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Understandings of bank instruments

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Page 1: Understandings of bank instruments
Page 2: Understandings of bank instruments

The process of earning money is getting hard with

the day but losing them is very easy. So to have a

secured future you need to be very careful in your

investing.

But fortunately now various banks and financial

companies provide best possible ways to monetize

your investment so that you and your family have a

secured financial future.

And the best way to monetize your investment is

use the various bank instruments provide by a top

level bank and financial company.

Page 3: Understandings of bank instruments
Page 4: Understandings of bank instruments

Before you use bank instruments first

understanding it is very convenient.

By definition bank instruments are asset

backed notes which are issued by a bank to an

investor and it mature over 5-10 years and until

it matures at its pre-defined value they collect

an interest annually.

Financial companies and banks create these

paper notes and they sell it to investors with a

certain annual interest and maturity value

guaranteed.

Page 5: Understandings of bank instruments

This allows the investors to gain expected profit and

bank gain immediate cash to meet capital

requirements for additional financing opportunities.

SBLC, LTN, MTN, BG, SKR, POF, KTT etc are

some bank instruments and you can gain benefit

from both purchased own or lease bank

instruments.

There are several steps before a bank instrument

matured and they are given below:

Page 6: Understandings of bank instruments
Page 7: Understandings of bank instruments

When an investor cleared through compliance then

the issuing bank create an instrument and named

the investor as the sole beneficiary of it.

The instrument contains predefined interest rate

and a value on the date of its maturity and

depending on their relationships and the

instrument’s size the buyer pay a discounted rate

to the issuing bank.

The investor can collect the interest and exercise

the value upon maturity by holding the note till the

end.

Page 8: Understandings of bank instruments

But in case if the buyer is a trader then they will to

sell the note at a higher price to a pre-defined “exit

buyer”.

After the first purchaser has purchased the note

they will sell it to another one at a higher price.

This type of middle man activity is normal and

they usually are high net worth individuals, large

corporations, hedge funds, etc.

Page 9: Understandings of bank instruments

The final middleman that holds the note also repeats

the same process but the type of buyer is different

than the rest.

The final middleman sell the note to institutional

buyer like pension funds, hedge funds, mutual

funds, and other low risk ventures flock for security

and higher yields.

The final buyers who hold the note receive the

difference between the discount they paid against

the face value and also the interest until the time of

its maturity.

Page 10: Understandings of bank instruments