Topic 6 The global credit market 1 The nature and structure of the global credit market 2 Participants in the global credit market 3 Financial instruments of the global credit market 4. Paris Club and London Club
The nature of the global credit market 1) Institutional approach: The global credit market is a marketplace for the exchange of debt securities and short-term commercial paper. 2) Functional approach: The global credit market is a system of market relations, provides accumulation and redistribution of funds between countries to the continuity and profitability of the reproduction process
The structure of the global credit market 1) The world market debt securities. In this market traded mostly bills and bonds (private and public) 2) The global market of bank loans. This is a market of various financial loans and borrowings. Eurocredits market is the stability of credit related to providing international loans in euros large commercial banks in developed countries
1. 2 Participants in the global credit market Lender – the side in credit relations, which provides loans on terms of repayment, maturity and payment. Lenders in the market are the financial and credit institutions, mainly banks, as well as trusts and foundations. Borrower - the person receiving the loan agreement or a bank loan sum of money or other things that it is obliged to return within the prescribed period. Borrowers are firms, banks and government.
3 Financial instruments of the global credit market Bond – the debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. On the world market debt securities issued foreign bonds. They are usually treated in any one foreign country and denominated in its national currency.
Financial instruments of the global credit market Treasury bond – the marketable, fixed-interest U. S. government debt security with a maturity of more than 10 years. Treasury note – the marketable U. S. government debt security with a fixed interest rate and a maturity between one and 10 years. Treasury bill – the short-term debt obligation backed by the U. S. government with a maturity of less than one year.
Paris Club and London Club Paris Club is an informal intergovernmental organization developed creditor countries, which acted as the initiator of France. The association was created in 1956. The main objective of the Paris Club is debt restructuring of developing countries. Paris Club members are 20 states: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, the Russian Federation, Spain, Sweden, Switzerland, the United Kingdom and the United States of America
London Club The London Club is an informal group of private creditors on the international stage. The London Club is also the organization responsible for rescheduling debt payments made by countries to commercial banks. The name "London Club" came into being since the "Club" sits in London which is regarded as the financial nerve centre of transnational banks. Though referred to as a club, it is not a formal body with fixed membership.
