Provision at Credit
Category: General Banking
The word «credit» has different meanings; first, it is money lending, or a promise of money lending; when a Bank gives a credit limit to a customer in any form, its risk equals the amount of this limit even if the customer has not (or only) partially used this credit.
It can also be the guarantee given by Banks either to get their money in advance or to delay payment: the risk of the bank is included in the guarantee. In case of bankruptcy, the bank will have to pay up to the level of the guarantee if necessary.
Credits to companies
There are two different types of credits:
— credit to finance operations of the firm i.e. operating credits.
— credits to finance the development of the firm, i.e. investment credits.
Credits to private individuals
The most common credits are the following:
— overdraft
— consumer credit
— mortgages
The interest rate of a credit depends on the cost of the resources, the risk premium, the overhead expenses plus margin.