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A short-term loan for reliable partners
The discount credit is also referred to as the bill credit. This is generally referred to as a short loan within the banking sector. The bills not yet due are purchased by the banks. In return, the customer receives the amount of the bill of exchange. This amount serves as consideration for the customer. The discount is deducted by the respective bank. A discount is the interest that will accumulate until maturity. The loan is then transferred to the bank. On the due date of the bill of exchange, the drawee must repay to the bank the amount specified. Almost all banks grant discount credits exclusively to trustworthy partners. It can be relatively well clarified that later losses will not occur. The bank thus retains all securities and risks can be almost entirely excluded.
An example of the discount credit
Any company (X) delivers goods with a value of 10,000 euros to another company (Y). Company Y requests a deferral for a total of 90 days. Company X agrees to this proposal. A bill of exchange is issued to the Y-company. With this bill of exchange, company X sells the associated receivables to a bank. The bank shall reduce the payout number by five percent. The change is therefore not made to a purchase of 10,000 euros. Instead, a payment of 9,875 is made to Company X. Company Y will be presented with the bill of exchange by the bank after the agreed 90 days. From this the bank finally receives the 10,000 euros.
The discount credit as secured credit
The purchase of a receivable (bill of exchange) constitutes a secured loan. In the case of an irrecoverable claim, it is possible that the seller will be taken back the claim. The Institute shall the customer (borrower) is usually granted a discount credit line. Within this limit, there may be bills of exchange eligible for the Bundesbank. For the purpose of rediscounting, the Bundesbank may be able to achieve this. The Bank receives the securitised receivables from its customers in the form of bills of exchange. After deduction of interest, these are purchased for the remaining term. The discounted bill amount is immediately refunded. The credit institutions are primarily interested in Bundesbank-compatible exchange material. Rediscounting may result in refinancing.
Legal basis for discount credit
The Bill of Exchange Act provides the actual legal basis for the discount credit and the applicable rules. These provisions can be found in §§ 433 ff. of the German Commercial Code. BGB. The issued bills of exchange of the money loan are precisely defined. The bill discount loan and the credit policy regulations of the Federal Banks can be found under Section 19 (1) no. 1 BBankG. The acceptance credit is regarded as the opposite of the discount credit.
The significance of the discount credit
The Deutsche Bundesbank’s discount business was discontinued with the transfer of monetary policy powers to the ECB. This bill purchase at the discount rate no longer exists since January 1999. Previously there was the possibility that the banks had the possibility to rediscount the purchased bills at the Bundesbank at a discount rate. Of course, a good credit rating was also a prerequisite in this case. Discounting has generally lost some of its importance, partly because the European Central Bank does not engage in rediscounting. However, the individual banks still sometimes buy bills of exchange and grant discount credits at the same time, but this usually concerns foreign business.