated Real-time Gross

Settlement Express Transfer System, a real-time gross settlement system for the Euro, which is composed of 15 national RTGS systems, the ECB payment mechanism and interlinking.

– National Real-time Gross Settlement, RTGS: Belgium (ELLIPS), Germany (ELS), Greece (HERMES), Spain (SLBE), France (TBF), Ireland (IRIS), Italy (BIREL), Luxembourg (LIPS), Netherlands (TOP), Austria (ARTIS), Portugal (SPGT), Finland (BOF); UK (CHAPS), Denmark (DEBES), Sweden (RIX).


– EPM ( European Central Bank Payment Mechanism)

Purposes of TARGET:– to provide the payment procedures necessary for

implementing the ECB’s single monetary policy;– to promote sound and efficient payment

mechanisms in euro 。


Foreign exchange accounts with domestic institutions

– Foreign exchange accounts for current account transactions

(1) foreign exchange working capital of domestic entities in executing overseas construction and other services contracts;

(2) foreign exchange overseas receipts and payments to be made by domestic entities on behalf of clients involved in overseas business;


(3) project funds of enterprises with export-import license in business of export of jumbo electronic equipment with total project funds reaching a specified sum and duration, or advanced and progress payments for projects under international bid;

(4) foreign exchange within an amount verified by SAFE that is received by international travel agencies and prepared by foreign travel agencies;


(5) foreign exchange of foreign-funded enterprises within a balance ceiling verified by SAFE;

(6) foreign exchange expenses of foreign establishments remitted from abroad.


– foreign exchange account for capital account transactions

(1) external borrowing by domestic entities and foreign exchange loans of domestic Chinese-funded financial institutions;

(2) foreign exchange of domestic entities for repayment of principal of domestic and external foreign exchange liabilities;


(3) foreign exchange of domestic entities from stock issuance;

(4) capital paid in foreign exchange by Chinese investors of foreign-funded enterprises;

(5) foreign exchange remitted by overseas entities or individuals for establishing a foreign-funded enterprise.


The transactions on foreign exchange owned by individuals:

– (1) Foreign exchange owned by individuals can be held, deposited in banks or sold to the designated foreign exchange banks.

– (2) Foreign exchange for private trip abroad may be purchased up to an limit. Individuals must apply to SAFE for the purchase of foreign exchange exceeding the limit and present to the customs office valid documents for carrying foreign exchange exceeding a limit.

Documents

国际结算理论与实务 （ Theories and Practices of International Settlements ） 主讲人：李颖 山东大学经济学院金融系 联系方式： [email protected]

国际结算理论与实务（ Theories and Practices of International Settlements ）主讲人：李颖山东大学经济学院金融系联系方式： [email protected]