Turkish Banking System

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7. Corresponded checks the documents and sends them to issued bank

8. Assuming bank checks the documents and submits them to (its client importer)

Letter of Credit (L/C) Types

There is a time element ex. 30, 60, 90, 180 days after shipment date (on which date) the payment to exporter is realized.

- Banker’s acceptance

- Transferable

- Confirmed

- Unconfirmed

- Receivable

- Unreceivable

- Red clause

- Green clause

- Back to back

Counter Trading

Definition: The mutual exchange of goods and services instead of cash payments.

Types:

- Counter purchase: third party could be involved and the buyer may be given a time.

- Barter: the transaction happens at the same time, no time gap.

- Buyback: ınvolves the purchase of equipment, the payment of which is realized by exporting the products produced by the companies using such equipment. Repayment of the original purchase through the sale of related products.

- Offset

- Switch reading

TR/Co[pic 2][pic 3][pic 4]

1 mio euro

1 mio euro

Polland Co 1 mio euro French[pic 5]

Forfaiting

Definition: is a form of medium long term foreign trade financing method which involves “without recourse” purchase of series of avalized promissory notes usually at 6 months intervals with maturities up to 3-7 years, by forfaiting companies.

- The p/notes are signed by the importers and are avalized by the importer’s bank.

- The p/notes are sold (at discount) by the exporter to the forfaiting companies “without course” basis

- By forfaiting transaction, the exporter gets his payment immediately after shipment, which allows him to finance his production, whereas the importer will pay at maturity.

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- Contract

- Transfer of good shipment

- Documents submitted to aval bank by importer

- Avalized p/notes sent to the exporter

- Forfaiting contract

- Documents + p/notes submitted to forfeiter

- Payment (on discount) on without recourse basis

- At maturity of each p/note submitted for payment to aval bank

- Payment made by aval bank + importer

- Forfaiting is difficult method, that is why it is costly

The cost will depend on:

- Type of foreign currency involved

- Amount of the transaction

- Avalizing bank

- Country of import

- Terms of the p/notes involved

First Forfaiting Company was in 1960 Finance AG Zurich (subsidiary of credit sussic)

- Banks can either establish a Forfaiting subsidiary or can realize the transactions through special departments. Today Zurich; London and New York are centers forfaiting transactions.

GUARANTY

Definition: Letter of guaranty is a financial instrument which guarantees the performance of commitment.

Types of L/G

- Bonds: taking part in a tender generally is 3% of the tender amount.

- Performance: submitted by the winner and is about 6% of the tender amount. Long term.

- Advanced payment: to cover risks of advance payment and is about 15-25% of the payments.

Guaranties involved in a typical L/G

- Applicant (bank customer which participates in a tender)

- Bank 8issuing l/g) upon instruction by its customer (applicant)

- Beneficiary (tender owner)

- Correspondent Bank (foreign bank which issues l/g)

ISLAMIC BANK

There are 4;

Albaraka Turk, Kuveyt Turk, Turkiye Finans and Bank Asya.

-Globally total assets are managed by Islamic Banks. About 1.3 trillion.

Funding of Islamic Banks

- Deposits:

Current deposits and term deposits/ participation.

Lending of Islamic Banks

- Murabaha: most popular way of lending and production support facility

- Mudaraba: project financing, joint venture between entrepreneur and bank, all capital provided by the bank where as entrepreneur will manage the project.

- Ijara: type of leasing transaction financed by Islamic banks.

FINANCIAL LEASING

Definition: is medium long term facility which provides transfer of economic ownership of a capital equipment by a lessor to a lesser based on a legal lease contract.

Definition: leasing is a financial method in which the ownership of investment equipment remains the leasing company (lessor) while the lesser obtains the right to utilize the goods by paying a certain amount of lease rentals.

This method aims to increase the efficiency and profitability by helping the companies