Understanding the Functions of the Bank of Spain and Financial Concepts

ITEM 13: People Asked:

1. What is the Bank of Spain?

The Bank of Spain is a financial intermediary that is unusual in that its funding is not aimed at companies or families, but rather at the public sector or other financial institutions. The Bank acts as a monitor of both financial institutions and non-bank entities, conducting economic and financial studies.

Functions in the State:

• Starting the issuance of coins, subject to ECB approval over the volume of issuance.
• Providing treasury services and acting as the financial agent of public debt.
• Advising the government and organizing reports and studies that are unprecedented.

Functions of the Eurosystem:

• Conducting foreign exchange operations consistent with the Treaty of the European Union.
• Holding and managing the official foreign reserves of Eurozone countries.
• Promoting the smooth functioning of payments in the Euro area.
• Issuing and circulating notes as legal tender.

2. What is Leasing?

Leasing is a funding system under which a company can incorporate a capital asset on a lease, paying a fee periodically. This process involves the client company, the company that provides the asset, and the leasing company. At the end of the rental period, the asset may be returned to the leasing company or purchased by the client according to the method specified in the agreement.

3. What is Factoring?

Factoring is another form of corporate financing that involves the sale of all receivable rights represented on invoices or bills of exchange. In exchange for a commission, it provides immediate liquidity to the company that sold these rights and helps avoid issues with defaulters.

4. What is the Stock Market?

The stock market consists of civil associations that serve the public interest. Its aim is to facilitate the negotiation of any value in a competitive, orderly, and continuous manner.

5. Difference Between Fixed Income and Variable Income:

Fixed Income:

This class of securities represents a percentage of a loan to a particular company. They pay a fixed rate agreed upon at the time of issuance.

Equities:

Equities are shares that represent a percentage of ownership in a company's capital. They do not guarantee future income but can provide higher returns than fixed income securities.

6. What is the Indice de la Bolsa?

The Indice de la Bolsa is an indicator of the evolution of a market based on the behavior of the prices of the most representative stocks, selected according to their degree of liquidity.

7. What is the Steady Market?

The steady market is a computer networking system among the four Spanish stock exchanges that enables the trading of certain securities through computer terminals in real time.

Theory of the Official Credit Institute (ICO)

The ICO is a financial intermediary that is atypical because it does not capture resources from the general public. This financial entity operates under government institutions, granting subsidies to economic sectors facing funding difficulties and infrastructure needs.