What is aims and objectives of banking instruments ?
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With so many people trying to broker private placement programs and bank instrument sales, we felt that it was critical to outline the entire process from instrument creation to maturity.
To truly understand the purpose and functions of bank instruments, we must first define what a bank instrument in fact is. By definition, bank instruments are asset backed notes issued by a bank to an investor which mature over 5-10 years, collecting an annual coupon (“interest”) until it matures at its pre-defined value.
For those who don’t understand why debt instruments, bonds, or notes are created, let’s explain it all in 2 sentences:
Companies, or in our case banks, create paper notes (“IOU’s”) which they sell to investors, guaranteeing a certain annual interest and maturity value. This allows the investor to collect their expected profit, while the bank accesses immediate cash to meet capital requirements for additional financing opportunities.
Unlike its boring cousins (bonds), the bank instrument is rather complex, and is typically referred to as a “hybrid note”. Unique amongst most debit financing notes, bank instruments: collect high annual interest rates, are backed by top rated banks, and are issued ONLY in amounts of 50 Million EURO or greater. Though those are intriguing qualities, the key is: bank instruments can be purchased at a discount from face value, and traded to investors in the secondary market.
To truly understand the purpose and functions of bank instruments, we must first define what a bank instrument in fact is. By definition, bank instruments are asset backed notes issued by a bank to an investor which mature over 5-10 years, collecting an annual coupon (“interest”) until it matures at its pre-defined value.
For those who don’t understand why debt instruments, bonds, or notes are created, let’s explain it all in 2 sentences:
Companies, or in our case banks, create paper notes (“IOU’s”) which they sell to investors, guaranteeing a certain annual interest and maturity value. This allows the investor to collect their expected profit, while the bank accesses immediate cash to meet capital requirements for additional financing opportunities.
Unlike its boring cousins (bonds), the bank instrument is rather complex, and is typically referred to as a “hybrid note”. Unique amongst most debit financing notes, bank instruments: collect high annual interest rates, are backed by top rated banks, and are issued ONLY in amounts of 50 Million EURO or greater. Though those are intriguing qualities, the key is: bank instruments can be purchased at a discount from face value, and traded to investors in the secondary market.
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