Período de Recuperación del Capital (PAYBACK)

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The most predominant form of collateral is cash and government securities. According to ISDA, cash represents around 82% of collateral received and 83% of collateral delivered in 2009, which is broadly consistent with last year’s results. Government securities constitute fewer than 10% of collateral received and 14% of collateral

delivered this year, again consistent with end-2008.[7] The other types of collateral are used less frequently.

Hypothecation   is the practice where a borrower pledges collateral to secure a debt. The borrower retains ownership of the collateral, but it is "hypothetically" controlled by the creditor in that he has the right to seize possession if the borrower defaults. A common example occurs when a consumer enters into a mortgage agreement, in which the consumer's house becomes collateral until the mortgage loan is paid off.

The detailed practice and rules regulating hypothecation vary depending on context and on the jurisdiction where it takes place. In the US, the legal right for the creditor to take ownership of the collateral if the debtor defaults is classified as a lien.

Rehypothecation is a practice that occurs principally in the financial markets, where a bank or other broker-dealer reuses the collateral pledged by its clients as collateral for its own borrowing.

Administrative, statutory, or contractual requirement that securities be hypothecated as collateral for public fund deposits or serve as a bond or security for specified deposits. Securities backing public deposits are marketable securities, such as U.S. Treasury bills or bonds. Pledged securities generally are kept by the pledging bank in a separate account. They can be placed with an independent trustee, for example, a Federal Reserve Bank, and serve as collateral for deposits by the U.S. Government, states, or municipal governments. A minimum amount of hypothecated securities-the pledging ratio of securities to public deposits-must be kept at all times. U.S. Treasury securities generally are counted at face value, commercial paper and bankers' acceptances at 90% of face value, and municipal securities at 80% of value.

Pledging Requirements

Administrative, statutory, or contractual requirement that securities be hypothecated as collateral for public fund deposits or serve as a bond or security for specified deposits. Securities backing public deposits are marketable securities, such as U.S. Treasury bills or bonds. Pledged securities generally are kept by the pledging bank in a separate account. They can be placed with an independent trustee, for example, a Federal Reserve Bank, and serve as collateral for deposits by the U.S. Government, states, or municipal governments. A minimum amount of hypothecated securities-the pledging ratio of securities to public deposits-must be kept at all times. U.S. Treasury securities generally are counted at face value, commercial paper and bankers' acceptances at 90% of face value, and municipal securities at 80% of value.

This Cession and Pledge of Goods

This Cession and Pledge of Goods may be considered for use where a debt is owed or may in the future be owed by a person, and additional security is required. By signing this Cession and Pledge of Goods, the debtor agrees to transfer to the creditor the right

to the goods being ceded or pledged should the debtor default. The goods may include, for example, shares, Kruger Rands, or an investment account.

More information

Why do I need a Cession and Pledge of Goods?

The Cession and Pledge of Goods strives to afford you as the creditor additional security. In the event that the debtor defaults in payment, you may use this Cession and Pledge of Goods to claim the goods that the debtor has ceded / pledged in terms of this agreement.

What type of business should use a Cession and Pledge of Goods?

If your business has debtors that owe money, this Cession and Pledge of Goods may be considered to reduce your risk in the debtor defaulting.

What does the Cession and Pledge of Goods look like? • The Cession can be printed onto two A4 pages.

What do you need to do to use the Cession and Pledge of Goods?

• Read the document to ensure that it suits your requirements. Make changes as

required.

• Complete the relevant details, and get the debtor to sign.

pledge

transfer or assignment of assets to secure payment of an obligation. Also called a security interest . The borrower assigns an interest in the property to the lender, which becomes a lien on the collateral. If the borrower offers stocks, bonds, or other securities as collateral, the lender generally takes possession or is assigned ownership of the collateral until the loan is paid.

Fixed Asset Loans

Introduction

Fixed asset loans are issued to address the financing demand of the enterprises' fixed asset investment activities. Enterprises' investment activities in fixed assets include: infrastructure construction, technology transformation, new product development and manufacturing and related activities such as house purchase, engineering project construction, technology and equipment purchase and installation.

Category

exchange on-lending loans with the following purposes:

Capital construction refers to the infrastructure, municipal projects, service facilities, newly established or expanded productive projects etc., which are approved by the authorized state departments.

Technology transformation mainly refers to the production expansion project for the existing enterprises.

Technology development refers to the activities about the research and development of the new technology and new product, and the conversion or application of the development achievements to the production field.

Other fixed purchase refers to the direct purchase of places or facilities etc., which are approved by the authorized state departments.

Features

1. Generally the loan amount is relatively large;

2. Generally the term is relatively long, most are long or medium term with installment schedule;

3. On the way of the loan guarantees, except providing the necessary security, generally require taking the new added fixed assets of the project as mortgage;

4. Regarding the application process, the loans should be applied and approved on case by case basis;

5. The differences between the fixed asset loans and working capital loans.

Item Fixed Asset Loans Working Capital Loans Usage

Address the financing demand of the enterprises'

fixed assets investment activities

Meet the medium- and short-term financing demand of enterprises

Term

One to five years of medium-term loans or more than five years of long-term

loans

Short-term loans less than one year or one to three years of medium-term loans

Auditing

Approach Apply and review case bycase

Apply and review case by case or the credit line of the working capital loan which can be

easily borrowed, used and repaid within the term and limit specified by the bank

Source of Repayment

The cash flow after project's acceptance of completion or

the equity fund of the enterprise

Mainly enterprise's business income

Risk

Influenced by more external factors, having more uncertainty and instability in

the nature of higher risk

Risk is mainly with the borrower, guarantor or mortgage (pledge)

Income Long-term, stable income Short- and medium-term income Interest Rate

Generally use the floating interest rate, and implemented in accordance with relevant loan interest rate policies of the People's Bank of China, loan interest rate management regulations of our bank and the agreement of the loan contract.

Charges

All types of charges for fixed asset loans are subject to the contract.

Target Customers

Enterprise and institution legal persons and other economic organizations, which keep independent accounting and whose registrations have been approved by the industry and commerce administration authorities (or the competent authorities).

Application Qualifications

1. The applicant should provide the business license approved annually by the industry and commerce administration authorities, The institutions should provide the legal person certificate;

2. Provide loan license/card issued by the People's Bank of China;

3. Have good economic benefits, good credit status , strong debt paying ability and perfect administration system;

4. Implement loan guarantee acceptable to the bank;

5. Open basic deposit account or general deposit account in Bank of China;

6. The fixed asset loan projects should be in line with national industrial policies and credit policies;

7. The ratio of capital to total investment should be in accordance with the national regulation; 8. Projects should be approved by the relevant government departments, with

complete supporting conditions, implementation of the imported equipment and materials source;

9. For application of foreign exchange fixed asset loans, the applicant should hold the import certificate or registration documents.

Process

1. The borrower submits a loan application to the bank;

2. The borrower submits relevant documents, including business license, articles of association, financial reports of the past three years, project approval and the approval documents, project economic benefit analysis, usage and repayment plan and so on; 3. The bank conducts survey and evaluation before disbursement, and investigates the borrower's credit rating and legitimacy, security, profitability of the borrower, verifies the conditions of collaterals, pledge, guarantor to form the assessment;

4. After the bank's internal review and approval, and with the consent of both parties on the terms of the loan contract, mortgage contract, guarantee contract, the parties sign

such contracts;

5. The borrower handles the mortgage registration and other relevant procedures agreed in the contracts;

6. The borrower submits the withdrawal application;

7. Bank funds are credited into the account, and the borrower withdraws the money.

What is project finance?

Introduction

Risk

minimisation

process

STEP

1

-

Risk

identification

and

analysis