Legal encyclopedia. Letter P

INTEREST RATE

- the percentage that the debtor is obliged to pay to the creditor for a loan of money, which will go to finance consumption or purchase of capital assets.

PS, paid for the conduct of any transaction, depends on the purpose and duration of the loan, the amount of borrowed money, securing the loan and

Solvency of the borrower, other conditions stipulated by the contract. These factors, in their entirety, affect the degree of risk of the lender related to the provision of the loan, the lender evaluates.

PS for short-term loans:

1) interbank clearing rate. PS, according to which commercial banks give each other short-term sterling funds;

2) the discount rate of bills. PS, according to which the Central Bank provides loans to accounting houses for their financing as a lender in last resort with a view to

Securing the positions of their treasury bills;

3) base rate. The lower interest rate used by commercial banks as a basis for setting interest on loans for their clients. Usually banks for large, stable customers set the PS above the base rate. Their risk of non-payment is low and administrative payments are low, while for small new enterprises PS will be higher.

The PS level is determined by the demand and supply for short-term financing in the money market, which is determined by the manipulations of the bank. The Bank conducts activities as a kind of monetary policy. Previously, all rates were related to the bank rate, but at present financial authorities are trying to control the PS level indirectly, through open operations in the market, buying and selling monetary policy instruments.

In the period of inflation, when prices are rising rapidly, it is important to distinguish between the nominal PS specified in the loan contract and the actual PS, which should take into account the impact of inflation reducing the real

Value or purchasing power of the interest received.

The level and dynamics of interest rates are differentiated depending on the economic content of the transactions for which it is paid, and depends on the terms of the loans, their security, the type of loan, the form of lending, the degree of credit risk, and so on.

PS are also divided into:

1) long-term and short-term;

2) basic and secondary (they change after the main ones);

3) market;

4) adjustable;

5) rates applied exclusively in national credit markets, in contrast to rates used simultaneously in the field of domestic and international credit (their level depends on changes in exchange rates and other factors).