Why certain cooperation between banks and trust companies are off-balance sheet businesses

1. First understand the off-balance sheet business

Off-balance sheet business refers to the business carried out by commercial banks Business activities that are not included in the balance sheet but can affect the bank's current profits and losses can be divided into narrow and broad senses. Off-balance sheet businesses in a narrow sense refer to those businesses that, although not included in the balance sheet, are closely related to the asset business or liability business on the balance sheet. In addition to the above-mentioned narrow off-balance sheet business, off-balance sheet business in a broad sense also includes settlement, agency, consulting and other businesses. Off-balance sheet items are also called "contingent liabilities" and "contingent assets" items, or "contingent assets and liabilities."

The so-called off-balance sheet activities (OBS) refer to the activities engaged in by commercial banks that are not included in the balance sheet according to common accounting standards and do not affect their total assets and liabilities, but Business activities that can affect the bank's current profits and losses and change the bank's return on assets.

2. Cooperation between banks and trust companies is off-balance sheet business

In addition to off-balance sheet business in a narrow sense, off-balance sheet business in a broad sense also includes risk-free settlement, agency, consulting, etc. business activities, so in a broad sense, off-balance sheet business refers to all businesses engaged in by commercial banks that are not reflected in the balance sheet. According to the requirements put forward by the Basel Committee, off-balance sheet business in a broad sense can be divided into two major categories: First, contingent claims (debt), that is, off-balance sheet business in a narrow sense. The second is financial services, including: (1) trust and consulting services; (2) payment and settlement; (3) agent services; (4) loan-related services, such as loan organization, loan approval, syndicate loan agency etc.; (5) Import and export services, such as agency banking services, trade declarations, export insurance services, etc. Why is acceptance business an off-balance sheet business for banks?

To be precise, bank acceptance business is an off-balance sheet business for banks, and commercial acceptance business is an intermediary business for banks. Bank acceptance refers to the bank's unconditional commitment to pay the bill after it expires. That is to say, if the bill issuing company has funding problems, the bank will have to advance the funds. Therefore, for the bank, the bank acceptance business is a contingent liability and is a Off-balance sheet business. How do banks and trust companies cooperate, and what types of cooperation are there? I am a novice, and I am looking for an expert to explain it in a simple way~~~

1. Custody fund relationship. This is necessary for the development of trust products. For each trust product, a bank must set up a special fund account for the trust product. The funds used by trust companies must go through the bank, so as to achieve bank supervision of trust funds.

2. Sales relationship, the bank helps the trust company sell products, and the trust company gives the bank a commission;

3. Customer relationship, the bank develops financial products with a low starting point, such as starting from 50,000, Some of the products starting from 100,000 and 200,000 are used for investment trust products, and banks make profits from them. For example, the annualized rate of return of trust products is 10, and the annualized rate of return of bank-developed products for retail investors is 4.5... Why should bank asset-backed financial products cooperate with trust companies

Banks have investment banking departments responsible for investment loans. Yes, but the restrictions are very strict. Trusts are much more flexible than banks. For some cases that are inconvenient for banks, trust companies can handle them. Naturally, most of the corresponding financial products or funds are sold by banks (banks can earn more handling fees and increase deposits). Of course, some trusts also sell products on their own. At the same time, both parties guarantee more stable income and higher yields. How do private equity funds and trust companies cooperate?

Sunshine private equity funds are all established in the form of trust plans, and the management and utilization of their properties are jointly completed by trustees, managers, custodian banks, custodian brokers, and other service institutions.

Trust companies bear the responsibility of fund security, and private equity fund management companies issue investment recommendations. In fact, private equity managers will not have direct contact with funds.

Commercial banks have off-balance sheet business. Do ordinary companies have off-balance sheet business? For example, financial derivatives, into which category does the company classify this?

Many financial derivatives transactions do not have corresponding accounts on the balance sheet, so they are also called "off-balance sheet transactions (referred to as off-balance sheet transactions)." Why is derivatives business an off-balance sheet business of a bank?

Bank derivatives mainly refer to interest rate and exchange rate derivatives. Including interest rate futures, interest rate forwards, interest rate options, interest rate swap contracts, etc. The transactions of these derivatives are very risky, and according to the definition of off-balance sheet business, off-balance sheet business is a risky business activity, forming the bank's contingent assets and contingent liabilities, part of which may also be transformed into The bank's actual assets and liabilities are usually required to be disclosed in the notes to the accounting statements.

Therefore, derivatives business is an off-balance sheet business of banks. Why do banks and insurance companies cooperate?

Because there are three major sectors of finance: banking, securities and insurance

Banks are part-time agents, which is a win-win situation for both insurance companies and banks. There is a narrow sense of off-balance sheet Business

Off-balance sheet business in a narrow sense generally includes the following three types:

1. Guarantee business refers to the business in which commercial banks accept the entrustment of customers and assume responsibility for third parties, including Guarantee (letter of guarantee), standby letter of credit, documentary letter of credit, acceptance, etc.

2. Commitment business refers to a commercial bank providing agreed credit business, including loan commitments, to customers on a certain date in the future in accordance with pre-agreed conditions.

3. Financial derivative transaction business refers to forward, swap, option and other derivative transactions of currencies (including foreign exchange) and interest rates conducted by commercial banks to meet the needs of customers for value preservation or their own position management. business. Which trust companies does First Trust Network cooperate with?

It is estimated that there are at least 68 trust companies maintaining close cooperation with First Trust. Judging from the current situation, more trust companies will join First Trust. In the arms.