Foreign economic activity. International settlement mechanism (most important)

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Foreign economic activity. International settlement mechanism (most important)

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66. Mechanism of international settlements

International settlements include payments for monetary claims and obligations arising in the course of foreign trade transactions and other relations between foreign firms, companies, organizations and individuals. This implies the selection of appropriate payment terms, forms of payment, means of payment, financial guarantees, as well as payment assurance channels. The difference between international and domestic payments is their connection with the exchange of national currencies through foreign exchange transactions. In the payment turnover, foreign currency does not act as cash, but in the form of bank and credit means of payment, such as telegraphic and postal orders, checks and bills.

mottos - means of payment in foreign currency intended for international settlements. They are implemented in the form of settlement and payment documents that circulate between correspondent banks of exporters and importers.

The need for currency exchange in international settlements is caused by objective conditions - the absence of a single currency that could act as a legal means of payment and generally recognized by all states.

A significant share in the field of international settlements falls on foreign trade payments for the supply of goods, the provision of services and the performance of work; repayment of commercial loans and execution of guarantees.

The settlement mechanism for foreign trade transactions is formed in the form of counter flows between sellers (exporters) and buyers (importers) - commodity and payment. Most often in the form of telegraphic or postal transfers and payment orders from banks to their correspondents to pay a specific amount to a specified counterparty.

The essence of the mechanism of international settlements is that importers, having received trade documents from exporters, send to the latter payment documents payable in foreign currency, which they usually sell to their national banks in exchange for the currency necessary to continue or complete operations.

Banks, in turn, send these means of payment to their correspondent banks abroad, for which amounts are collected from debtors and credited to correspondent accounts of banks that previously sent means of payment. Given that the accounts of correspondent banks are backed by foreign currency, authorized banks of the exporter can sell means of payment in various currencies to legal entities and individuals to pay monetary obligations abroad: import of goods, transport, insurance premiums, repayment of a loan and payment of interest on it .

All foreign trade settlements pass through banks by offsetting counter obligations, without paying in cash. The settlement operation consists in transferring amounts from the account of the bank that issued the payment order to the account of the bank executing this order, and then these amounts are credited to the accounts of the firms in whose favor they are transferred.

Settlements for export-import operations are of a documentary nature, i.e. are carried out on the basis of commercial documents, the list and characteristics of which are determined by the terms of foreign trade contracts. Bank customers are required to ensure the correctness and reliability of the execution of shipping documents provided to the bank for export deliveries, as well as a thorough check of payment documents issued to foreign counterparties for imports.

Participants of international settlements:

▪ representatives of the parties to commodity and financial obligations (exporters-importers and creditors-borrowers);

▪ intermediaries represented by banks (authorized and correspondents) and brokers (currency or banking).

Author: Bobkova O.V.

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