Finance Law for Long Term Borrowings

Describe about the Finance Law for Long Term Borrowings.

Scenario a:

Under the given case study, long-term funds at a fixed rate of interest are not available by VT bank and Cynthia is not keen to pay under the floating rate of interest. Hence, for borrowers like Cynthia interest rate swap provide access to long-term borrowings at a lower rate of interest even though she borrowed funds for business needs (Adelino et al. 2016). It is known that majority of the companies aiming for expansion largely makes the use of interest rate swaps to exchange floating rate of interest obligations from bank.

Going by the scenario surrounding the case study if Cynthia really wants a loan of $2 million dollar to be repaid on a period of 4 years at a fixed interest rate similar to the rate it could obtain by issuing the mortgage and house. In order to obtain this Cynthia can enter into an interest rate swap under which she can receive floating rate of cash flows so that she can offset the floating rate of payment to be made to bank (DeYoung et al. 2015). This is perhaps the most note worthy feature of swapping the interest rate as this will allow Cynthiya to borrow fixed rate funds which would have been available at higher interest rate.

	Floating rate	Fixed rate
Synthiya	Bank bill rate + 1.0%	7
VT Bank	Bank Bill rate + 0.5	4
Difference in rates	0.5%	2

Scenario b

The firm can decide to repay the loan early but it does not have any such rights to exercise. A general overview says that the repayment charges can be calculated based on the amount of loan taken. If the firm decides to repay the loan amount before the expiration period, such decisions may be affected by the amount of interest the firm can save and the cost to break down the loan (Hastings et al. 2015). Hence, Cynthia can make the repayment of loan in advance or pay out the loan before the expiration period but she will incur repayment charges. The bank may specify the amount of charges, which need to be paid out as repayment charges, which will be based on the pro rata basis for each month of term of loan, which has expired. Therefore, it should be noted that VT Bank would calculate the fee, which will be based on the current rate of interest, the value Cynthia looks forward to repay depending upon the size of loan.  

Scenario c:

It is revealed from this case study that Cynthia cannot insist bank upon re-crediting the savings account for the sum stolen by the employee. This is because bank has issued in its statement that if there any inconsistencies in the statement noticed by the customers they can revert within ten business days. It also stated that if failed to notify any amount due or any discrepancies will not be entered by bank (Peltoniemi and Vieru 2013). However, Cynthia is also not aware of the fact that the letter provided by bank containing new terms. She cannot claim anything from her misstatement, as she is not aware of the fact that her employee Sophia had stolen 10,000 by way of cheque even though such misstatement is addressed in the monthly statement. Therefore, it is worth mentioning that Cynthia was careless in her approach and the policies provided by the bank should have been preserved for future records (Cerqueiro et al. 2016). Thus, VT Bank upon approached for re-crediting of savings account may present the records and evidence to prove the evidence that the stolen amount has been withdrawn from her employee Sophie.

Scenario d

Under the given case study, VT Bank is suspicion upon the activity of the firm and it has the legal obligations to inspect the accounts as the bank has made investment an investment of $2 million. As it has been explained under subsection, 3.2 if any transactions have a reasonable ground to believe that any such suspicion act or transaction has been made it can inspect the book of accounts of the customers (Peltoniemi and Vieru 2013). It is worth mentioning that context in which the transactions takes place or attempted is a significant factor in determination of suspicion. This generally varies from business to business and clients to clients. Therefore, the bank does not have any limitations on combining the bank accounts of Cynthia in order to inspect any such suspicious transactions.

An assessment of suspicion for VT Bank is based on the ground that a reasonable evaluation of relevant factors which consist of the knowledge of the Cynthia business, their financial history and background. Thus, the bank has the right to combine the bank accounts as the circumstances surrounding the case study states that all the transactions made by the business need to be reviewed.

Scenario e:

The case study provides the evidence that John who is the former manager of Cynthia had a telephonic conversation with the manager of VT Bank and making him aware of the potential conduct of an employee named Sophie. The VT Bank manager had conversation with John and made him aware of the potential conduct of Sophie (Davidson et al. 2016). However, it should be noted that Cynthia and her partners does not have any recourse against the manager of VT Bank and their former bank as because VT bank manager is knows that the Sophie has the habit of enchasing cheques and Cynthia is well aware of this fact.

Cynthia and her partners cannot bring any legal actions against the respective bank managers as there is no such law which can prevent an individual to pass on the information of other person having a criminal record (Cerqueiro et al. 2016). Thus, in the light of the above situation, VT Bank manager is making John aware of Sophie’s habit of cashing up the partnership’s cheques in Casino and no actions can be bought against the managers by Cynthia and her partners for passing up such information.

Reference List:

Adelino, M., Schoar, A. and Severino, F., 2016. Loan originations and defaults in the mortgage crisis: The role of the middle class. Review of Financial Studies, p.hhw018.

Cerqueiro, G., Ongena, S. and Roszbach, K., 2016. Collateralization, bank loan rates and monitoring. Journal of Finance.

Davidson, T. and Simpson, W.G., 2016. Federal Home Loan Bank Advances and Small Business Lending. Journal of Entrepreneurial Finance, 18(1).

DeYoung, R., Gron, A., Torna, G. and Winton, A., 2015. Risk overhang and loan portfolio decisions: small business loan supply before and during the financial crisis. The Journal of Finance, 70(6), pp.2451-2488.

Hastings, A.C., Bellamane, H.K. and Morimoto, G.C., Intuit Inc., 2015.Methods, systems, and articles of manufacture for fulfilling a loan request of a business entity. U.S. Patent 9,189,789.

Le, T., 2016. Information Loss in Mortgage Securitization: Effect on Loan Modification. Available at SSRN.

Park, J.Y., 2016. A Study on the Improvement of Independent Loan Fund Business for low-income Disabled. The Journal of the Korea Contents Association, 16(4), pp.691-704.

Peltoniemi, J. and Vieru, M., 2013. Personal guarantees, loan pricing, and lending structure in Finnish small business loans. Journal of Small Business Management, 51(2), pp.235-255.

 

MyAssignmenthelp.co.uk is a name in assignment writing services that students trust. We offer our assignment writing services for a wide variety of assignments including essays, dissertations, case studies and more. Students can place their order with us anytime as we function 24x7, and get their copies at unbeatable prices. We guarantee that all of our solutions are plagiarism-free.