Chapter3: Credit Instruments International Settlements

1. Chapter3: Credit Instruments International Settlements • Definition of credit instruments A credit (financial) instrument is a written or printed paper by means of which funds are transferred from one person to another. • 1. Traditional credit instruments: notes • Definitions • in the general sense, documents of title • in the narrow sense, notes, negotiable securities with the purpose of payment in money, signed by the issuer, unconditionally paid by the issuer or another person.

2. Chapter3: Credit Instruments International Settlements • Notes in China Bill of exchange/draft Promissory note Check/cheque • Legal Framework • Anglo-American framework，focusing on rights and liabilities of parties concerned 1882, Bills of Exchange Act

3. Chapter3: Credit Instruments International Settlements Mainland Framework，focusing on statutory forms of behaviors related to bills. • Uniform Law for Bills of Exchange and Promissory Notes Signed at Geneva, 1930; • Uniform Law for cheques Signed at Geneva, 1931. • The difference between the above two frameworks:

4. Chapter3: Credit Instruments International Settlements United Nations Framework • Convention on International Bills of Exchange and International Promissory Notes, 1987; • Convention on International Cheques. China Law of the People’s Republic of China on Negotiable Instruments, 1st, Junanry,1996

5. Chapter3: Credit Instruments International Settlements 我国票据法的特别规定： 1、不得采用不记名背书； 2、承兑不得附条件，否则视为拒绝承兑； 3、不允许部分付款； 4、本票仅指银行本票； 5、允许持票人在到期日前进行追索； 6、凡签发持票人或来人抬头的汇票无效。

6. Chapter3: International Settlement Instruments • Characteristics • Negotiability Assignment: share certificate, life policies, certificate of government stock, debenture; 在财产保险中，保单转让必须经保险人同意，如果要想继续保持合同关系，被保险人必须在保险标的所有权转让时，事先书面通知保险人，经保险人同意，并对保单批注后方才有效，否则，合同在保险标的所有权转让时即告终止。该程序适用于除货物运输险之外的其他所有财产保险。

7. Chapter3: International Settlement Instruments • Characteristics • Negotiability Assignment: share certificate, life policies, certificate of government stock, debenture; Transfer: B/L, warehouse receipt, dock warrants, quasi-negotiable instrument; Negotiation: bills of exchange, promissory notes, checks, CDs, bearer securities, negotiable instrument.

8. Chapter3: International Settlement Instruments Negotiable instrument is a chose in action, the full and legal title to which is transferable by delivery of the instrument with the result that complete ownership of the instrument and all property it represents passes freely from equities to the transferee, providing the latter takes the instrument in good faith and for value.

9. Chapter3: International Settlement Instruments • Non-Causative Nature: the efficacy of the instrument is independent on the causes for issuing. • Requisite in Form: to be effective, a bill must embody the required items. • Presentation: the holder must present the bill to the payer in order to be paid. • Restitution

10. Part4： 国际结算中的业务风险及防范 • Risks in bills • Forgery of bills（票据的伪造） • 狭义的票据伪造，指假冒他人名义为出票行为； • 广义的票据伪造，指假冒他人名义而为的各种票据行为，包括出票、背书、承兑、保证等票据行为的伪造。

11. Part4： 国际结算中的业务风险及防范 • Falsification of bills（票据的变造） • 所谓票据的变造，是指无权变更票据记载事项的人，擅自变更票据上的（除签章外）的记载事项的行为。例如：变造票据的记载金额、票据的到期日等等。

12. Part4： 国际结算中的业务风险及防范 • Droit flaws（票据的所有权缺陷） • 持票人对票据享有的所有权有缺陷。 • 票据的持有人以欺诈、胁迫、暴力或恐吓等手段，或以不合法的支付对价，或在票据的流通转让过程中违反诚信原则，或在相当于欺诈的情况下取得票据。

13. Chapter3: International Settlement Instruments • 1. Bill of Exchange • Definition • A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a specified or determinable future time a sum certain in money to or to the order of a specified person or to bearer.

14. 必要项目 汇票字样，bill of exchange 出票日期和地点（date and place） 付款期限（tenor） 无条件付款命令，pay to sb.…… 汇票金额（amount） 收款人（payee） 受票人或付款人（drawee/payer） 出票人（drawer）

15. Chapter3: International Settlement Instruments • the date and place of issuance Functions: to determine whether the presentation of the draft has expired; ——见票后定期付款的汇票，持票人应当自出票日起1个月内向付款人提示承兑； ——见票即付的汇票提示付款期限自出票日起1个月。 to determine the payment date; to decide whether the drawer has the issuing ability.

16. Chapter3: International Settlement Instruments • tenor sight bill: pay on demand (example3-9) time bill (example3-10): pay on a fixed future date; pay at xx days after date; pay at xx days after sight.

17. Chapter3: International Settlement Instruments • unconditional order to pay Pay to ABC co. Or order the sum of one thousand USD$. Pay to ABC co. Providing the goods they supply are complied with contract the sum of ten thousand USD$. Pay to ABC co. The proceeds in our No.1 account the sum of one thousand USD$. Pay to ABC co. or order the sum of ten thousand USD$ and charge/debit the sum to applicant’s account maintained with you. Pay to ABC co. or order the sum of ten thousand USD$ drawn under L/C No.12345 issued by XYZ bank, N.Y. dated on 15th. Aug. 2004.

18. Chapter3: International Settlement Instruments • payee bearer title: Pay to bearer or Pay to ABC co. or bearer. Restrictive title: Pay to John Davids only or Pay to John Davids not transferable. Indicative title: Pay to the order of ABC co. or Pay to ABC co. or order.

19. Chapter3: International Settlement Instruments • the name and address of the drawee or payer sequence of debtors’ payment to bills of exchange: before acceptance: the issuer, the first endorser, the second endorser,……..; after acceptance: the drawee, the drawer, the first endorser, the second endorser,……

20. Chapter3: International Settlement Instruments • signature of the issuer “for” “on behalf of ” “for and on behalf of” “per pro” e.g. for ABC co. Ltd. London John Smith,

21. Chapter3: International Settlement Instruments • behaviors related to bills of exchange • issuance; • endorsement Endorser: when a payee or a holder signs his name on the back of the instrument for the purpose of transferring it to another person, he is called an endorser. He is liable to any of his subsequent endorser.

22. Chapter3: International Settlement Instruments Endorsee: the person to whom an instrument is endorsed. He is the holder of an instrument. blank endorsement: For Bank of China signature indicative endorsement: Pay to the order of (name of the endorsee) for (name of endorser)

23. Chapter3: International Settlement Instruments restrictive endorsement: Pay to (name of endorsee) only Pay to (name of endorsee) not transferable Pay to (name of endorsee) not to order for (name of endorser) • presentation or presentment

24. Chapter3: International Settlement Instruments • Acceptance: • If the drawee agrees and assents to the order in writing addressed to him on a bill of exchange, he will sign his name on its face, indicating that he will pay on due date. Then the drawee becomes an acceptor. ordinary acceptance: Accepted DATE For (name of drawee) signature

25. Chapter3: International Settlement Instruments restrictive acceptance: • conditional acceptance: Accepted Date Payable on delivery of B/L For (name of drawee) signature

26. Chapter3: International Settlement Instruments (2) partial acceptance: Accepted Date Payable for amount of GBP20,000 only For (name of drawee) signature

27. Chapter3: International Settlement Instruments (3) acceptance at a designated place: Accepted Date Payable at the Hambros Bank and there only For (name of drawee) Signature

28. Chapter3: International Settlement Instruments (4) Deferred acceptance: Accepted Date Payable at 6 months after date For (name of drawee) signature

29. Chapter3: International Settlement Instruments • payment • dishonor and protest Dishonor: a failure or refusal to make acceptance on or payment of a draft when presented. Protest: A written statement under seal drawn up and signed by a Notary Public or other authorized person for the purpose of giving evidence that a bill of exchange has been presented by him for acceptance or for payment but dishonored. Advice of dishonor: China 3 days; England two days; Geneva 4 days.

30. Chapter3: International Settlement Instruments • Recourse A bona fide holder can claim payment from all parties liable on the instrument when dishonored by the acceptor. A bona fide holder is the person who is in possession of an instrument that is ① complete and regular on its face; ② taken before maturity without notice of its previous dishonor; ③ taken in good faith and for value; ④ taken without notice of any infirmity in the instrument or defect in the title of the person negotiating it.

31. Chapter3: Credit Instruments International Settlements 票据时效期间届满而使票据权利消灭的情形： • 持票人对汇票、本票出票人和承兑人的权利，自票据到期日起2年；见票即付的汇票、本票自出票日起2年。 • 持票人对支票出票人的权利，自出票日起6个月。 • 持票人对前手的追索权，自被拒绝承兑或被拒绝付款之日起6个月。 • 持票人对前手的再追索权，自清偿日或被提起诉讼之日起3个月。

32. Chapter3: International Settlement Instruments • types of bills of exchange • commercial drafts and bankers’ drafts Commercial draft: a bill of exchange issued by a firm on another firm or on a bank. Bankers’ draft: a draft drawn by a bank on another bank.

33. Chapter3: International Settlement Instruments

34. Chapter3: International Settlement Instruments • Commercial acceptance bill and banker’s acceptance bill • clean bill and documentary bill Clean bill: a bill without shipping documents attached thereto. Documentary bill: a bill with shipping documents attached thereto.

35. Chapter3: International Settlement Instruments • promissory notes • definition: A promissory note is an unconditional promise in writing made by one person to another signed by the maker engaging to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person or to the bearer.

36. Chapter3: International Settlement Instruments • Sample3-11 • Difference between a promissory note and a bill of exchange A promissory note is an unconditional promise to pay, whereas a bill of exchange is an unconditional order to pay; There are two parties to a promissory note, whereas there are three parties to a bill of exchange; The maker is primarily liable on a promissory note, whereas the drawer is primarily liable for a sight bill and the acceptor is primarily liable for a time bill.

37. Chapter3: International Settlement Instruments • types: bank notes • check • definition: A check is an unconditional order in writing, addressed by a person to a bank, signed by the person making it, requiring the bank to pay on demand a sum certain in money to or to the order of a specified person or to the bearer.

38. Chapter3: International Settlement Instruments • Sample(3-12) • Types: Cash check, transfer check, ordinary check Crossed check: a check under which funds must be paid to a bank only. General crossing: the bank through which the check is paid is not specified. Example3-14. Special crossing: only the bank mentioned in the check can receive payment from the drawee bank. Example3-15

39. Chapter3: International Settlement Instruments • traveler’s check • definition: A traveler’s check is a specially printed form of check issued by a financial institution, leading hotels, and other agencies in preprinted denominations for a fixed amount to a customer for use when he is going to travel abroad. A traveler’s check is actually a draft on a bank or other agency.

40. Chapter3: International Settlement Instruments • parties Issuer: the financial institutions, leading hotels or other agencies issuing the traveler’s check. Selling agent or office: the one that sells the traveler’s check. The selling agents should keep separate accounts to record the total amount of checks received and sold and remit the proceeds to the issuer at once.

41. Chapter3: International Settlement Instruments Holder: When purchasing the check, the person must sign his name thereon on the counter of selling agent. Paying agent: the one that undertakes by arrangement with the issuer to pay the traveler’s check presented by the holder. Transferee: the one to whom the traveler’s check is transferred.

42. Chapter3: International Settlement Instruments • Procedures First, after filling in an application form, the purchaser signs his name on the face of each check in the presence of the teller and pays the amount equivalent to the total value of the checks plus commission; Secondly, whenever the holder needs to cash the check, he countersigns on each check in the presence of the cashier. After ensuring that the signature is identical with that already signed thereon, the cashier encashes the check;

43. Chapter3: International Settlement Instruments Thirdly, After paying the check, the paying agent sends the check forward for collection and instructs the issuing bank to pay the proceeds either to its account or to some other bank for credit to its account. • Advantages Safe; widely acceptable; convenient

44. Chapter3: International Settlement Instruments • credit card short-term small amount consumer’s credit extended by a bank Parties: issuing bank, cardholder, and merchant. • Cyber-payments • Definition Cyber-payment is a system that facilitate the transfer of financial value through Internet or smart cards.

45. Chapter3: International Settlement Instruments • Advantages Cyber-payments can provide the transacting parties with immediate, convenient, secure and potentially anonymous means to transfer financial value. • Disadvantages Cyber-payments also have the potential to facilitate the international movement of illicit funds.

46. Chapter3: International Settlement Instruments • development Magnetic cards: such as credit card, ATM cards, prepaid cards, debit cards, cards that contain a magnetic stripe that allowed the user to gain access to a line of credit or bank account; Chip cards: such as memory cards, smart cards, optical cards or laser cards. Smart cards are micro-processor-equipped cards that work with card readers installed in the computers of consumers, an access device and a self-contained store of value.

47. Chapter3: International Settlement Instruments Exercise: 天津纺织品进出口公司出口美国ABC Trade Co. (add: Room15, the 10th floor Great Building, Revenue Street, N.Y., USA)一批货物,金额为23845美元.假定天津纺织品进出口公司于2002年12月5日签发以其指定人为为收款人、见票后60天付款的远期汇票，请代替天津纺织品进出口公司完成下列行为： 1）出具汇票。 2）指定付款人于2002年12月12日承兑汇票，完成汇票的普通承兑行为。 3）计算汇票的付款到期日。

48. 我国票据业务的创新 银行承兑汇票票据置换业务

49. 我国票据业务的创新 有选择的筛选客户开办业务 加强交易真实贸易背景的审核 加强票据置换的金额配比管理 注 意 事 项 加强质押银行承兑汇票的管理 加强伪假票据的真伪鉴别 注意票据到期日的匹配度 完善“未用注销”的操作管理

50. 我国票据业务的创新 票据权益投资集合资金信托 ——一种权益投资方式，由信托公司作为受托人和管理人，向合格投资者募集资金，主要用于银行持有的已贴现、未到期银行承兑汇票收益权。 ——票据由合作银行负责保管和托收，按照合同约定收取标的票据，经承兑行兑付所得票款划付至信托计划专户。每期票据到期兑付收回投资后，受托人根据投资收益情况向受益人分配信托收益，信托本金由受托人进行循环再投资。