II !

lANKING AND MEANS Of

6. Banking Services
~A\'MENT

Sight Deposits, Checking Accounts (GB : Current or drawing

accounts) and Checks (US) I cheques (GB) (depot avue, comp-
te en banque et cheques)
Checking accounts or demand deposit accounts are bank accounts
in which both individuals and companies keep money that they plan
to use in the near future. Checking accounts serve two purposes ;
first, they provide an efficient system of payment between buyers
and sellers, and second, they provide a safe place to keep excess
cash. Anyone may open a checking account by providing proof of
identity and a specimen signature (example of the account holder's
signature) which the bank keeps in its files. In the case of compa-
nies, one or more authorized signers sign all the checks. After
making the initial (first) deposit into the account, customers are
expected to permanently maintain sufficient funds in the account to
pay (U.S. cover) any checks they write except in the case of au~hori­
zed overdrafts, discussed later. Checks (GB cheques) are the nego-
tiable instmment which an account holder uses to give payment ins-
tructions to his bank. The account holder is the drawer\ the bank
where the account is held is the drawee 2 bank (paying bank, the
check is drawn on this bank), and the check is made payable (writ-
ten) to the order of the payee3 or beneficiary. In order to negotiate
a check, the payee must endorse (sign) it on the back, whether the
check is to be deposited in an account or exchanged for cash. Only
the payee has the right to endorse the check. An exception is made
to the endorsement rule if the check is a bearer check. A bearer
check may be cashed (exchanged for cash) by whoever presents it
to the paying bank. Most checks, however, are order checks, mea-
ning that they are made payable to the order of a specific payee. The
checkbook contains checks printed in a numbered sequence, and a
check register where the account holder records the deposits (GB

1. drawer tireur
2. drawee tire, accepteur
3. payee beneficiaire
payments) made to the account, and the checks issued (written) on
the account. Once a month, on the closing date (determined by the
bank) the customer receives a bank statement which details all of
the transactions affecting the account during the previous month.
Deposit Accounts : Savings and Passbook Accounts Compte
de depot, Compte d'epargne sur livret
For customers that wish to save money (US : put money aside)
banks provide savings accounts which pay interest on the funds
deposited. The procedure for opening a savings account is the same
as for a checking account. Regular savings accounts pay interest at a
slightly lower rate than passbook accounts (US). Passbook accounts
are so named because each transaction affecting the account is
recorded by the bank teller ( GB : bank clerk, cashier) in a small
account register or passbook. Passbook accounts pay interest (inter-
est is credited) only on the quarter (every three months), whereas
regular savings accounts pay interest evety month.
Passbook accounts have a, withdrawal restriction : money may only
be withdrawn during a cettain period of time at the end of each quar-
ter. At any other time of the year, withdrawals will incue penalty
charges 2 including loss of interest.
Time Deposits depots aterme
Most banks offer certificates of deposit, in vatying amounts, as a
form of short-term investment. CD's pay high interest but must be
left on deposit with the bank for certain fixed periods of time
(2 months, 3 months, 6 months, etc.).
Credit Cards cartes de credit
Credit Cards are a system of payment involving electronic transfers
of payments. Like automatic payment cards, credit cards may be

1. to incur encourir, s'exposer a

2. penalty charge penatite
II BANKING AND
6. Banking Services
MEANs OF PAYMENT

issued by banks or other commercial organizations such as depart-

ment stores, fuel companies, etc. There are two payment systems
for credit cards : the cardholder's bank account may be automati-
cally debited for the amount of the purchase(s) , and the merchant's
account credited, or the customer is assigned a credit limit (the total
amount the cardholder is permitted to charge) and each month he
pays a percentage of the total purchases. The latter system is called
a revolving charge account. The card issuer determines the mini-
mum payment which must be made every month, and interest is
charged on any amoun~s over this minimum (the outstanding balan-
ce). The interest is added to the next month's bill. In either case, the
merchant receives payment within the month after the purchase.
Banks, department stores and other companies usually have a sepa-
rate credit card division which is responsible for all credit card ope-
rations.
Loan Documentation dossier de pret
Loan documents are signed by the borrower and the lender. The
documents serve to protect the financial institution and the borro-
wer and to define the responsibilities and obligations (terms and 1
conditions) that each party must observe. The borrower must usual-
ly comply with3 certain financial covenants (requirements) related to
its financial performance. These are detailed in the loan agreement
along with the financial reporting requirements (the date by which
the company must submit its financial reports to the bank), the
interest rate and fee structures, and sometimes a repayment sched-
ule. If the loan is secured4 there is usually a security and/or collateral
agreement, as there is a guaranty agreement if the loan is guaranteed
by a third party. For most loans there is also a promissory note which
is signed by the borrower and kept in the bank's vault5 for the duration
of the loan.

3. to comply with se conformer a, respecter

4. to secure a loan garantir un emprunt
5. vault cbambreforte
 Services

Depending upon the nature of the loan, there may be only one (stan-
dard) document, or there may be scores of documents unique to a
panicular transaction. Loan documentation is prepared (U.S.) or
drawn up by the internal legal counsels Oawyers) of the lender and
the borrower, and the documents are signed at the closing' (U.S.).
Security, Guarantees, Pledges, and Liens caution, garanties,
nantissement et droit de gage
Depending upon the loan, financial institutions may require some
sort of tangible safeguard from their customers for the loans they
provide them. Secured loans are backed (U.S.) or supported by
transferable securities (stocks, debentures) or other negotiable
financial instruments which become the possession of the lender if
the borrower defaultsl 2 on the loan. For the duration of the loan,
the lender keeps the securities in its vault and returns them once
the loan has been repaid. Collateral is another term for security. A
guarantee may be provided as a loan safeguard. The guarantor is
answerable to the lender in case the borrower defaults on the loan.
The borrower and the guarantor are different parties. For example,
a parent company may guarantee the loan of its subsidiaty. If the
subsidiary defaults, the parent must assume (pay) the loan. In some
transactions, a less binding (mainly diplomatic) form of guarantee
may be provided, called a comfort letter With a comfort letter, the
parent company acknowledges to the lender that it is aware of its
subsidiary's plans to incur debt. It is not a guarantee to pay the debt
in case of default. In most cases where a comfort letter is given, the
borrower is an autonomous subsidiary with little financial depend-
ence on the parent company. With the comfort letter, the parent

1. closing I. ici : signature, 2. cloture

2 default non paiement
3. comfort letters comfort letters are often used in
international transactions where for example a
U.S. parent gives its comfort letter to a U.S. bank making a
loan to its foreign subsidiary.
 BANKING AND MEANS OF PAYMENT

demonstrates its confidence in the subsidiaty's management and

financial condition. A pledge is another loan safeguard which
involves chattel' or other personal property. A pledge agreement
entitles the pledgee (lender) to retain the object of property until
the pledgor (borrower) ·satisfies the debt, and to sell said property
to recover the debt in case of non-performance (default). A lien is
the above-mentioned right of one party to retain the property
(including real estate and buildings) of another until the debt is
paid. The party having the lien, the lienor, may sell the propertf,
Discounting Bills of Exchange escompte de lettres de change
Abill of exchange may be discounted, i.e. purchased by a third party
for a sum (amount) lower than that the party will receive when the
bill matures. The party discounting the bill gains by receiving·money
at an earlier date. The amount of discount the banker deducts from
the (total) amount of the bill, (that is the commission or the inter-
est) will vary according to the risks the purchaser takes. A sound
(good) bill is one which is backed or countersigned by a well-known
finance house or bank. Bills are usually discounted by banks, in par-
ticular discount houses in the U.K. This is another way for banks to
lend money. This allows businessmen to replenish 6 their working
capital quickly, with which they may buy fresh stocks of goods.
Other Banking Services
Banks issue travel(l)er's checks in various denominations 7
(amounts) to customers travelling abroad. Travel(l)er's checks may
be used to pay hotel and restaurant bills and may also be exchanged
for the local currency of the country or countries visited. They are
considered a wise choice because the customer is protected against
lost or stolen checks, which is not the case with lost or stolen cash.

4. chattel bien meuble, bien rnobilier

5. property bien, patrimoine.
6. to replenish completer, recharger
7. denominations coupures; ici: devises, montants
~~BANKING AND MEANS OF PAYMENT
6. Banking Services ·

Banks may also act as trustees (a party appointed to protect the

interests and property of another party unable to do so itselO and
executors (a party appointed to carry out the wishes of another,
deceased, party) for both individuals and corporate customers.
Banks obtain and provide credit information for their customers. If
one party wishes to obtain information on the credit-worthiness of
another party the inquirer directs his bank to request credit infor-
mation from the other's bank.
Credit information is kept strictly confidential and requests must be
made through the proper channels, with the assurance that the
information will be used only for the stated purpose. The ipforma-
tion is provided in the form of a report.
All banks have vaults (U.S.) (or strong rooms G.B.) and most rent
safety deposit boxes to customers that wish to keep their important
documents, stock certificates, jewellery or other valuables in a guar-
ded environment.
Finally, most banks offer money orders and cashier's checks for pur-
chase as an alternative payment method to checks. The customer
pays the face value' of the money order or cashier's check purcha-
sed plus a small commission or fee. Money orders and cashier's
checks are drawn in three copies ; one is retained by the bank, the
second is kept by the purchaser and the third is given to the payee.

International Banking Services

Banks play a crucial role in international or foreign trade
(import/export business) as well. They act as intermediaries for the
collection and transfer of payments in different currencies between
buyers and sellers located in different countries.

1. face value valeur nominate

The services that banks provide in foreign trade are handling ship-
ping documents, the observance of buyer's conditions of purchase,
discounting bills of exchange, loans to exporters, collecting pay-
ments ... In foreign trade, you must use the services of a bank in
making payments. This may be done by :
1) Cash with order (CWO) paiement aIa commande
2) Foreign bill of exchange traite sur l'etranger
3) Documentary bill traite documentaire
4) (Documentary) letter of credit lettre de credit
5) Banker's draft (bankdraft) traite sur une banque
6) Transfer (inter-bank transfer) virement
Payments may be effected in advance, where the customer is unk-
nown to the vendor, or in the case of a single isolated transaction
(by banker's draft or wire transfer). Payments are effected on open
account if the customer's standing is unquestionable or if the seller
has complete confidence in the buyer (payments made by bill of
exchange or wire transfer).

17. Means of payment

bill of exchange (or draft) traite (effet de commerce)
An order requiring the person to whom it is addressed to pay on
demand or at some future date a stated sum of money to, or to the
order of a specified person, or to bearer. It requires acceptance by
the drawee.
There are three parties to a bill of exchange : the creditor, who
draws the bill (drawer), the debtor, upon whom the bill is drawn
(drawee), the person to whom the money is to be paid (payee), and
who may be the drawer himself or a third party to whom the drawer
is indebted.