What is the difference between a correspondent bank and an intermediary bank? Banks - as financial intermediaries Intermediary and not a banking organization
Financial intermediaries are the entire set of financial institutions operating in the economy. The essence of their intermediation is to accumulate small scattered funds of individuals who are not inclined to investment risk or have too small savings for effective investment. Financial intermediaries, having formed such a reserve, direct them in the form of loans to the most effective ways of investing capital.
Banks play the role of financial intermediaries, accepting funds from depositors and providing them as loans to borrowers. This bank activity brings real benefits to both depositors and borrowers. Depositors take advantage of the fact that their deposits perform the function of means of circulation and the function of liquid assets, and in a number of cases they also earn interest. Borrowers are taking advantage of the new opportunities to obtain loans for long periods of time. This occurs even when most small individual depositors deposit only small amounts of money with the bank, for short periods of time, usually as demand deposits.
Banks perform the function of distributing (allocating) limited credit resources between alternative ways of their further use. Preference is given to reliable investments. An issued loan can lead to permanent losses for the bank in cases where borrowers are unable to repay with interest the amount they borrowed. This can happen when credit resources are used unproductively. Bankers do a good job of making loans if they anticipate the results of their possible use. Bankers select borrowers and provide loans only to those who are able to pay the maximum interest rate on the loan issued. And also for those whose future investments themselves provide a high percentage return (construction of production enterprises, development of new technologies, acquisition of new equipment, etc.). Banks, for the most part, are joint stock, as they are relatively privately owned. Bankers are the owners of a portion of the share capital and receive maximum income in the form of dividends when the bank is most successful in issuing loans. Banks make a profit from their intermediary activities. Consequently, bankers have an incentive to pursue the most successful lending policy possible.
Issuing a loan.
Banks make a profit by accepting money from depositors and lending it to borrowers. Banks charge a higher interest rate on loans than what they pay on deposits. This excess should be enough to cover current expenses and ensure profit. In some cases, banks receive additional income as payment for their lending services and other banking operations. Banks also earn income when they invest part of their assets in securities. In this case, they are no different from ordinary shareholders and receive income from dividends.
Many people invest their money in the bank. They won't all come to the bank at the same time to get their money. In fact, the daily withdrawal of deposits is equal to the same amount of deposits that customers make. Depositors' deposits become the bank's actual reserves. From these he deducts required reserves, which by law must be deposited in a reserve account with the Bank of Russia. Bank deposits are mostly current accounts and demand deposits and are subject to immediate payment upon demand of the depositor. In the event of a “banking panic,” when a large portion of depositors withdraw their funds from deposits, the bank can use these required reserves to pay.
The bank can issue loans using its excess reserves. Typically, a loan is issued by simply transferring the loan amount to the borrower's loan account. Only the debt obligation of the borrower remains with the bank. This debt obligation transferred to the bank is not money, since it is not a generally accepted medium of exchange. The bank, by creating a loan account, created money. It is through the expansion of bank credit that most of the money used in our economy is created. After the specified period, the borrower is obliged to return the money with interest. If the borrower cannot repay the loans, the bank compensates for the damage by selling the collateral. If there is no collateral or its value is insufficient, the bank has the right to go to court. However, the bank is unlikely to get its loan back. The borrower cannot repay the loan, and the trial may drag on for a long time so that inflation depreciates the value of the loan money.
Payments by checks.
Collection is a banking operation through which a client receives funds based on a check issued by another bank. Payments by checks are based on a correspondent relationship between two banks. Correspondent banks can carry out interbank clearing, that is, carry out mutual offset of claims through non-cash payments among themselves. Collection of a check is the same banking operation, only performed on behalf of the client.
The buyer deposits the money into the buyer's bank account and receives a checkbook. Now the bank has the money, the buyer has the check. The buyer pays for goods and services received by check. Thus, the check ends up with the supplier. He presents the check for payment to his bank - the supplier's bank. This bank transfers the check amount to the supplier's bank account. The supplier's bank gives its money and receives a check in return. If the supplier's bank and the buyer's bank are connected by correspondent relations, then the following actions occur. The supplier's bank sends a coded telex, fax, teletype to the buyer's bank with a request to increase its correspondent account, that is, to pay the check in the form of an increase in its deposit with the buyer's bank.
The second method of collection is that the supplier’s bank can simply transfer money from the correspondent account of the buyer’s bank to the supplier’s current account. The check has been collected. Since banks deal with a large number of clients, during collection checks go from one bank to another and back, and their correspondent accounts generally remain at a certain level. In cases where banks do not have correspondent relations, collection is carried out through Clearing Houses, OPERA, and RCC (cash settlement center). The supplier's bank and the buyer's bank have correspondent accounts with these institutions. And this institution, having received a check for collection, increases the correspondent account of the supplier’s bank and reduces the correspondent account of the buyer’s bank by the amount of the check.
Of course, this process takes much more time than direct collection. Usually, collection through intermediaries is carried out when banks are located not in the same city, but in different places in Russia.
There are 2 types of checkbooks:
- - non-limited check books are valid for a year from the date of issue;
- - limited - 6 months;
Checks issued are valid for 10 days, not counting the day they are issued. In case of payments by checks, the supplier will completely protect himself from doubts regarding the timing of settlement with the buyer and will speed up payment. When a buyer applies for a limited edition carnet, he simultaneously provides payment order for depositing funds. When issuing an unlimited book, a current account is opened from which checks are paid.
Savings checking checks have a slightly different configuration (they settle in the same way). Firstly, they are issued and accepted for payment only at branches of Sberbank of Russia (if the check is Russian). Secondly, checks are issued for amounts up to 100 thousand rubles. Thirdly, checks are issued and accepted for payment upon presentation of the client’s passport. And fourthly, they are only valid for 4 months.
Calculation of payment requirements.
When making payments using payment requests, the recipient of funds submits to the bank serving him a settlement document containing a requirement for the payer to pay the recipient a certain amount through the bank for the service or product provided. Mutual settlement of banks is carried out in the same way as in settlement by checks. A scheme for settlements with payment requests called “Acceptance Form of Payments” is attached. Settlements with claims with acceptances means that there must be the payer’s agreement to pay the claim presented to him. The acceptance form of payment is used by enterprises mainly for payment for goods and services. Without acceptance form are paid mainly public utilities, requirements for telephone, postal and telegraph services, etc.
The payer must monitor incoming payment requests in order to promptly refuse consent to payment in full or in part. The bank may set a refusal period. Depending on the time of submission of acceptance, consent to payment can be subsequent or preliminary. Moreover, the payer reserves the right to declare a complete or partial refusal to accept. When making payments by subsequent acceptance, claims are paid during the day as they are received by the payer’s bank; preliminary acceptance - the next day after the expiration of the acceptance period.
Calculation by payment orders.
Oddly enough, in Russia the form of payment by payments (payment orders, demands, demands-orders) prevails over the form of payment by checks. A payment order is a written order from the payer to his servicing bank to transfer a certain amount of money from his account to another enterprise in the same or another same-city or out-of-town bank.
Payment orders are used to pay suppliers in case of prepayment or by agreement, as well as when taxes are transferred and employees' salaries are transferred to their accounts in Sberbank. Orders are valid for 10 days from the date of issue.
Now accepted between enterprises new form payment using “demands-orders”. In this case, the supplier sends a payment request with attached shipping documents directly to the paying buyer, without presenting them to the bank. After receiving them, the buyer checks and clarifies the amount, then issues a payment order to his bank to transfer funds. In this case, errors and claims when making payments through banks are excluded.
25.Banks as financial intermediaries and characteristics of their activities in modern Russia.
Federal Law “On Banks and Banking Activities” “A bank is a credit organization that has the exclusive right to carry out the following banking operations in aggregate: attracting deposits of funds from individuals and legal entities, placement of these funds on one’s own behalf and at one’s own expense on the terms of repayment, payment, urgency, opening and maintaining bank accounts of individuals and legal entities.”
Banks as financial intermediaries, accepting cash deposits from different subjects of economic relations, issue them to other subjects for different periods. The former can return the money on demand or without notice; the latter usually need the money for a long period. The bank acts as an intermediary, accepting deposits, paying interest on them and issuing loans, charging higher interest rates to borrowers.
In market conditions, a commercial bank is not only one of the types of commercial enterprises, but also plays an important role as a financial intermediary in the following areas:
1. in the field of redistribution of temporarily free funds of legal entities and individuals on the basis of urgency, payment and repayment;
2. when making payments between business entities, when the responsibility of banks for the timely and complete execution of payment orders of their clients is especially important;
3. when performing transactions with securities, when the bank acts as an investment broker, investment consultant, investment company or fund.
26. Currency: concept and classification of types. Factors determining the position of the national currency in the international market.
Currency is the monetary unit of a specific country. The same term refers to funds of foreign countries in the form of coins and banknotes, as well as credit and means of payment in foreign currency. Also used to denote international units of account issued by international financial organizations (SDR, euro). Classification of species:
By affiliation: National currency - a monetary unit issued by the state itself, is considered the main currency of the country, the national bank is obliged to maintain its exchange rate in relation to the currencies of other countries. Foreign - any other currency, with the exception of the national one, issued by banks of other countries.
Collective – used in a number of countries, for example, the euro.
On circulation and conversion. Convertible - a currency with maximum liquidity accepted by almost all foreign banks, such monetary unit can be sold or bought in any country.
Partially convertible currency - accepted as a means of payment in banks in a number of countries, its exchange for another monetary unit is sometimes associated with some difficulties.
Non-convertible - circulating only within the country of the issuer - which issued it for circulation, is ignored by other countries as a means of payment.
By scope: price currency, payment currency, check currency, bills of exchange, currency valuable papers.
There is also an international currency - the one with the help of which most international payments are made, and which serves as the basis of the reserve currency (a national currency generally recognized in the world, which is accumulated by the central banks of other countries in foreign exchange reserves).
7 main currencies that are fully convertible and most often used in international payments ($US, Euro, Swiss Franc, Pound Sterling, Japanese Yen, Canadian $, Australian $).
The value of the national currency on the world market is determined by the country’s export potential. The fall in the exchange rate of the national currency leads to a decrease in the prices of national goods on the world market, expressed in foreign currencies, which contributes to the growth of exports, which as a result becomes more competitive. At the same time, prices for foreign goods expressed in national currency become higher, as a result of which their imports decrease. As a result of the depreciation of the national currency, national assets and securities denominated in it become cheaper and become more attractive to foreign investors, which leads to an increase in capital inflows from abroad. An increase in the national currency exchange rate causes the opposite effect.
The second story concerns the analysis of the role of banks in a growing economy.
Here it is necessary to make a reservation that we are not talking about a central bank that issues cash (the important role of the emission policy was discussed in detail above), but about a so-called intermediary bank that directly interacts with production subsystems and households. In our understanding, an intermediary bank is a quasi-macro-level monetary institution that performs two classic functions of any bank: regulatory and intermediary. We agree with the existing definitions of these functions, namely that “the regulation of money circulation is implemented (by the bank) through accumulation, issuance, lending, organization of settlements and cash transactions. As an intermediary in payments, the bank is a center in which cash flows are crossed, funds are concentrated and redistributed, changes and diversification of directions, size and timing of investments of funds and capital are ensured, wider contacts of reproduction subjects are carried out and risk is reduced.”
However, to the above definitions we would also like to add the fact that an intermediary bank, by accumulating temporarily free funds of some subsystems and lending them to other subsystems, helps to reduce the monetization coefficient or, what is the same thing, to accelerate money circulation. In this we see one of the most important manifestations of the effectiveness of the banking institution.
This effectiveness is especially obvious if we try to move away from the hypothesis embedded in the basic model that all the money circulating in the economy is cash, which in the intervals between circulation acts is stored either in the safes of subsystems or in the wallets of households. The emergence of an intermediary bank radically changes the situation: it becomes possible to increase output without increasing the volume of money supply, which is tantamount to a decrease in the monetization coefficient.
For example, consider the situation of simple reproduction described in section 14.2. It shows that in the absence of banks, the total accumulated funds in the “safes” of production subsystems at any point in time are My(t)= 18hY. Essentially, this money is withdrawn from economic circulation and is forced not to work. The intermediary bank allows you to return them to circulation. Let us make an approximate assessment of how much the efficiency of money circulation increases due to the activities of an intermediary bank.
Let there be no intermediary bank. Then in 1 year all 3 subsystems produce products in the amount of 3-12-T=36U, of which 24 F are consumer goods (products of subsystems G/ and G 2), 12 Y- new fixed capital (products of the subsystem Gi). At the same time, the money in economic system at each moment of time are distributed as follows: in the “safes” of production subsystems there are funds in the amount M Y = I8/7F, and in the “wallets” of the population - in total Mh = 2 Y/k h(assuming that k h= 1, that is, the population lives “from paycheck to paycheck” and by the time they receive their next paycheck, they spend All own funds without making long-term savings, then M/, = 2 U). Monetization rate M/ GDP defined as
Where M- monetary aggregate Ml, in the case under consideration with k h = 1 and h= 2/3 is equal to:
In this case, depreciation charges lie in the “safes” of the subsystems as dead weight. If there is an intermediary bank, these temporarily idle funds can be put into circulation on a repayable basis in the form of credit money. Let us consider the limiting case when All Depreciation charges stored in the intermediary bank are used to issue loans. Then all depreciation charges return to active economic circulation and begin to perform the function of money M /; . Accordingly, the monetization coefficient M/GDP in this case with k h= 1 is equal to:
those. the efficiency of using money in the system increases seven (!) times: 0.38888/0.05555 = 7. In other words, the production and consumption of the same amount of product is serviced by seven times less consumer money.
The above estimate is indicative only. To understand the logic of the transformation of depreciation savings into credit funds (which ultimately leads to economic growth), more detailed calculations are necessary. The model presented in Section 13 allows us to do this. Below is the result of calculations for one of the scenarios for including accumulated depreciation charges in economic turnover through consumer loan. The simulated scenario can be correlated with the situation in industrialized countries in the 19th century, when there was high stability in prices, employment and bank interest rates on loans over a fairly long period of time (almost a century).
The conditions for the calculations were as follows.
Calculation algorithm.
1. Transfer of “temporarily free” funds - depreciation accumulations - from the safes of the subsystems to the intermediary bank.
We assume that until t 0 - 0 subsystem G/, G2 , Gj operate in switching mode simple reproduction. WITH moment t 0 = 0 one of the newly updated subsystems (let it be G/) sends its depreciation charges to the intermediary bank on its deposit, where they accumulate for 2 years. The other two subsystems follow a similar scenario, only with a time shift of 1 and 2 years, respectively.
At the cash desk of the intermediary bank, due to depreciation charges of all 3 subsystems, funds are accumulated, which the bank, from the beginning of the 4th year, allocates for consumer loans to households.
2. Expansion of production.
Starting from the 3rd year, subsystem G? switches to the implementation of program A - to update fixed capital, increasing its labor productivity by g times. Accordingly, the subsystem Gj begins to increase the volume of production of consumer products on January 1 of the 4th year, also by g times. The other two subsystems act similarly with a time shift of 1 and 2 years, respectively.
3. Consumer loan.
Households do not have the necessary funds to buy growth release of consumer goods subsystem G 3 which begins on January 1 of the 4th year. However, the intermediary bank has (in the form of cash) depreciation charges for subsystems Gj And G2. The bank can provide this cash to households in the form of a loan. Let us assume that households of the subsystem G 3 take out a consumer loan for one month on January 1 of the 4th year to buy growth products, and the subsystem G 3 having increased its cash income for the current January, it increases the wages of its household workers on January 31 of the same year.
In this case, households in the subsystem are able to repay the loan from the increased salary. Then, on February 1 of the 4th year, these households take out a new consumer loan to purchase increased production, which they repay upon receiving their next salary, and so on every subsequent month. A similar situation is repeated every time any of the subsystems renews its fixed capital and increases the volume of production of consumer goods. As a result, the volume of consumer credit is steadily growing, providing effective demand for increased production.
4. Temporary characteristics of the model:
o the update cycle of the entire system is equal to the number of subsystems, that is, three years;
o the renewal (self-reproduction) time of one subsystem is equal to one year;
o the frequency of salary payments, for simplicity and clarity of calculations, was chosen to be 10 times during the accounting year in question (that is, when making calculations, it was conventionally assumed that the year consists of 10 months).
5. Algorithm implementation:
The subsystems open their current accounts at the intermediary bank, which reflect the movement of funds of the subsystems, while time deposits are opened for the depreciation accumulations of the subsystems - deposits. Households open current accounts in the same way.
Subsequently, the subsystem gives the intermediary bank an order so that it transfers a certain amount of money from the wage fund to the accounts of its employees once a month.
When the subsystem goes into self-reproduction mode and earns nothing, it instructs the bank to transfer certain amounts of money for salaries once a month from its current account, which contains accumulated depreciation deductions, to the accounts of its employees.
The following algorithm for spending funds by households is assumed. They receive their wages at the end of the month. When funds appear in the account, households pay off the previously taken loan and then spend their money evenly over the next month on purchases of goods. It is assumed that the propensity of households to spend money on consumption is directly proportional to the amount of income, i.e. The higher the income, the more money is spent on consumption. If the money in the account runs out before the end of the month, households take out another loan.
6. Calculation results.
The results of calculations using the basic model, taking into account the intermediary bank and consumer loan, are presented in Fig. 16.1-16.5. Subsystems G are updated one by one, with each update the volume of production of their products Yj increases in g once. For the convenience of calculations and analysis, it is assumed that salaries are paid 10 times a year, salaries are calculated in 10 steps per month, a total of 100 steps per year, so the calibration of the graphs is 1 year = 100 divisions.
Rice. 16.1.
A - general dynamics;
B - detailed picture with an increased time scale
Rice. 16.2.
Rice. 16.3.
Rice. 16.4.
Rice. 16.5. Dynamics of household funds Mhi
It can be seen that in the 63rd year (which corresponds to the value of 6300 on the x-axis), the total bank consumer loan issued by the bank to all households becomes equal to all the cash in the bank’s cash desk (this money is depreciation savings, which at the beginning of the billing period subsystems were placed on deposit. We will consider this amount in relative units to be equal to 1.00). Thus, the total loan amount in 1963 became equal to 1.00 (see Fig. 16.1). During this time, the total depreciation fund increased from 1.00 to 6.73 (6.73 times, see Fig. 16.2-16.3); it represents entries in the intermediary bank in the deposit accounts of the subsystems, expressed non-cash money supply(the amount of cash in the economic system has not changed). During this time, annual production increased from 1.00 to 6.75, i.e. 6.75 times (see Fig. 16.4). The monthly salary increased from 0.0667 to 0.45, i.e. the same number of times (see Fig. 16.5).
Thus, the use by an intermediary bank of depreciation savings stored in it as credit funds allows, with a constant volume of cash, to ensure economic growth by 6.75 times (!) without additional money emission (at the same time, only the number of non-cash money - entries in accounting books) due to more efficient use of cash accumulated by economic agents (and, accordingly, temporarily unused) cash. The resulting value of 6.75 practically coincides with the previously made tentative estimate of 7.0 (the difference between the calculation and the estimate is due to the discrete nature of the algorithm used in the calculation).
The considered scenario reflects an ideal situation that is only theoretically possible. Realistically achievable economic growth figures will be lower, in particular for the following reasons.
Firstly, the intermediary bank cannot convert all its cash funds into loans. By existing rules In order to reduce risks, it reserves issued loans at the Central Bank. Depending on the established mandatory reserve norm, the growth rate cashless money supply will be different. In Fig. 16.6-16.12 presents the calculation results for the case when the reservation rate is 10 %.
Rice. 16.6.
Rice. 16.7.
Rice. 16.8.
Rice. 16.9. Dynamics of fixed capital Kj
Rice. 16.10.
Rice. 16.11. Dynamics of household funds We
Rice. 16.12.
It can be seen that the economic system is moving to a new regime of simple reproduction, the productivity of which is significantly higher than the starting conditions, but 10% lower than that shown in Fig. 16.1-16.5 ideal scenario. Further economic growth is possible only in the case of additional emission of consumer money by the issuing center.
Secondly, shown in Fig. 16.1-16.5, the growth scenario is also ideal because it made the assumption that the increase in wages does not occur at the stage of updating fixed capital, but only when the updated subsystem begins expanded production of consumer products. As a result, the balance between supply and effective demand (including credit) is not disturbed and inflationary processes do not arise. Thus, shown in Fig. 16.1-16.5 script displays non-inflationary height. In fact, during the expanded renewal of fixed capital, a certain increase in costs inevitably occurs, since innovation is not free and requires R&D (this became especially evident in the second half of the 20th century). Due to the fact that wage increases occur already at the stage of renewal of fixed capital, there is an accelerated growth of effective demand, generating some inflationary background. In turn, inflationary processes reduce economic growth in real terms and lead to deviations from the ideal scenario.
- The co-authors of this section are M.Yu. Ivanov and A.A. Rubinstein.
- 1 Russian Banking Encyclopedia / Ch. ed. O.I. Lavrushin. M.: Encyclopedic Creative Association, 1995. P. 45.
- If k/,
- Keynes notes that “during the 19th century. ... the wage unit showed a generally stable upward trend, but labor productivity also grew. The resultant of all these cm was manifested in relative price stability - the highest five-year average of the Sauerbeck price index between 1820 and 1914. was only 50% higher than the lowest. This situation was not an accident and was correctly described as the result of the balance of power in an age when individual groups of entrepreneurs were strong enough to prevent the wage unit from rising too quickly in relation to the efficiency of production, and when monetary systems were at the same time sufficiently flexible and sufficiently conservative to ensure such an average supply of money, expressed in wage units, at which the minimum average rate of interest was acceptable to the owners based on the given value of their liquidity preference. The average level of employment was below full employment, but not enough to encourage revolutionary change.” See Keynes J.M. General Theory of Employment, Interest and Money. Favorites. M.: Eksmo, 2007. pp. 284-285.
- To simplify calculations, let us assume that the deposit and lending rates are zero.
- Here, in order to simplify the model, we deviate from Keynes’s position that “... the fundamental psychological law, the existence of which we can be quite confident not only from a priori considerations, based on our knowledge of human nature, but also on the basis of a detailed study of the past experience, is that people tend, as a rule, to increase their consumption as income increases, but not to the same extent as income grows” and we do not take into account the propensity to accumulate. See Keynes J.M. General Theory of Employment, Interest and Money. Favorites. M.: Eksmo, 2007. P. 117.
Correspondent and intermediary banks act as third-party banks that coordinate with beneficiary banks to facilitate international fund transfers and settlement of transactions. The differences between them are incompatible; Depending on where you are from, correspondent banks are different from intermediary banks, or they may be a type of intermediary bank indistinguishable from intermediary banks.
Role of third party banks
Wire transfers - an electronic method of sending money to another person or organization - are very common transactions with all banks, but international wire transfers are more expensive and more difficult to complete.
In some parts of the world, such as Australia or EU member states, banks that handle international transfers are called intermediary banks. No distinction is made between intermediaries and correspondent banks.
Transactions in foreign currency
In other parts of the world, such as the United States, there is sometimes a distinction between specific roles for intermediary and correspondent banks.
The most commonly cited difference between the two is that correspondent banks process transactions involving more than one currency. For example, if the transferring party deals in US dollars and the receiving party is located in France, there is a correspondent bank covering all transactions from dollars to euros.
In France there is another relevant bank that deals with receiving foreign currency for the recipient. In most cases (though not always), correspondent banks are located in a country where the two currencies are domestic.
Intermediary banks route cash for foreign transactions, but these transactions do not involve multiple currencies. Most of these cases involve the establishment of a bank that is too small to handle foreign transfers, so the assistance of an intermediary bank is enlisted.
At any moment in a market economy, there are market entities that do not have sufficient funds to pay planned expenses. At the same time, there are always firms, individuals and government organizations that currently have more money than their current needs. The former act as the demand for borrowed capital, its consumers or borrowers, the latter – as suppliers of monetary resources or lenders. The same subjects in different time can be both lenders and borrowers. The redistribution of financial resources between lenders and borrowers in the economic system is carried out by special financial institutions called financial intermediaries.
A financial intermediary is an institution that communicates between lenders and borrowers, borrowing funds from lenders and providing them to borrowers. The volume of funds accumulated and used by financial intermediaries significantly exceeds their volumes passing through other sectors of the economy. There are financial intermediaries between the financial institutions themselves. Thus, a number of financial institutions - leasing, factoring companies, financial houses - most receive their funds as loans from other financial institutions.
At first glance, it may seem that direct interaction between borrowers and lenders is more profitable from a financial point of view. However, in developed economies this is not the case. Let's consider the benefits and advantages of financial intermediation from the point of view of lenders and borrowers.
From the point of view of creditors, the advantages of financial intermediation are expressed, firstly, in the fact that with their help a reduction in credit risk is achieved. In conditions of incompleteness and imperfection of information characteristic of modern market economy, credit risk is high, i.e. the risk of non-repayment of principal and interest on the loan. Intermediaries diversify risk by distributing investments by type of financial instrument, over time, between different lenders, which leads to a reduction in the overall level of credit risk (risk transformation).
Secondly, financial intermediaries make it easier for other economic entities to find reliable borrowers. The intermediary develops a system for checking the solvency of borrowers and organizes a system for distributing its services. This also ultimately reduces credit risk and lending costs.
Thirdly, financial intermediaries provide solutions to liquidity problems of economic agents. Financial institutions allow them to maintain the required level of liquidity for their clients, which determines the ability to fully and timely fulfill their obligations to counterparties.
From the point of view of borrowers, the advantages of financial intermediaries are determined, first of all, by solving the problem of finding lenders willing to provide loans on acceptable terms. Financial intermediaries organize the collection of data about them and develop methods for attracting free funds.
In addition, in the absence of a financial intermediary, the rate for borrowed funds for the borrower under the same economic conditions is most often higher than in the presence of one. This paradox is explained by the fact that financial intermediaries reduce credit risk for primary creditors (depositors, money owners) and can set lower rates for raising funds, which naturally affects the establishment of interest rate placement at a relatively lower level than with direct lending.
The next advantage is that financial intermediaries help coordinate the timing of placement and attraction of financial resources. The problem of timing arises due to the fact that the borrower usually needs money for longer periods than lenders are willing to offer. Financial intermediaries perform term transformation by filling the gap between the lender's liquidity and the borrower's preference for long-term loans. Solving this problem is made easier by the fact that not all clients demand their money at the same time, and the receipt of funds by the financial intermediary is also distributed over time.
Finally, financial institutions satisfy the demand of borrowers for large loans by aggregating a significant number of small amounts from many clients (transformation of the size of monetary amounts).
Financial intermediaries are investment funds and companies, pension funds, Insurance companies, credit organizations and other financial institutions.
The main role in financial intermediation is played by credit organizations, which, using a variety of instruments, attract temporarily free funds of economic agents. And then they provide them on credit terms for the use of other economic entities.
A credit organization is a legal entity that, in order to make a profit as the main goal of its activities, on the basis of a special permit (license), has the right to carry out banking operations provided for by law. It is formed on the basis of any form of ownership as an economic society.
Activities that include banking are in many countries regulated by law (credit system law or banking law) that makes it possible to accurately determine whether an enterprise is a credit institution or not.
Classic banking operations are:
· attracting funds from individuals and legal entities into deposits;
· placing these funds on your own behalf and at your own expense on the terms of repayment, payment and urgency;
· implementation of non-cash payment and collection operations (girship operations).
Before starting their activities, credit institutions must obtain special permission to carry out banking operations (license, certificate). A banking license usually depends on the presence of certain prerequisites established by national laws. These prerequisites are: a certain (minimum) equity capital, the presence of a business plan; personal and business suitability of persons designated as bank managers, in the presence of an internal control system.
Banking license is issued by government agency The entity that exercises control over banks is usually the Central Bank of the country.
Credit organizations include banks and non-bank credit organizations.
Bank- a credit organization that has the exclusive right In total carry out banking operations.
Credit organizations that have the right to carry out separate banking transactions are called non-bank credit organizations. The range of banking operations is established by national banking legislation.
Currently, there are three types of non-bank credit institutions operating in Russia:
· settlement non-bank credit organizations;
· non-bank credit collection organizations;
· non-bank depository and credit organizations.
The Bank of Russia has established a list of acceptable transactions that each type of organization can perform.
Settlement non-bank credit organizations may have different functional purposes: servicing legal entities, including credit institutions, in the interbank, foreign exchange, and securities markets; making payments using plastic cards; cash services for legal entities, transactions for the purchase and sale of foreign currency in non-cash form, as well as other transactions provided for by their charters.
Non-bank credit collection organizations on the basis of a license issued by the Bank of Russia, has the right to only collect funds, bills of exchange, payment and settlement documents. Currently in Russian Federation There are two non-bank credit collection organizations operating.
Non-bank depository and credit organizations on the basis of a license from the Bank of Russia, they have the right to attract funds from legal entities into deposits (for a certain period), place them on their own behalf and at their own expense, buy and sell foreign currency in non-cash form, issue bank guarantees, as well as carry out other transactions not classified by law as banking operations, including: issuing guarantees for third parties, acquiring rights of claim from third parties, carrying out trust management of funds and other property of clients, conducting leasing operations, etc.
Non-bank credit organizations forbidden provide services to individuals.
Only banks have the full ability to carry out financial intermediation in full.
Banks are financial and credit institutions that accumulate available funds, provide them for temporary use, act as intermediaries in mutual payments and settlements between enterprises, institutions and individuals, regulating monetary circulation in the country, including the issue (issue) of money. That is, banks play a special role in the functioning of not only financial market, but also in the markets of goods and resources, since only banks act as financial intermediaries both in the redistribution of funds and in making payments between various subjects of a market economy.
Banking activities has certain peculiarities , which allow us to clarify the essence, functions and purpose (role) of banks in the economy.
1. The bank operates in the sphere of exchange, not in the sphere of production. Indirectly, of course, production is also affected, since the bank serves various production needs (accumulation of production materials, acquisition of new machinery and equipment), but the process itself reflects the activity of economic entities in the redistribution (exchange) of created material goods.
The bank is an intermediary between commodity producers, more of a seller than a manufacturer.
The bank employs special personnel - mainly employees, not workers: people engaged in non-physical labor; and monetary transactions, processing of numbers, information, economic analysis, organization of accounting, settlements between enterprises.
2. Bank-it is, in a certain sense, a trading institution. The motives of trade (commerce) predominate in his activities. Not being the owner of funds that reflect the movement of material flows, the bank “buys” them and “sells” them to other economic entities at a different, higher price.
The similarity between banking and trade is not accidental. The bank actually “buys” resources, “sells” them, functions in the sphere of redistribution, and facilitates the exchange of goods. It has its own “sellers”, storage facilities, a special “inventory”, its activities largely depend on turnover.
A merchant, in turn, is similar to a bank in the sense that it can provide some banking services. For example, a large trading enterprise, like a bank, can issue significant amounts of cash loans. Trading can work to a greater extent not on its own, but on borrowed capital.
This is where the similarities between banking and trading basically end. The fundamental difference between a bank and a trading enterprise lies in the basis of the bank. The basis of a bank is understood as its main quality - credit business, something that, in a host of other activities, has historically been assigned to the bank as a fundamental activity on a scale that required special organization.
Under these conditions, the bank appears to us not as a trading enterprise, but as a specific enterprise, as follows:
· in trade, ownership of goods passes from the seller to the buyer; this does not happen with a loan (the loaned value passes to the borrower only for temporary possession);
· in a trade transaction, what is sold is what belongs to the owner; with a loan, this is not always the case (for example, a bank basically transfers what does not belong to it; it “trades” other people’s money);
· in trade, the seller receives the price of the product from the buyer; with a loan, the lender receives not only the amount of the loan provided, but also an increase in the form of loan interest.
2. Bank-this is a commercial enterprise. Operations of both issuing and commercial banks are carried out on a fee basis. For loans provided, they receive a loan interest, for settlement, cash and other operations performed on behalf of their clients - a certain commission.
3. The bank's activities are entrepreneurial in nature. Thanks to the bank, the idle capital of some economic entities begins to “work” for others. Thanks to the energy of capital redistribution between economic entities, industries, territories and countries, banks strengthen the productive movement of material, labor and monetary resources and facilitate the implementation of various economic projects.
4. Working in the exchange sphere, The bank acts as a productive institution that regulates money circulation in cash and non-cash forms.
Based on the essence of the bank, it can be defined as a monetary institution that regulates payment turnover in cash and non-cash forms.
6. Bank is an intermediary organization, financial intermediary.
7. Bank-it is not only a commercial enterprise, but also a public institution. The bank helps to comply with public interests, works to meet public needs, while banking activities are not political, but economic in nature.
For example, an issuing bank (central bank), although it carries out some operations on a fee basis, making a profit is not the driving motive of its activities.
Activities are no exception commercial bank, which aims to make a profit by making money on the difference between the resources it “purchases” and the resources placed on a return basis. It is important not to forget that the profit that the bank strives for is not main goal his activities. Profit is one of the goals, but does not determine all commercial activities of the bank. According to modern enterprise theory, of incomparably greater importance for a bank is its competitive position in the market and its reputation as a steadily developing economic entity.
Banking activity is the activity of a monetary institution in the field economic relations. Not only the development of the country’s economy, but also the social atmosphere in society depends on the results of banks’ activities. General economic and banking crises lead to significant losses, bankruptcy of enterprises and credit institutions, depreciation or loss of savings and deposits of citizens and, as a consequence, to the emergence of tension in public relations and a decrease in the image of the bank as a socio-economic institution. That is why the activities of banks have a noticeable social connotation.
7. Bank How a specific enterprise produces a product that is significantly different from the product of the sphere of material production; it produces not just a product, but a product of a special kind in the form of money, means of payment. Money is a reproductive category. Cash and non-cash money, issued by the bank as the only monopolist in the total mass of subjects of reproduction, serves both the sphere of production and the sphere of distribution, exchange and consumption. In addition to this product, banks provide various types of services, mainly of a monetary nature.
The bank's main product is in the service sector, in contrast to industrial enterprise is not the production of things, consumer goods, but the provision of credit. The specificity of a bank loan is that it is provided not as a certain amount of money, but as capital, i.e. The borrowed funds must not only circulate in the borrower’s household, but also return to their starting point with an increase in the form of loan interest as part of the newly created value.
7. If a bank operates mainly on other people's money, accumulated on the basis of repayment, then the enterprise operates primarily on its own resources.
8. A bank differs from an industrial enterprise in the nature of its issuance. It not only issues shares and other securities, but also carries out operations for recording and storing securities of other issuers.
