Banks are one of the most regulated financial institutions around the world. The banking sector needs to ensure that all its customers comply with regulatory requirements. Compliance is very important and central banks and other global watchdogs provide stringent oversight.
Every business needs to know and understand the preparation of accounting documents like the balance sheet and income statement. In terms of documents, any accountant will tell you how important receipts or invoices are. What about the documents used in banking?
Like in accounting, there are several documents that one might not miss on if they were dealing with a bank. Here we list some of these tools.
Documents most commonly used in banking
1. Deposit Slip
The deposit slip is a common banking document that anyone depositing cash into an account will need. It is a form on which the depositor indicates the date of the transaction, the depositor’s name, account number and amount deposited.
2. Debit Card
Banks issue debit cards to account holders. The card helps the individual gain access to their money electronically. Most people use debit cards to withdraw money from automated teller machines (ATMs) or to pay for goods or services at shopping malls and other point-of-sale locations. The debit card allows for debit or credit transactions on an individual’s account.
3. Credit Report
This is a detailed report showing the credit history of an individual. Banks rely on these reports to determine credit worthiness of anyone seeking a loan facility. Another document closely related to the credit report is a Soft Probe.
A Soft Probe is a document banks prepare and use to indicate a customer’s creditworthiness. Banks also use the document to confirm whether a given customer’s account is in good standing.
4. Bank Statement
The bank statement is a financial document used in the banking sector to show a summary of account transactions. The document is usually prepared every month and takes into account transaction details in a deposit or a credit card account. The statement contains particulars such as date, type of transaction, amounts involved and the balances.
5. Loan agreement form
The Loan Agreement form is one of the most commonly used documents in the banking sector. Whenever one needs to apply for a loan, the bank will provide the loan agreement form to be filled by the borrower and verified by the lender. A bank will rely on other documents to establish the creditworthiness of the borrower.
The loan agreement form contains a commitment to a repayment schedule and may include collateral in case of an inability to pay.
6. Letter of Credit (DLC)
Banks use a letter of credit as a financial document that stipulates what documents a party needs to provide for payment to occur. The DLC also ensures the payment occurs as indicated and through SWIFT.
7. Bank Pre-Advice
The Pre-Advice document is used by banks to offer advice and as a request to open financial instruments on behalf of customers in this or that bank. It involves two banks, with the recipient bank expected to acknowledge and accept the advice before the asking bank proceeds to facilitate the said financial instrument.
A check, also cheque, is a document most used within the banking sector. A written check will instruct a bank or other such financial institution to pay the indicated amount of money. The amount is paid from the drawer’s account to the person named on the check or the bearer.
9. Bank Guarantee (BG)
Another common document is the Bank Guarantee. Banks use this financial instrument to indicate that the bank is ready to make a full payment once the target party meets certain conditions as set out in a Sale and Purchase Agreement (SPA). Anyone with a BG document can borrow money or access credit against it.
10. Bank Note
This is a banking document that people also call as a “bill”. It is a negotiable promissory note, which a bank issue, and whose usage is broadly similar to what we call money or legal tender.
A banknote is always payable on demand and to the bearer. The financial institution (bank) prints the note’s amount payable figure on the note.
Banks and other financial institutions lead the way when it comes to automation, meaning digitization could transform how we access and use some of these documents. Meantime, however, these are some of the top documents used in banking.