International credit transactions

As international credit transactions ( english international lending ) is defined as the cross-border supply and the cross-border demand for loans and credit derivatives .

General

International credit traffic is a complementary market to national credit traffic and requires internationally free capital markets that enable unrestricted capital mobility. It arises when the economic cycles in at least two countries do not proceed in the same phase (phase shift) or when warehousing causes costs . Market participants are non-banks such as importers and exporters of goods , services and capital , as well as credit institutions and states . These pursue commercial motives such as exporting and importing goods or investing and receiving money . In addition, the interbank market also participates in international credit transactions. Speculative motives are pursued by speculation in the case of expected changes in interest rates and / or exchange rates, in which credit institutions can participate in proprietary trading . Risks of appreciation or depreciation are of the greatest importance for the behavior of participants in international credit transactions and thus ultimately also for international credit transactions itself. The transactions take place in the home currency or in a foreign currency . In the euro zone , international credit transactions have lost an important barrier because of the euro , because the second most important risk - currency risk - has been eliminated.

Differences to national credit transactions

The granting of international credit differs significantly from the national credit business. While the methods of credit checks can also be used to analyze the creditworthiness and creditworthiness of foreign borrowers , the special features of the research material must not be overlooked. This applies in particular to the differences in company , commercial , accounting and tax law .

Is common in contracts , loan agreements or bond the English language , in which jurisdiction is predominantly common law or US law agreed. That is why loans , credit agreements or bonds and their contents have English names, for which there is often no commonly used German translation. The Anglo-Saxon character has also had an impact on the types of credit, so that overdrafts or guarantees , for example, are unknown in international credit transactions . Because of the jurisdiction, German law cannot apply, so that conflict of laws may apply.

Types and documentation

The following financing instruments are available for international credit transactions:

• Interbank trade : The international lending of credit institutions to one another was one of the banks' main sources of refinancing until the Lehman Brothers went bankrupt in September 2008 . The Lehman bankruptcy is the real reason for the current attentism of the credit institutions on the interbank market. Statistically it can be shown that since then the credit institutions have tended to invest their money with their central banks and largely ignore the interbank market.
• Syndicated loans : banks lend to international large companies as part of the syndication, which have emerged in both the types of credit as an international even in the loan agreements standards.
• Credit trading and trading in derivatives : There is organized trading between banks and other financial intermediaries who exchange loans, credit derivatives, swaps , options or futures . In the case of loans, the subject of loan trading is in particular the fungible transferable loan facilities .
• Securities trading : International trading in debt securities (especially government bonds ) is also part of international credit transactions , since the creditor acquires a credit risk from a foreign debtor when buying .
• The foreign trade financing takes over the financing of foreign trade for exporters and importers .

Non-governmental organizations such as the Loan Market Association , Loan Syndications and Trading Association or the International Swaps and Derivatives Association ensure standardized documentation . Standardized financial products are for loans:

• Roll-over credit : is a medium to long-term usable, revolving credit line with short-term interest rate adjustment dates, which is rolled over to the next interest date ( English "roll-over" );
• Revolving credit facility : the revolving taken within the credit line in claim tranches are temporary and can be out of time to maturity of the loan limit prolonged be.
• Term loan facility : The credit line is fully defined in terms of amount, term, interest rate and repayment. They must be drawn upon by a certain point in time, otherwise the credit line will expire.
• Stand-by facility : is a loan approval that serves to secure liquidity and is only used in exceptional cases. It is required by rating agencies for the possible repurchase of the borrower's own commercial papers .
• Guarantee facilities / contingencies : As part of loan lending , banks issue guarantee facilities in the form of bank guarantees or similar forms of liability.

Effects

Since international credit transactions are cross-border, creditors are exposed to at least one country risk ; there is an additional exchange rate risk for foreign currencies and an interest rate risk for different interest rates . An exporter can protect himself against country risks by means of export credit insurance, currency and interest rate risks are to be eliminated by hedging transactions or interest rate swaps .

Interest rate differentials and / or changes in exchange rates are inhibiting factors for international credit transactions. Speculative motives target precisely these factors. There is then a tendency for loans from the lower interest level to flow into the country with a higher interest rate. The credit risk and country risk act as barriers that can be overcome by a correspondingly higher interest rate differential. An interest rate difference of 2 percentage points , for example , only diverts credit flows if the additional credit and country risk is lower than these 2 percentage points. This means that the credit and country risk has an impact on international credit transactions, as does transport costs that hamper international trade.

International credit transactions can represent the preliminary stage for the transfer of goods and services . According to this, lending abroad ( capital export ) entails an export of goods, so that the passivation of the capital account is at least partially offset by an activation of the current account . In foreign trade, the export in the exporting country leads to an import of capital, which results in a decrease in foreign currency balances of foreign banks and thus in foreign liabilities and vice versa. International credit transactions thus also affect the current accounts of the participating states. International lending triggers international capital movements, which are reflected in the national current accounts. A country with a current account surplus acquires claims on future payment flows from abroad, current account deficits increase foreign liabilities.

purpose

International credit transactions serve to facilitate international payment transactions when the due dates of liabilities and receivables of an economy fall apart. International credit and debt relationships can be seen as a kind of trade in goods, in which - from a domestic perspective - present goods (granting of credit, capital export) are exchanged for future goods (loan repayment, capital import). This is called intertemporal trade, in which a certain good is exported in the present and imported again in a later period and vice versa. The initially exporting country has a trade surplus in the current period, but may also have trade deficits in the future. In intertemporal trading, you save in the present (or go into debt ) and get into debt or save in the future. In reality, the amount of the accumulated capital and that of the domestic capital investments are almost identical: Countries with a high proportion of accumulated capital also have a high domestic investment rate for a long time. The reason for this is that many countries would much rather invest their capital in their own country than export it abroad. The long-term profits that could be made through intertemporal trading are therefore not realized.

See also

• Intertemporal production possibilities

literature

• Jorn Atmann: Foreign trade for companies , Gustav Fisher Verlag, Stuttgart Jena 1993.
• Bank Lexicon , 10th edition Gabler, Wiesbaden 1988.
• Hans E. Büschgen: Internationales Finanzmanagement , 3rd edition, Frankfurt am Mein 1997.
• Paul R. Krugman: International economics , 6th Edition, Maurice Óbstfeld USA 2003.
• Horst Siebert: Außenwirtschaft , 7th edition, Lucius & Lucius Stuttgart 2000.
• Helmut Beyer, Ludwig Heinz, Gitta Krabbe, Jochen Lehnhoff: The credit business - introduction to the basics , 1st edition, Wiesbaden 1993.
• Louis Perridon, Manfred Steiner: Finanzwirtschaft der Unternehmens , 13th edition, Munich 2004.

Individual evidence

1. ↑ Lutz Beinsen, Fundamental imbalances in the balance of payments as a result of international capital movements , 1969, p. 63 f.
2. ↑ Werner Steuer, Die Aufwertungsspekulation , 1969, p. 19.
3. ↑ Hans-Jürgen Schmidt-Wilke, Risk Problems and Risk Policy in International Banking , 1970, p. 90.
4. ↑ "Interest rate cuts are particularly important now" , Handelsblatt dated December 10, 2008.
5. ↑ "ECB Concerned About Interbank Market" , Handelsblatt dated December 11, 2008.
6. ↑ Günter Wöhe / Jürgen Bilstein / Dietmar Ernst / Joachim Häcker, Basic Features of Corporate Financing , 2009, p. 243.
7. ↑ repayment in one sum on the due date ("bullet repayment") is also possible
8. ↑ Hubertus Adebahr, Currency Theory and Monetary Policy , 1990, p. 215 f.
9. ↑ Hubertus Adebahr, Currency Theory and Monetary Policy , 1990, p. 241.
10. ↑ Philipp Harms, Internationale Macroeconomics , 2008, p. 43.
11. ↑ Ernst Heuss, Economic Systems and International Trade , 1955, p. 94
12. ↑ Helga Luckenbach, Fundamentals of International Economic Policy: International Trade Policy , 2010, p. 12.
13. ↑ Compact Lexicon Economic Theory , Springer Fachmedien Wiesbaden, 2013, p. 157.
14. ^ Paul R. Krugman, International Economics , 6th Edition 2003, p. 656.