Active and Passive Products

INTRODUCTION
Before talking about what a bank 's passive operations are, we must know what banks
are and what they are in charge of. The activities of banks give rise to banking
operations, which are classified as fundamental and accessory. Banking activity is
twofold: intermediate and direct, of which the most important is intermediary.
We say that the intermediary activity, that activity or action that banks carry out to
capture resources available in the market to dedicate them for investment or
consumption purposes. These resources are captured in the market to be used for
investment or consumption purposes. These resources captured in the market can be
internal or external, depending on their origin.
The main internal resources are bank deposits, and the main external resources are those
from foreign capital markets .
Through direct activity, banks intervene in funds from their capital and reserves.

 PASSIVE OPERATIONS OF A BANK

They are those funds deposited directly by customers, which the bank can use to carry
out its asset operations. They are recorded on the right side of the balance sheet; This
being the opposite case for asset accounts , since the balances of these accounts increase
with Credit transactions and decrease with Debit transactions.
The collection of liabilities is of great importance for every bank, since it involves the
activities carried out by a banking institution to collect money , essentially from the
general public. For a bank to develop, it is necessary to acquire deposits, since without
these it is impossible to create a sufficient reserve to help it place these deposits.

Funds in loans and investments that generate dividends, and that allow you to meet the
cash withdrawal demands requested by your clients .
 CURRENT ACCOUNTS
The bank current account is a contract by virtue of which a bank undertakes to fulfill the
payment orders of another person (called a "current account holder" up to the limit of
the amount of money that is deposited in said account, or the credit that has been
stipulated between the parties. It is a basic instrument in the banking business as it
allows banks to raise money from the public, thereby obtaining funds for loans and
other activities, offering clients the security of custody of their money and an agile and
widely available means of payment. accepted.
Competition has led banks, today, to offer various services related to checking accounts:
interest payments on minimum balances, telephone formation service , electronic
banking , etc.
In other words, current accounts or demand deposits are characterized because the funds
deposited in them are immediately available and in cash, through any instrument
 provided by the entity to obtain the amounts of money deposited in them, debit or credit
card. , checks , promissory notes, or in person at the window. Depending on the agreed
modality, they offer other types of services such as direct debit payments and
collections, payroll entry, making transfers; some more specific such as payroll
advances, travel assistance insurance , home insurance, advantageous conditions on
loans and credits , etc.
The entity sends to the address of the owner the information on the operations carried
out through a checking account, periodically, biweekly, monthly, etc., in a document
called an extract.

SAVINGS ACCOUNTS
Savings books or demand savings accounts are products very similar to current accounts
and are, by definition, cash deposit contracts , freely available. All operations carried
out are reflected in the booklet that is given to the account holder, popularly called
"savings book." Savings accounts are those accounts that are deposited in financial
entities that have among their activities, the collection of funds and they are kept in the
possession and at the disposal of said entity for longer periods than current account
deposits.
The fact of maintaining the funds deposited in the bank for a longer period of time , but
with the ease of converting them into current money (cash) in a short time and without
loss of value , is what assigns this type of deposit the category or qualifier of "quasi-
money". It can also be said that it is an instrument that allows you to have cash quickly
since it can be done over the counter, or using a linked payment instrument. Another
characteristic that should be noted is the fact that the physical notebook remains in the
possession of the client , and he must update it when he considers it convenient,
himself, at the ATMs enabled for this purpose, or at any branch of the bank.
Until relatively recently, the main differences were that with the savings book you could
not operate with checks, some cash services were not available and overdrafts were not
accepted. Currently this is not the case; when a savings book is contracted, the bank
usually offers similar instruments and services, associated with a checking account.
However, in entities where this is not possible, the solution consists of linking a
checking account and a savings account of the same owner, to correct the limitation
imposed by the entity of issuing checks against a savings book, these are called
combined passbooks or savings accounts. On the other hand, to make withdrawals from
these accounts, especially when they are large amounts, the bank requires prior written
notice, so that it can have sufficient liquidity to cover the commitment.
Banks recognize a quarterly benefit in interest on savings accounts , which according to
the regulations of the Banking Commission, this interest is annual, capitalized quarterly,
on the average of the lowest balances of each month. Any person of legal age can open
this type of account. For the bank, it constitutes a typical resource raising service.
 COMMON CHARACTERISTICS OF CHECKING ACCOUNTS AND SAVINGS
ACCOUNTS
No minimum contributions are required to open the account. The risk of non-payment
depends on the solvency of the entity, controlled directly by the Bank of Spain , and the
coverage offered by the Bank Deposit Guarantee Fund up to a maximum amount. The
profitability offered is minimal, payable monthly, quarterly, semi-annually or annually,
and basically, they offer three modalities, the most used, remunerating the daily balance
from the first deposit made; another remunerates in tranches, paying more interest for
 tranches with higher balances, and the last one conditions the remuneration from a
certain average balance.
The bank will charge us, in general , a maintenance fee, an administration fee, in
particular cases a note fee, and if applicable, an overdraft fee. These commissions must
be publicly displayed in each office , and in any case the client has the right to have
information on the commissions applicable to the contract.
The expenses incurred can arise from very diverse operations, from transfers, deposit of
checks, use of debit or credit cards , etc. There is a great offer and very varied typology
of these products, segmenting them even by age ranging from children's accounts,
accounts for young people (from 18 years old to 26, or specific banks up to 31) with
limited advantages, or specific accounts for pensioners.
The appearance of Internet banking has been a very interesting alternative to traditional
banking based on the fact that the conditions offered by some entities are very
favorable, either from the point of view of superior profitability, or due to the omission
of commissions and other expenses. management , another advantageous possibility is
to also be able to operate by telephone .
Despite these advantages, there are certain drawbacks such as the limitation of
contracting some products or carrying out operations only available in the physical
offices or collaborating entities of banks that operate online.
 FIXED-TERM DEPOSITS
They are deposits that are formalized between the client and the bank through a
document or certificate; They are agreed for a specific amount and term and cannot be
withdrawn or increased before the expiration of the agreed term.
They are also said to be deposits that are formalized between the client and the bank
through a document or certificate; They are agreed for a specific amount and term and
cannot be withdrawn or increased before the expiration of the agreed term. The interest
paid on these deposits is at the discretion and policy of each bank.
These deposits are lines for raising resources that, because they are negotiated in
installments, are not payable on demand and their delivery to the client is only payable
on the date on which the term expires or through written notification previously
delivered to the bank. The bank can use the resources obtained as productive assets for
medium and long-term loans, investments and other types of credit, which, at the same
time, make up the bank's liabilities, decisively condition the productive capacity of the
banking company .

 What is a savings account?

A savings account is an ordinary demand deposit (passive product), in which the funds
deposited in the account are immediately available and generate a certain profitability or
during a certain period depending on the amount saved.
Remuneration conditions vary depending on the specific product. Thus, there may be
savings accounts that pay interest, for example monthly, quarterly or annually.
 Likewise, remuneration can be linear (same interest for any balance), by balance
tranches or even in kind.
These types of accounts may also be subject to the payment of commissions, although
since the popularization of online banking the trend is to eliminate the payment of
commissions on savings products.
The services associated with a savings account also vary depending on the entity. They
can range from the most basic, such as deposits and payments of checks or transfers , to
more complex ones such as debit or credit cards associated with the account.
Savings accounts or savings accounts are used mainly by individuals and civil entities.
They serve three things:
 To earn interest during the time these funds are not used.
 Funds can be withdrawn at any time using a receipt called a “debit note.”
 Deposited funds earn moderate interest. It should also be taken into account that
they are added to the capital every 6 months or annually.
The percentage that the bank contributes to a savings account varies between

ACTIVE PRODUCTS

 FINANCIAL PRODUCTS
We already know what activity banks carry out, so to carry it out they must require
instruments that make this mediating work in the capital market possible.
Therefore, financial institutions must have two main types of products:
Liability products: they are financial instruments that allow agents with excess capital
to temporarily transfer it to the financial intermediary in exchange for a certain
remuneration. The simplest examples of this type of product are checking accounts,
savings accounts, time deposits, etc.
Asset products: they are financial instruments through which banks lend their resources
to agents in need of financing in exchange for interest. These types of products include
loans, credit accounts, etc.
Banks and financial agents today, in addition to their traditional work as financial
intermediaries, are increasingly becoming financial services companies that try to cover
all the needs of their clients in the economic field. Thus, banks are no longer content
with taking deposits and giving loans, but also market investment funds, cards,
insurance, manage direct debit bills (water, electricity, etc.), taxes and so on.
ACTIVE OPERATIONS
They are those where the bank places money in circulation to generate more money
through loans that it grants to people or companies that require it. As a result of these
loans granted by the bank, interest or commissions are generated that credit applicants
must pay.

DOCUMENTS THAT INCLUDE IT

The documentation required to carry out the study and determine whether funds are
granted varies depending on whether the request is made by a company or an individual.
Generally, the bank needs the identification of the natural or legal person, deeds of
incorporation and powers if necessary, that is, of the owners who are going to sign the
application for the operation, records where unpaid amounts of bills of exchange appear.
change, promissory notes, checks and other commercial documents

The entity also requires official documents that demonstrate earning capacity, latest
income tax returns, VAT returns, latest payrolls, etc., in the case of companies, official
financial statements, balance sheet and income statement, corporate tax, etc. ., from this
information will be able to deduce the applicant's generation of resources to be able to
meet the repayment of the principal and calculate the maximum amount of debt.

With the information provided by the client, the analysis is carried out, and if it is
satisfactory, the operation is carried out, otherwise, greater guarantees will be requested
or the granting of the loan or credit will be denied.

The main guarantees that financial entities require to comply with credit or loan
operations are real guarantees: pledge and mortgage, and personal guarantees:
responding for the debt with all present and future assets, or guarantees from third
parties that respond subsidiarily. of payment, in case the main debtor does not return the
money to the bank.
Fiscally, it is indifferent to dispose of external resources through a credit policy or loan
contract. For legal entities, formalization expenses and interest are deductible as
expenses. However, for natural persons it is necessary to distinguish between what
would be business expenses or personal expenses that do not imply strict investment.
Thus, there are interest deductions in certain tax regimes for individuals, as long as it is
a loan or credit for investment, that is, the financing is intended for the acquisition of
elements and goods used for professional activity or business, as opposed to what would
be a consumer loan or credit, which does not enjoy any tax advantage. Likewise,
mortgage loans benefit from very favorable tax treatment when the individual obtains
the funds for the purpose of acquiring or improving the habitual residence. The different
products and main operations that banking entities offer to their clients respond to the
terminology used in accounting practice, in this way, passive operations refer to the
deposit contract, imputing them to the liabilities of the balance sheet as obligations for
the financial entity, while active operations are based on the loan contract and its
corresponding location on the balance sheet. banking is in the asset as goods and rights.
Among the different legal versions that cover the various deposit concepts and their
classifications, it is worth highlighting the one made by the Commercial Code
circumstantially when referring to the separation between regular deposit and irregular
deposit.
Regular deposit is when the depositary is obliged to return exactly the same thing that
he has received as deposit, while in irregular deposit the depositary can use and
consume what has been deposited, so that he acquires its property and undertakes to
return not the same thing, since they are fungible things, but the same thing of the same
kind and quality, an obvious example would be money.
A bank deposit of money is called a deposit made by a natural or legal person in a credit
institution, which undertakes to safeguard and return, when the depositor demands it or
upon expiration of the deposit if a period has been agreed for the return. the money
resulting from the deposit constituted plus the interest set in the contract for the free
disposal and use that the entity has of it, since the money delivered to the bank becomes
its property, to be able to carry out asset operations and, therefore therefore, banking
activity. The client acquires a credit right against the entity, so not only does he not pay
for the custody itself, which would constitute the commercial deposit, but it is the bank
that pays interest precisely for the availability of the thing deposited.
Investment and deposit operations carried out by savers and investors are protected by
guarantee funds regulated by Law. Thus, in the event of bankruptcy of a bank or savings
bank, the Bank Deposit Guarantee Fund, an institution financed by private banks.

CLASSIFICATION OF CREDITS
By the modality of Provision of Funds:
· Actual provision in one or more items
· Credits in a checking account.

According to the Maturity Scale:

· Up to 30 days
· From 31 to 60 days
· From 61 to 180.
· From 181 to 360
· Older than 360 days.

For its Purpose:

· For production: purchase of raw materials and inputs in general.

· For investment: purchase of machinery, equipment and construction.

· Home Acquisition. Fundamentally by natural persons.

By the economic activity attended:

· Communal, social and personal service.
· Agricultural, fishing and forestry.
· Manufacturing mining industry
· Construction
· Financial establishment, insurance and services.

By type of guarantee:
· Chattel mortgage
· No warranty
· Commercial documents
· Garment

TYPES OF CREDITS
There are many types of loans, the most traditional in the financial system being
commercial loans, loans to microentrepreneurs, consumer loans and mortgage loans.

COMMERCIAL CREDITS.
They are those direct or indirect credits granted to natural or legal persons intended for
the financing of the production and marketing of goods and services in their different
phases.
Credits granted to people through credit cards, financial leasing operations or other
forms of financing are also considered within this definition.

CREDITS TO MICROENTERPRISES
These are direct or indirect credits granted to persons or legal entities intended to
finance production, marketing or service provision activities.

CONSUMER CREDITS
They are those credits that are granted to natural persons with the purpose of paying for
goods, services or expenses related to a business activity.

Credits granted to natural persons through credit cards, financial leases and any other
type of financial operation are also considered within this definition.
The personal loan is the most common and simplest of the asset instruments. The bank
lends money to a client, who undertakes to repay in successive periods (normally
calendar months, although they can also be quarters, etc.), the principal loaned and the
corresponding interest. Although it is called a personal loan, it can be granted to natural
persons (individuals) or legal entities (companies, associations, foundations, public
entities, etc.). The name personal loan is rather given by the type of guarantee that the
bank receives for the recovery of the money, since this is a purely personal guarantee,
without the bank receiving any asset as pledge (mortgage guarantee), for Ensure client
compliance. Normally, banks require the formalization of loans in a document or policy
intervened by a notary public (notary), in order to be able to take advantage of the
executive route in case of non-payment by the client.
In addition to paying interest, banks usually charge a series of commissions on the loans
they grant, these are usually:
- Opening commission: this is passed on to the client for the administrative expenses
derived from the formalization of the loan.
- Study commission: for studying the feasibility of the operation.
- Early repayment fee: charged if the client wants to repay the capital in advance.
- Early cancellation fee: if the client cancels the loan before what was agreed.

The interest rate that the client pays to the bank can be fixed for the entire life of the
loan or variable, that is, referenced to an index, it is reviewed from time to time
(normally every year) and varies in the same direction as the interest rate. reference
type.
Thus, the client must pay the bank a monthly fee that is made up of capital repayment
(amortization) and interest. So that the fee that the client pays is the same every month,
the French method is used to calculate it, which consists of increasing throughout the
life of the loan the part of the fee corresponding to amortization and that corresponding
to interest. is decreasing, so that the sum of both remains constant. In this way, when
beginning to repay a loan, the client is amortizing little capital and paying a large
portion of interest, a situation that is reversed as the loan comes to an end.
In some cases, the bank may require additional guarantees from the loan holder or
holders, such as the incorporation of guarantors to the operation or pledging some of the
holder's assets.
The guarantor is a person who is subsidiarily responsible for the owner for the payment
of the debt, so that if the owner does not pay the loan installments, the guarantor must
do so and if he cannot either, the bank will go against the owner's assets and if this does
not have, against the assets of the guarantor.
The pledge guarantee consists of establishing as a pledge, a movable asset (generally
some financial asset), property of the owner of the loan, so that if he does not pay his
debt, the ownership of the pledge would pass to the bank.
In practice, personal loans are used by families to finance the purchase of consumer
goods (furniture, automobiles, etc.) and by companies mainly to finance working capital
or machinery.

MORTGAGE LOANS FOR HOMES

These are lines of credit intended for natural persons for the acquisition, construction,
renovation, remodeling, expansion, improvement and subdivision of their own home.
Such credits are granted backed by mortgages.
A Home Loan is a very common type of debt instrument, used to purchase real estate.
Under this agreement, the money is used to purchase property. Commercial banks,
however, are provided with a bond (seizure) on the Deed of the home until the mortgage
is paid in full. If the creditor goes bankrupt , the bank will have legal rights to take
possession of the property and sell it, to recover the remaining money.
In the past, commercial banks have not been very interested in real estate lending and
have put only a relatively small percentage of their assets into mortgages. As their name
implies, these financial institutions secure their profits primarily by lending to
businesses and individuals and leave the major task of home financing to others.
However, due to changes in banking laws and policies, commercial banks are
increasingly active in housing financing.
Changes in banking laws now allow commercial banks to make mortgage loans on a
more liberal basis than ever before. When acquiring real estate mortgages, these
institutions follow two main practices. First, some of the banks maintain active and
well-organized departments whose main function is to actively compete in real estate
lending. In areas lacking financial institutions specializing in real estate lending, these
banks become the source of residential and large-acre (farm) mortgage loans. Second,
banks acquire mortgages simply by purchasing them from bankers or mortgage
salespeople.
In turn, commercial services companies, which were originally used to obtain loans for
permanent lenders such as commercial banks, wanted to expand their activity beyond
their areas of influence. In recent years, however, these companies have focused on
acquiring mobile mortgage loans in sufficient volume for commercial banks and savings
and loan associations. Service companies obtain these loans from retailers, usually with
leverage practices. Almost all bank and service company contracts contain a credit
insurance policy that protects the lender if the consumer goes bankrupt.

CREDITS POLICIES
Credit policies constitute a regulatory framework that provides uniformity and
coherence to the decisions made in a banking institution; They must be defined by the
highest authority of the banking institution, that is, by the administrative board.
POLICY COMPONENTS
Amount of the funds raised to be placed: once the amount corresponding to the legal
reserve required by the BCV has been set aside, the authorities of the banking institution
must decide on the proportion of the funds raised that will be used to grant loans. The
following factors must be taken into account:

1- Endogenous or internal factors to the bank: the most important factor is the
composition of the deposits, a fact that in turn is related to their cost and stability.

2- Exogenous or external factors to the bank: refers to the seasonal behavior of the
public's preference for cash.

The markets that serve the bank: depend on several factors among which the following
stand out: the economic activity to which the members of the administrative board are
dedicated, the regional or national character of the institution, and the territorial origin
of the capital.

The size of the bank: this determines the markets they can serve.

Channels for the approval and settlement of credits: the bank's administrative board
must design, as part of its policies, a system for the analysis, approval, and settlement of
credits that contemplates the following: autonomy for agency managers to authorize
credits under certain conditions; creation of regional credit committees chaired by a
regional vice president, which must meet periodically to consider credit
applications...etc.
ASSET PRODUCTS OF THE FINANCIAL SYSTEM
The main function of the financial system is simply financial intermediation; That is, the
process by which they raise funds from the public with different types of deposits
(passive products) to place them through financial operations (active products)
according to the needs of the market. They also mediate in the placement of resources
from government institutions.
Below we present basic concepts of some credit products intended for the business
sector. Each financial institution has different policies and products, with common
bases; so we have:
The promissory note loan is a short-term operation (maximum one year), whose
monthly or quarterly repayments can also be paid at maturity. Generally, they are 90-
day operations extendable to one year with monthly interest charged in advance.
Generally used to finance the purchase of merchandise within the economic cycle of the
commercial company (buy-sell-collect).
Another reason for requesting a promissory note is due to temporary cash deficiencies
that require positive adjustment, caused, among others, by longer credit terms compared
to the terms granted by suppliers.
The interest loan is a short and long-term operation, which can range from one to five
years. Installments are generally monthly, but can also be negotiated and interest is
charged upon maturity. This type of credit is generally used to acquire real estate, or
assets that, due to the volume of cash they represent, cannot be amortized with the
company's cash flow in the short term.

Having good savings habits is usually the first and most important of the personal

finance tips, as it teaches us the value of taking advantage of what we have today to

ensure the conditions with which we will live tomorrow.

Being a concept that sounds very simple, relatively easy to achieve and applicable to

everyone, saving has become a culture in itself, on which many tools and options have

been developed designed to increase its performance.

These options, developed by financial institutions such as banks and investment funds,

are gaining popularity and further development by implementing new technologies,

complementary financial products and increasingly personalized attention to the needs

of those who hire them.

Before a bank executive comes to you and seeks to sell you these financial services with

all the features we mentioned and more, we would like you to know the two most

common types of services - and the most convenient - related to savings: the Account

Current and Savings Account.

Current account

They are the most popular type of account in the financial market and the simplest form

of banking, since their main function is to be a means for people to deposit their money

safely and be able to access it at any time.

To do this, it uses checks as a tool for banking operations and does not have an interest

rate or return that will return you more money for keeping your resources in the account

for a time. Of course, they may include commissions for administration of the service.

Yes, it suits you:

 You want to make free transfers between your checking account and savings
account.
 You are just looking for an account with which to make your most frequent
payments.
 You want to link it to a debit card, checkbook or credit card.
Savings account

The purpose of this account is to allow its owner to develop the habit of saving with an

account in which, like the checking account, cash can be accessed at any time.

The main difference with respect to a Current Account is that the Savings Account does

offer a certain profitability, since they “return” a certain amount or return to you for

keeping your resources in the account, which makes it a good way to save more money

and comply with your financial goals.

Yes, it suits you:

 Save a sum of money month after month.

 You want to prepare for times of economic instability.
 You do not need to make frequent withdrawals or transfers from said account, as
certain transaction fees are usually deducted.
 You require a debit card for purchase or withdrawal operations at ATMs.
Now that you know the preferred option for you and your assets, it is time to start the

savings habit with the right tool, a decision that involves discipline, determination,

constant monitoring and a personalized strategy to maintain control over your personal

finances.

Learn more about these strategies and the solutions that can maximize your savings with

us. Contact us and receive personalized advice!

Charge on account

The debit to account is an accounting action that must be carried out by any
company or entity with legal personality when a decrease in balance occurs, or an
outflow of funds occurs.

Definition of debit

According to the Bank of Spain (BE), an account charge is an “entry or entry in the
debit of an account, which for the account holder means an outflow of funds, and
therefore, a decrease in its balance.”

What is payment or account credit?

To credit an account is to register a concept in the respective accounting account. It

could be said that it is the same as causing, since it is about recording in the accounting
any economic movement or fact that occurred that must be recognized. Crediting the
account does not necessarily imply that the payment has been made.

Time deposits and savings accounts

What are the differences between both?

 1. The terms : savings accounts, as a general rule, have an indefinite duration,
which allows us to benefit from their advantages until the moment we decide to
close them. Deposits, on the other hand, have a fixed term, which can last from
days to years.
2. Profitability: deposits usually have higher profitability than savings accounts, but
there are also exceptions. We can find accounts with a fixed remuneration above
the deposits.
3.  The availability of money: the accounts allow you to have the money
without affecting the interest obtained and without penalty. Fixed-term
deposits are also fully available, except on rare occasions. Of course,
when we decide to withdraw the money before the stipulated period, a
penalty is usually applied, such as a reduction in interest or a 0% return
on the redeemed capital.
4.  Contributions: other differences that we can find are whether we can
add more capital to our fund. In the case of savings accounts we can
make the contributions we want. On the contrary, deposits once opened
do not allow modifications to be made.
5.  The payment of interest: as a general rule, settlement in savings
accounts is usually done monthly, and in the case of fixed-term deposits
they usually have annual payment or at maturity. We can also find some
exceptions both in accounts and deposits and that settlements are made
monthly or semi-annually.

Term deposits

Definition
A time deposit (also called a fixed-term deposit) is a product that consists of delivering
an amount of money to a banking entity for a certain time. After that period, the entity
returns the money, along with the agreed interest. It may also be that interest is paid
periodically for the duration of the operation. Interest is settled in a checking account or
passbook that the client must have open at the entity at the beginning.
Characteristics

The differences between a time deposit and demand deposits (checking accounts and
savings accounts) are:
 Time deposits have a “maturity date,” which is when the money and interest can be
withdrawn without paying a penalty or commission. The deposited amount cannot be
used until the maturity date.
 If you need to use your savings before the maturity date, you will have to pay a penalty
or an early cancellation fee. Be careful: penalties do not appear in the rate brochures and
commissions do, although both must appear in the contract. The penalty and
commissions cannot be greater than the amount of gross interest accrued since the
beginning of the operation.
 There are also deposits on the market that do not allow early cancellation or that only
allow it under special conditions.
 Generally speaking, time deposits give you higher interest than demand deposits.
 In time deposits, direct debits of receipts and payrolls are not allowed, nor other
concepts of movement of collections or payments.
Renewal:
If you have contracted a term deposit, you should be attentive when its expiration date
approaches to be able to make decisions about its renewal.
Some deposits are renewed once the term has expired, for another equal term, if the
holder so wishes. If not, the contract is terminated and the money is deposited into an
associated checking account or passbook.
Other deposits renew automatically, but usually at a lower interest rate. There are also
deposits that do not allow renewal. You, as a customer, should inform yourself about
renewal options and make decisions based on your situation and needs at that time.
Interests
The interest rate is the price that the financial institution pays you for the money you
deposit. Although you will find the nominal interest rate in the contracts, in order to
compare the offers of different entities it is preferable to use the APR (Annual
Equivalent Rate). The APR indicates the effective cost or performance of a financial
product, since it includes the nominal interest rate, less commissions and other expenses
that may apply, taking into account the term of the operation. Real profitability is a
much more reliable indicator. But the comparison will only be valid between deposits
with equal terms.
The interest offered for a term deposit depends on the market and the need of credit
institutions to raise funds.
Normally a fixed interest is agreed for the duration of the term deposits. However, it is
increasingly common to offer variable or mixed interest rates; This is the case of
structured deposits, in which, after an initial period at a fixed rate, a variable rate is
applied linked to the evolution of an index, the value of a basket of shares or even the
possibility of a crash occurring. future fact.
There are other types, called structured deposits, with a fixed interest period followed
by a variable interest, linked to the evolution of an index, the value of a basket of shares
or even the possibility of a future event occurring. Entities are increasingly offering
these deposits, which have one of their main attractions in the insured fixed interest.
However, due to their peculiarities they do not fit with the description we are making of
the deposits.
Quite high interest rates are usually offered for certain short-term deposits (one month,
two months), but it must be taken into account that the rate offered usually refers to an
annual period, so some calculations must be carried out to obtain the interest that will
actually be received, taking into account the duration of the deposit

FINANCIAL PRODUCTS

We already know what activity banks carry out, so to carry it out they must require
instruments that make this mediating work in the capital market possible.
Therefore, financial institutions must have two main types of products:
Liability products: they are financial instruments that allow agents with excess capital
to temporarily transfer it to the financial intermediary in exchange for a certain
remuneration. The simplest examples of this type of product are checking accounts,
savings accounts, time deposits, etc.
Asset products: they are financial instruments through which banks lend their resources
to agents in need of financing in exchange for interest. These types of products include
loans, credit accounts, etc.
Banks and financial agents today, in addition to their traditional work as financial
intermediaries, are increasingly becoming financial services companies that try to cover
all the needs of their clients in the economic field. Thus, banks are no longer content
with taking deposits and giving loans, but also market investment funds, cards,
insurance, manage direct debit bills (water, electricity, etc.), taxes and so on.
ACTIVE OPERATIONS
They are those where the bank places money in circulation to generate more money
through loans that it grants to people or companies that require it. As a result of these
loans granted by the bank, interest or commissions are generated that credit applicants
must pay.

DOCUMENTS THAT INCLUDE IT

The documentation required to carry out the study and determine whether funds are
granted varies depending on whether the request is made by a company or an individual.
Generally, the bank needs the identification of the natural or legal person, deeds of
incorporation and powers if necessary, that is, of the owners who are going to sign the
application for the operation, records where unpaid amounts of bills of exchange appear.
change, promissory notes, checks and other commercial documents

The entity also requires official documents that demonstrate earning capacity, latest
income tax returns, VAT returns, latest payrolls, etc., in the case of companies, official
financial statements, balance sheet and income statement, corporate tax, etc. ., from this
information will be able to deduce the applicant's generation of resources to be able to
meet the repayment of the principal and calculate the maximum amount of debt.

With the information provided by the client, the analysis is carried out, and if it is
satisfactory, the operation is carried out, otherwise, greater guarantees will be requested
or the granting of the loan or credit will be denied.

The main guarantees that financial entities require to comply with credit or loan
operations are real guarantees: pledge and mortgage, and personal guarantees:
responding for the debt with all present and future assets, or guarantees from third
parties that respond subsidiarily. of payment, in case the main debtor does not return the
money to the bank.
Fiscally, it is indifferent to dispose of external resources through a credit policy or loan
contract. For legal entities, formalization expenses and interest are deductible as
expenses. However, for natural persons it is necessary to distinguish between what
would be business expenses or personal expenses that do not imply strict investment.
Thus, there are interest deductions in certain tax regimes for individuals, as long as it is
a loan or credit for investment, that is, the financing is intended for the acquisition of
elements and goods used for professional activity or business, as opposed to what would
be a consumer loan or credit, which does not enjoy any tax advantage. Likewise,
mortgage loans benefit from very favorable tax treatment when the individual obtains
the funds for the purpose of acquiring or improving the habitual residence. The different
products and main operations that banking entities offer to their clients respond to the
terminology used in accounting practice, in this way, passive operations refer to the
deposit contract, imputing them to the liabilities of the balance sheet as obligations for
the financial entity, while active operations are based on the loan contract and its
corresponding location on the balance sheet. banking is in the asset as goods and rights.
Among the different legal versions that cover the various deposit concepts and their
classifications, it is worth highlighting the one made by the Commercial Code
circumstantially when referring to the separation between regular deposit and irregular
deposit.
Regular deposit is when the depositary is obliged to return exactly the same thing that
he has received as deposit, while in irregular deposit the depositary can use and
consume what has been deposited, so that he acquires its property and undertakes to
return not the same thing, since they are fungible things, but the same thing of the same
kind and quality, an obvious example would be money.
A bank deposit of money is called a deposit made by a natural or legal person in a credit
institution, which undertakes to safeguard and return, when the depositor demands it or
upon expiration of the deposit if a period has been agreed for the return. the money
resulting from the deposit constituted plus the interest set in the contract for the free
disposal and use that the entity has of it, since the money delivered to the bank becomes
its property, to be able to carry out asset operations and, therefore therefore, banking
activity. The client acquires a credit right against the entity, so not only does he not pay
for the custody itself, which would constitute the commercial deposit, but it is the bank
that pays interest precisely for the availability of the thing deposited.
Investment and deposit operations carried out by savers and investors are protected by
guarantee funds regulated by Law. Thus, in the event of bankruptcy of a bank or savings
bank, the Bank Deposit Guarantee Fund, an institution financed by private banks.

CLASSIFICATION OF CREDITS
By the modality of Provision of Funds:
· Actual provision in one or more items
· Credits in a checking account.

According to the Maturity Scale:

· Up to 30 days
· From 31 to 60 days
· From 61 to 180.
· From 181 to 360
· Older than 360 days.

For its Purpose:

· For production: purchase of raw materials and inputs in general.

· For investment: purchase of machinery, equipment and construction.

· Home Acquisition. Fundamentally by natural persons.

By the economic activity attended:

· Communal, social and personal service.
· Agricultural, fishing and forestry.
· Manufacturing mining industry
· Construction
· Financial establishment, insurance and services.
By type of guarantee:
· Chattel mortgage
· No warranty
· Commercial documents
· Garment

TYPES OF CREDITS
There are many types of loans, the most traditional in the financial system being
commercial loans, loans to microentrepreneurs, consumer loans and mortgage loans.

COMMERCIAL CREDITS.
They are those direct or indirect credits granted to natural or legal persons intended for
the financing of the production and marketing of goods and services in their different
phases.
Credits granted to people through credit cards, financial leasing operations or other
forms of financing are also considered within this definition.

CREDITS TO MICROENTERPRISES
These are direct or indirect credits granted to persons or legal entities intended to
finance production, marketing or service provision activities.

CONSUMER CREDITS
They are those credits that are granted to natural persons with the purpose of paying for
goods, services or expenses related to a business activity.

Credits granted to natural persons through credit cards, financial leases and any other
type of financial operation are also considered within this definition.
The personal loan is the most common and simplest of the asset instruments. The bank
lends money to a client, who undertakes to repay in successive periods (normally
calendar months, although they can also be quarters, etc.), the principal loaned and the
corresponding interest. Although it is called a personal loan, it can be granted to natural
persons (individuals) or legal entities (companies, associations, foundations, public
entities, etc.). The name personal loan is rather given by the type of guarantee that the
bank receives for the recovery of the money, since this is a purely personal guarantee,
without the bank receiving any asset as pledge (mortgage guarantee), for Ensure client
compliance. Normally, banks require the formalization of loans in a document or policy
intervened by a notary public (notary), in order to be able to take advantage of the
executive route in case of non-payment by the client.
In addition to paying interest, banks usually charge a series of commissions on the loans
they grant, these are usually:
- Opening commission: this is passed on to the client for the administrative expenses
derived from the formalization of the loan.
- Study commission: for studying the feasibility of the operation.
- Early repayment fee: charged if the client wants to repay the capital in advance.
- Early cancellation fee: if the client cancels the loan before what was agreed.

The interest rate that the client pays to the bank can be fixed for the entire life of the
loan or variable, that is, referenced to an index, it is reviewed from time to time
(normally every year) and varies in the same direction as the interest rate. reference
type.
Thus, the client must pay the bank a monthly fee that is made up of capital repayment
(amortization) and interest. So that the fee that the client pays is the same every month,
the French method is used to calculate it, which consists of increasing throughout the
life of the loan the part of the fee corresponding to amortization and that corresponding
to interest. is decreasing, so that the sum of both remains constant. In this way, when
beginning to repay a loan, the client is amortizing little capital and paying a large
portion of interest, a situation that is reversed as the loan comes to an end.
In some cases, the bank may require additional guarantees from the loan holder or
holders, such as the incorporation of guarantors to the operation or pledging some of the
holder's assets.
The guarantor is a person who is subsidiarily responsible for the owner for the payment
of the debt, so that if the owner does not pay the loan installments, the guarantor must
do so and if he cannot either, the bank will go against the owner's assets and if this does
not have, against the assets of the guarantor.
The pledge guarantee consists of establishing as a pledge, a movable asset (generally
some financial asset), property of the owner of the loan, so that if he does not pay his
debt, the ownership of the pledge would pass to the bank.
In practice, personal loans are used by families to finance the purchase of consumer
goods (furniture, automobiles, etc.) and by companies mainly to finance working capital
or machinery.

MORTGAGE LOANS FOR HOMES

These are lines of credit intended for natural persons for the acquisition, construction,
renovation, remodeling, expansion, improvement and subdivision of their own home.
Such credits are granted backed by mortgages.
A Home Loan is a very common type of debt instrument, used to purchase real estate.
Under this agreement, the money is used to purchase property. Commercial banks,
however, are provided with a bond (seizure) on the Deed of the home until the mortgage
is paid in full. If the creditor goes bankrupt , the bank will have legal rights to take
possession of the property and sell it, to recover the remaining money.
In the past, commercial banks have not been very interested in real estate lending and
have put only a relatively small percentage of their assets into mortgages. As their name
implies, these financial institutions secure their profits primarily by lending to
businesses and individuals and leave the major task of home financing to others.
However, due to changes in banking laws and policies, commercial banks are
increasingly active in housing financing.
Changes in banking laws now allow commercial banks to make mortgage loans on a
more liberal basis than ever before. When acquiring real estate mortgages, these
institutions follow two main practices. First, some of the banks maintain active and
well-organized departments whose main function is to actively compete in real estate
lending. In areas lacking financial institutions specializing in real estate lending, these
banks become the source of residential and large-acre (farm) mortgage loans. Second,
banks acquire mortgages simply by purchasing them from bankers or mortgage
salespeople.
In turn, commercial services companies, which were originally used to obtain loans for
permanent lenders such as commercial banks, wanted to expand their activity beyond
their areas of influence. In recent years, however, these companies have focused on
acquiring mobile mortgage loans in sufficient volume for commercial banks and savings
and loan associations. Service companies obtain these loans from retailers, usually with
leverage practices. Almost all bank and service company contracts contain a credit
insurance policy that protects the lender if the consumer goes bankrupt.

CREDITS POLICIES
Credit policies constitute a regulatory framework that provides uniformity and
coherence to the decisions made in a banking institution; They must be defined by the
highest authority of the banking institution, that is, by the administrative board.
POLICY COMPONENTS
Amount of the funds raised to be placed: once the amount corresponding to the legal
reserve required by the BCV has been set aside, the authorities of the banking institution
must decide on the proportion of the funds raised that will be used to grant loans. The
following factors must be taken into account:

1- Endogenous or internal factors to the bank: the most important factor is the
composition of the deposits, a fact that in turn is related to their cost and stability.

2- Exogenous or external factors to the bank: refers to the seasonal behavior of the
public's preference for cash.

The markets that serve the bank: depend on several factors among which the following
stand out: the economic activity to which the members of the administrative board are
dedicated, the regional or national character of the institution, and the territorial origin
of the capital.

The size of the bank: this determines the markets they can serve.

Channels for the approval and settlement of credits: the bank's administrative board
must design, as part of its policies, a system for the analysis, approval, and settlement of
credits that contemplates the following: autonomy for agency managers to authorize
credits under certain conditions; creation of regional credit committees chaired by a
regional vice president, which must meet periodically to consider credit
applications...etc.

ASSET PRODUCTS OF THE FINANCIAL SYSTEM

The main function of the financial system is simply financial intermediation; That is, the
process by which they raise funds from the public with different types of deposits
(passive products) to place them through financial operations (active products)
according to the needs of the market. They also mediate in the placement of resources
from government institutions.
Below we present basic concepts of some credit products intended for the business
sector. Each financial institution has different policies and products, with common
bases; so we have:
The promissory note loan is a short-term operation (maximum one year), whose
monthly or quarterly repayments can also be paid at maturity. Generally, they are 90-
day operations extendable to one year with monthly interest charged in advance.
Generally used to finance the purchase of merchandise within the economic cycle of the
commercial company (buy-sell-collect).
Another reason for requesting a promissory note is due to temporary cash deficiencies
that require positive adjustment, caused, among others, by longer credit terms compared
to the terms granted by suppliers.
The interest loan is a short and long-term operation, which can range from one to five
years. Installments are usually monthly, but can also be negotiated and interest is
charged upon maturity. This type of credit is generally used to acquire real estate, or
assets that, due to the volume of cash they represent, cannot be amortized with the
company's cash flow in the short term.
The collateral for this operation may be the acquired asset or different real collateral
(pledge or mortgage). Additionally, it can carry the bonds considered necessary.
Leasing Operation through which the financial institution acquires movable or
immovable property according to the specifications of the lessee, who receives it for use
and preservation for specific periods, in exchange for monetary consideration (canon)
that includes capital amortization. , interests, commissions and surcharges arising from
the financial operation.
Leasing features:
* The assets acquired are to be rented, as requested by the lessee.
* During the term of the contract it is the lessee's responsibility to maintain the leased
property and be up to date with the payment of insurance policies.
* The rental duration must be equal to or less than the estimated useful life of the asset.
* The rental amount is set to amortize the value of the rented property during the period
of use determined in the contract.
* The contract allows the lessee to acquire the property at the end of the rental period by
paying a surrender value that corresponds to the residual value of the property.
* It must be related to production equipment or assets, which the lessee will use for
productive or professional purposes.
Types of financial lease:
Furniture Financial Leasing. A businessman contacts the distributor of the equipment he
requires, once selected, he contracts with the financial institution and acquires the goods
via lease, during the determined period that is directly related to the economic duration
of the equipment. After the time stipulated in the contract, the client exercises the
purchase option, thereby acquiring the good.
Real Estate Financial Leasing. It is the same as the previous one, with the difference
that the property acquired is a property that will be used for production or professional
use: Buildings, sheds, commercial or office premises. The term of this type of operation
is generally longer than the furniture, due to the amounts involved and the impact of the
installments on the cash flow of the companies.
Sale And Lease Back. It consists of the client selling a movable or immovable property
to the bank, so that the bank, in turn, leases it for a specific period, to ultimately return
the property to the client, through the use of the purchase option. The intention of this
operation is to satisfy working capital requirements.
We specify that, however, the asset acquired through this modality is the property of the
financial institution, therefore, it is the primary guarantee. The financial institution
requests as many additional guarantees as it is difficult to sell the asset to collect the bad
loan.
The discount Generally, trade in goods and services is not cash. When the company
sells on credit to its customers, it receives bills of exchange for the products delivered.
When companies lack liquidity to acquire new inventories or pay their suppliers, they
go to financial institutions (generally banks) and offer their bills of exchange for
assignment before maturity, receiving cash equivalent to the face value of the
documents less the commission that the financial institution receives for advancing
payment. This commission is known as a discount. As the credit documents expire, the
financial institution sends the collection so that the debtors pay the debt that originally
belonged to the company.
By collection policy, financial institutions, after having presented these documents for
collection three or more times to their corresponding debtors and not having received
payment, charge the value of the document or documents to the customer's account
(discontent) with the one who did the discount operation. In these cases, the client is
charged with late payment interest for the period from the expiration date to the date on
which it is charged to the account.
In discount operations, the financial statements of the company that carries out the
discount operation with the bank are fundamentally analyzed and, secondarily, the
financial situation of the creditors indicated in the credit documents. Depending on the
financial situation of the discount applicant and the creditors in the documents, the bank
may ask for additional guarantees when discounting
The letter of credit is a payment instrument, subject to international regulations, through
which a bank (Issuing Bank), acting at the request and in accordance with the
instructions of a client (orderer), must make a payment to a third party (beneficiary)
against the delivery of the required documents, as long as the credit terms and
conditions are met. In other words, it is a written commitment assumed by a bank to
make payment to the seller at the seller's request and in accordance with the buyer's
instructions up to the indicated sum of money, within a certain time and upon delivery
of the indicated documents. This instrument is one of the simplest documents in its form
and one of the most complex in terms of its content. Also called “Commercial Credit”,
“Documentary Credit”, and sometimes simply credit.
Every letter of credit has its origin in a contract for the purchase and sale of goods
(although it may originate in the provision of services).
In summary, letters of credit are: a promise from a bank or credit institution to pay a
certain sum of money; It is paid upon presentation of documents that certify a fact or
legal act; Your term to use the letter of credit must be pre-established. Once the term
has expired, the beneficiary of the letter of credit cannot draw on it; It must be issued by
a commercial bank.
The credit contract is what regulates the relationship between the issuing bank and the
ordering party. This contract defines the conditions under which the bank is willing to
issue letters of credit on behalf of the payer. In this contract, as in any credit contract, an
obligation is created for the bank to make credit available to its client (credit originator)
for a specific period and under specific conditions.
The credit contract is not a pre-contract or a promise to contract, but on the contrary, a
binding contract for the bank is precisely to have in favor of the client a certain
availability to issue the letters of credit approved in the contract, being the object of the
contract is the existence of the availability of credit in favor of the client and not the
letter of credit itself.
Types of Letters of Credit
There are two basic types: revocable and irrevocable. Every letter of credit must clearly
indicate which of these two it is.
Revocable Credit. It may be modified or revoked without prior notice to the beneficiary.
But the Issuing Bank must reimburse the Notifying Bank for the amount paid, the
acceptance of the negotiation that it has carried out based on what is expressed in the
letter of credit, before having received the modification or revocation.
Irrevocable Credit. It cannot be altered or canceled without the consent of the parties
(Order, beneficiary, Issuing Bank and Notifying Bank).
Depending on the method of payment to the beneficiary, letters of credit can be:
In sight. The Notifying Bank pays the Beneficiary, upon presentation of the documents
that demonstrate the shipment of the merchandise under the stated terms.
Against acceptance. The Notifying Bank accepts (signs as debtor) the beneficiary a bill
of exchange with a term determined in the letter of credit. When the client goes to the
Notifying Bank at maturity, it pays against the account of the Issuing Bank, who in turn
collects from its client. For exporters it is interesting to sell their merchandise by
offering payment terms through letters of credit with acceptance. By delivering the
shipping documents to the bank, as requested in the letter of credit, exporters obtain in
exchange a bill accepted by the bank, which can be discounted at any other financial
institution at preferential rates due to the quality of the drawer of the bill.
With refinancing. It is when the Ordering Party does not pay the letter of credit at the
time of receiving the merchandise, but instead receives refinancing through a loan at
interest for the payment to the bank of the amount of the letter of credit.
In general, asset operations pose a risk for the financial institution due to the possibility
of total or partial non-payment of a loan or credit. Taking this characteristic into
account, we could decompose the asset accounts for banks into two generic types:
Operations that involve movements of funds and in which the bank experiences a risk:
v Loan operations.
v Credit operations in current account.
v Discount of effects.
v Etcetera.
Operations that, in principle, do not represent the movement of money, since they only
represent a commitment on the part of the bank, but occasionally, they can produce
movement of capital, causing the entity to assume risk:
v Credit cards.
v Documentary credits.
v Guarantees.
v Guarantees.
v Etcetera.
From the financial point of view, for both natural and legal persons, operations are
generally classified as those carried out in the short term, such as credit policies,
commercial discounts, advances on bank receipts, factoring, credit cards. credit, etc.,
and the most common products used for the long term such as mortgage loans, personal
loans, leasing, etc.
SECURED LOAN
A secured loan is a loan in which the lender takes some asset (such as a vehicle or real
property) as collateral or insurance for the loan.
UNSECURED LOAN
Unsecured loans are loans that are not secured against the applicant's assets (there are
no liens involved). These may be available in financial institutions under different
premises or marketing packages:
Credit card debt.
Personal loans.
Bank overdrafts .
Credit facilities or lines of credit.
Corporate bonds .
 LEGAL FRAMEWORK ON INTEREST RATES

Article 49 of the BCV Law, dated 03/10/2001

The Central Bank of Venezuela is the only body empowered to regulate interest rates in
the financial system. In the exercise of such power, it may establish the maximum and
minimum rates that banks and other financial institutions, private or public, governed by
the General Law of Banks and Other Financial Institutions or by other laws, can charge
and pay for the different types of active and passive operations they carry out.
BCV Resolution 97.07.02 dated 07/31/1997
"Article 1.- The annual interest or discount rate that banks, financial institutions and
savings and loan entities governed by the General Law of Banks and other Financial
Institutions, by the Law of the National Savings and Loan System may charge. and by
special laws, for their operations, will be agreed in each case by the aforementioned
institutions with their clients, taking into account the conditions of the financial
market."
"Article 3.- The credits granted in which periodically adjustable interests have been
agreed upon, must be subject to the provisions of this Resolution regarding the
applicable interest or discount rate. To this end, the adjustments that must be made will
be carried out in the terms provided in the respective contracts.
"Article 4.- The annual interest rate that banks, financial institutions and savings and
loan entities governed by the General Law of Banks and other Financial Institutions, by
the Law of the National Savings and Loan System and by the special laws, for their
passive operations will be agreed upon by the aforementioned institutions with their
clients, taking into account the conditions of the financial market

Passive products of the financial system

Financial institutions, in order to obtain funds from the public, develop products with
which people can channel their common use funds or their surpluses destined for
savings and obtain benefits in exchange through interest.
These products can be classified into three large groups:
3.2.1. Deposits. They are the largest volume since they come from the large mass of
small and medium savers. These funds are generally the cheapest, depending on the
fund mix. The latter refers to the proportion between the cheapest deposits (no or very
low interest) and the most expensive deposits (those that pay high interest to maintain).
3.2.2. Interbank funds. Funds that financial institutions do not provide to their clients in
the form of credits. These cannot be left idle and are used for investments or loans to
other banks whose deposits are not sufficient to satisfy the credit demand of their
clients. In the latter case, the bank requesting the funds is receiving "deposits" from
another bank. This is a form of large volume deposit.
3.2.3. Collection by delivery of securities. In some cases, banks issue commercial
securities to raise funds from the public. They can be guaranteed by the mortgage loan
portfolio or the credit card portfolio. In any case, the interest rate will be almost directly
proportional to the total average risk of the portfolio that guarantees the issue. For
example, the issuance of securities against a mortgage portfolio has a lower interest rate,
reduces the risk of default and the guarantees are real and easy to liquidate in the event
of the debtor's failure.
 PASSIVE OPERATIONS OF A BANK

They are those funds deposited directly by customers, which the bank can use to carry
out its asset operations. They are recorded on the right side of the balance sheet; This
 being the opposite case for asset accounts , since the balances of these accounts increase
with Credit transactions and decrease with Debit transactions.
The collection of liabilities is of great importance for every bank, since it involves the
activities carried out by a banking institution to collect money , essentially from the
general public. For a bank to develop, it is necessary to acquire deposits, since without
these it is impossible to create a sufficient reserve to help it place these funds in loans
and investments that generate dividends, and that allow it to meet the withdrawal
demands of cash, requested by their clients .
 CURRENT ACCOUNTS

The bank current account is a contract by virtue of which a bank undertakes to fulfill the
payment orders of another person (called a "current account holder" up to the limit of
the amount of money that is deposited in said account, or the credit that has been
stipulated between the parties. It is a basic instrument in the banking business as it
allows banks to raise money from the public, thereby obtaining funds for loans and
other activities, offering clients the security of custody of their money and an agile and
widely available means of payment. accepted.
Competition has led banks, today, to offer various services related to checking accounts:
interest payments on minimum balances, telephone formation service , electronic
banking , etc.
In other words, current accounts or demand deposits are characterized because the funds
deposited in them are immediately available and in cash, through any instrument
provided by the entity to obtain the amounts of money deposited in them, debit or credit
card. , checks , promissory notes, or in person at the window. Depending on the agreed
modality, they offer other types of services such as direct debit payments and
collections, payroll entry, making transfers; some more specific such as payroll
advances, travel assistance insurance , home insurance, advantageous conditions on
loans and credits , etc.
The entity sends to the address of the owner the information on the operations carried
out through a checking account, periodically, biweekly, monthly, etc., in a document
called an extract.

 SAVINGS ACCOUNTS

Savings books or demand savings accounts are products very similar to current accounts
and are, by definition, cash deposit contracts , freely available. All operations carried
out are reflected in the booklet that is given to the account holder, popularly called
"savings book." Savings accounts are those accounts that are deposited in financial
entities that have among their activities, the collection of funds and they are kept in the
possession and at the disposal of said entity for longer periods than current account
deposits.
The fact of maintaining the funds deposited in the bank for a longer period of time , but
with the ease of converting them into current money (cash) in a short time and without
loss of value , is what assigns this type of deposit the category or qualifier of "quasi-
money". It can also be said that it is an instrument that allows you to have cash quickly
since it can be done over the counter, or using a linked payment instrument. Another
characteristic that should be noted is the fact that the physical notebook remains in the
possession of the client , and he must update it when he considers it convenient,
himself, at the ATMs enabled for this purpose, or at any branch of the bank.
 Until relatively recently, the main differences were that with the savings book you could
not operate with checks, some cash services were not available and overdrafts were not
accepted. Currently this is not the case; when a savings book is contracted, the bank
usually offers similar instruments and services, associated with a checking account.
However, in entities where this is not possible, the solution consists of linking a
checking account and a savings account of the same owner, to correct the limitation
imposed by the entity of issuing checks against a savings book, these are called
combined passbooks or savings accounts. On the other hand, to make withdrawals from
these accounts, especially when they are large amounts, the bank requires prior written
notice, so that it can have sufficient liquidity to cover the commitment.
Banks recognize a quarterly benefit in interest on savings accounts , which according to
the regulations of the Banking Commission, this interest is annual, capitalized quarterly,
on the average of the lowest balances of each month. Any person of legal age can open
this type of account. For the bank, it constitutes a typical resource raising service.
 COMMON CHARACTERISTICS OF CHECKING ACCOUNTS AND SAVINGS
ACCOUNTS

No minimum contributions are required to open the account. The risk of non-payment
depends on the solvency of the entity, controlled directly by the Bank of Spain , and the
coverage offered by the Bank Deposit Guarantee Fund up to a maximum amount. The
profitability offered is minimal, payable monthly, quarterly, semi-annually or annually,
and basically, they offer three modalities, the most used, remunerating the daily balance
from the first deposit made; another remunerates in tranches, paying more interest for
tranches with higher balances, and the last one conditions the remuneration from a
certain average balance.
The bank will charge us, in general , a maintenance fee, an administration fee, in
particular cases a note fee, and if applicable, an overdraft fee. These commissions must
be publicly displayed in each office , and in any case the client has the right to have
information on the commissions applicable to the contract.
The expenses incurred can arise from very diverse operations, from transfers, deposit of
checks, use of debit or credit cards , etc. There is a great offer and very varied typology
of these products, segmenting them even by age ranging from children's accounts,
accounts for young people (from 18 years old to 26, or specific banks up to 31) with
limited advantages, or specific accounts for pensioners.
The appearance of Internet banking has been a very interesting alternative to traditional
banking based on the fact that the conditions offered by some entities are very
favorable, either from the point of view of superior profitability, or due to the omission
of commissions and other expenses. management , another advantageous possibility is
to also be able to operate by telephone .
Despite these advantages, there are certain drawbacks such as the limitation of
contracting some products or carrying out operations only available in the physical
offices or collaborating entities of banks that operate online.
 FIXED-TERM DEPOSITS

They are deposits that are formalized between the client and the bank through a
document or certificate; They are agreed for a specific amount and term and cannot be
withdrawn or increased before the expiration of the agreed term.
They are also said to be deposits that are formalized between the client and the bank
through a document or certificate; They are agreed for a specific amount and term and
 cannot be withdrawn or increased before the expiration of the agreed term. The interest
paid on these deposits is at the discretion and policy of each bank.
These deposits are lines for raising resources that, because they are negotiated in
installments, are not payable on demand and their delivery to the client is only payable
on the date on which the term expires or through written notification previously
delivered to the bank. The bank can use the resources obtained as productive assets for
medium and long-term loans, investments and other types of credit, which, at the same
time, make up the bank's liabilities, decisively condition the productive capacity of the
banking company .
 MONEY TABLE

It is a specific intermediation and financial activity that contributes to solving temporary

liquidity problems for companies in the real sector and in the financial sector itself,
where brokers establish contacts with demanders and suppliers of money, but do not
participate in the operation. It is a financial instrument or mechanism specialized in
short-term operations. Money tables can be framed within the monetary or money and
secondary market; within the monetary market because the terms of its operations are
not greater than six months, in the secondary market because the assets and financial
instruments used have been issued in the primary market and through the money tables
they begin to circulate in the hands from third parties
It receives the name "Money Table" because it is with which the brokerage activity has
been associated, since these businesses were carried out in financial brokerage
companies in a completely private area, where there were very long tables as physical
equipment. open spaces, with sophisticated communication systems ; In addition, it is
also known as the Spanish translation of "MONEY DECK" by which it is known in
Anglo-Saxon countries.
The fundamental role of money tables originated in the operations known in Colombia
as CALL MONEY or hot money. Which consists of the collection and placement of
very short-term financial resources, a system commonly used by the financial and
banking system in periods of temporary illiquidity, such as reserve dates and certain
basic investments. This Call system is very agile, it is closed with a simple phone call.
Money tables basically work in two ways:
1.
2. Taking one's own position, which involves guaranteeing or endorsing the operations,
financing a portfolio of securities with one's own resources or those of third parties,
which is called dealers.
3. Without taking ownership, as intermediaries or financial brokers, combining the
needs of their clients, an operation called brokerage. This is a service that puts the
offeror in contact with the demander.

The credit quotas for users pass the dearlership, vary according to the ranking or
classification carried out by the table, the guarantees can be real or personal, according
to the allocated quota and the company . The brokerage activity as it should be
understood consists of putting two or more natural or legal persons in contact so that
they can carry out business directly with each other through a broker, who cannot take
any position in the business and Their work is remunerated with a commission paid by
those who do the business.
The procedure for offering money consists of placing a firm order on the table for a
precise term, during which the operators or brokers at the table can place it in order. The
 plaintiff's procedure is similar to that of the offeror, but it indicates the amount, term
and rate at which it would be willing to close the operation.
 SIGNATURE SPECIMEN

It is a document where the person must register their signature in the bank. They are
records that consist of a printed statement at the time of opening an account, where the
owner signs the document and only he or they can have the power to issue checks or
any other type of documents .
 CREDIT CARDS

Credit cards, which allow people to make their payments without having to have
monetary species, replace a high percentage of the use of coins, bills and checks.
Carrying the card has almost become an obligation due to the convenience it represents
when paying in a supermarket or restaurant, or going to an ATM to withdraw money.
Although it is pointed out that the credit card aggravates the inflationary process , since
its use increases the consumption of services, it does not matter much whether this
demand is in line with their production or not, several aspects could be listed in which
its incidence In financial economic activities it is very positive, since within it resources
are channeled in the form of loans to all sectors of the economy . Within these, the same
mechanism of the credit card has come to stop monetary expansion, replacing sources of
smaller amounts of credit and placing potential and not real credit in the hands of users,
whose destination, if used, will be satisfy needs for consumer goods , and not to create
an expansion of the currency by diverting resources to financial entities.
The cost of handling plastic money tends to minimize financial expenses for all sectors
involved in the operation, such as:
 The Users: since the expense of processing the credit is very low due to the rapid
granting, in addition to receiving it in the precise time; Therefore, opportunity cost is a
predominant factor.
 The Issuing Entity: expenses are lower due to automation and massification in making
credit decisions and reduction of operational expenses due to less handling of cash and
check transactions.
 Affiliates: due to the significant reduction in the granting of credit, the lower need for
financing and the lower paperwork expenses for billing. In addition, the monetary
authorities have lower expenses due to reduced currency management.

Currently, credit cards have played a crucial role in contributing to the development of
the economies of the most developed countries; To the extent that consumers have
greater facilities for acquiring goods and services, demand also grows in the different
market sectors.
Another aspect that marks the importance of credit cards is the fact that they are used
for the acquisition of all types of mass consumption goods, even forming a significant
part of the domestic budget of many households. Hence, from symbols of high
economic and social status, the famous credit cards have become a more common item
of clothing.
 SHORT AND LONG TERM LOANS

It is a contract or agreement according to which one of the parties delivers to another a

certain amount of money under the commitment that it will be returned after a certain
period, adding the corresponding interest. Every loan is made between a lender, who
 lends the money , and a borrower, who receives it, originating a debt from the latter to
the former.
The loans can be:
 Installment Loan: An installment loan is an agreement that provides a lump sum of
money at the beginning of the loan. The loan is repaid in equal amounts over an agreed
number of years.
 Short-Term Loan: A short-term loan can be used for purposes such as: capitalizing over
a given period, either to rehabilitate accounts receivable balances or to acquire
inventory . The lender usually expects these loans to be repaid after they have been used
for those purposes: for example, accounts receivable loans, when outstanding accounts
have been paid by customers, and inventory loans, when the inventory has been sold.
sold and the money collected. Short-term loans are generally repaid within a year.
 Long-Term Loan: A long-term loan is usually a formal agreement to provide funds for
more than one year and most are for some improvement that will benefit the company
and increase profits. An example is the purchase of a new building that will increase
capacity or machinery that will make the manufacturing process more efficient and less
expensive. Long-term loans are usually repaid from profits.
 SAVINGS CERTIFICATES

This is an account with fixed interest established at the time of opening until the
maturity date. The interest to be paid is tied to the time the certificate is held and the
amount deposited.
Benefits and Features
 It will earn a percentage of return at a fixed percentage and an interest rate according to
the amount deposited and the maturity date.
 A minimum deposit of $1,000.00 is required to open the savings certificate.
 Penalties apply if funds are withdrawn prior to maturity.
 The Savings Certificate is an automatically renewable account upon its maturity date. It
will be renewed for the same period of time and at the interest rate and percentage of
annual return prevailing in the Cooperative for said type of account.
 Zero service charges.
 It can serve as collateral for a loan.
 Funds deposited in the Account are insured for up to $100,000.00.
 INTERNAL EXECUTIVE CONTRACT

They are documents that legalize the opening of accounts, the placement of fixed-term
deposits, shares, credit documents, credit cards, and all banking transactions.
 CASH IN CASH AND BANK

Cash on hand is cash that is used to redeem checks or receive deposits.

Cash in bank is the money existing in the vaults, which is the receipt of what is in cash
and daily operations.
 BANKING BROCHURES AND INSTRUMENTS

Among these we have:

 Fundraising instrument: This is the name given to the means by which the banking
system collects resources from the saving public; Among the main ones are checking
and savings accounts, certificates of deposit, promissory notes, bonds and securities
obligations .
 Liquid savings instruments: These are those whose maturity or exchange period allows
for immediate availability of money. This concept in turn is divided into:

o Liquid Banking Instruments: Liquid banking instruments are short-term instruments,
that is, instruments with maturities of up to one year and bank acceptances.
o Liquid Non-Banking Instruments: refer to CETES, BONDES, TESOBONOS and
COMMERCIAL PAPER.
 Non-liquid savings instruments: These are those whose maturity or exchange period
does not allow immediate availability of money. This classification includes term
financial instruments. For example, banking instruments with a maturity of more than
one year: BIBS, AJUSTABONOS, Urban Renewal Bonds, Unsecured Obligations,
Mortgage Obligations, Promissory Notes from Private Companies, Retirement Savings
System Deposits.
 MORTGAGE LOANS

It is the most common method to access a home. This type of loan has the personal
guarantee of the borrower and is guaranteed with a home, a property or an asset. They
are registered in the Property Registry and formalized in a public deed . It can also
function as the loan received from a bank with which it is guaranteed by a mortgage on
the home.
There are several types of credits and among them we have:
 Variable Interest Mortgage Loan: Loan in which the interest rate changes throughout the
life of the operation, based on a reference.
 Fixed interest mortgage loan: Loan in which the interest rate does not vary throughout
the life of the operation.
 Mixed interest mortgage loan: Loan in which the interest rate remains fixed during the
first years - up to 10 - while during the rest of the life of the loan it becomes variable.
Conclusion:
In active operations, the bank assumes the position of creditor towards the client, while
in passive operations it is the financial institution that assumes the position of debtor.
Thus, the latter allow banks to attract funds that are already in circulation. New
resources are created as a result of active lending operations.
Thus, the relationship between both types of operations is complex and unique. A loan
is extended using monetary capital raised by passive operations, but the banking system
also possesses the ability to "create deposits" by transferring the loan amount to the
customers' account.
The possibilities, limits and consequences of credit expansion for banks are an
important issue in the theory of banking and credit, as well as in practical activities and
state policy in capitalist nations. To be sure, banks can contribute greatly to excessive
credit expansion during a phase of a cyclical economic recovery, as well as accelerate
inflation through their credit expansion.