The most important economic component of any country is the banking system. This refers to banking and banks as independent entities. The essence of the concept of the banking system consists in the complexity and interconnectedness of its structural parts. It would be advisable to consider this category in more detail, both in general terms and in relation to the Russian Federation.
The essence of the system of banking institutions
The essence of the banking system It consists in the totality of national credit (non-banking), banking structures, as well as banks, which are strictly combined. It is important to note that the presented elements of this complex are distinguished by the arrangement of credit-money relations and a single environment in terms of legislation.
You need to know that the regulation and control of the activities of the components of the banking system today is implemented on the basis of special legislation, which is represented by a number of laws related to banks and banking activities. Along with these legislative acts, the corresponding system includes laws that deal with issues of accounts, deposit secrets, bankruptcy, organization of electronic payments and so on.
System components
The main components of the organization of financial institutions are the following items:
- The country's central bank, which appears to be the first level of the aggregate system.
- Commercial banking structures that need to be assigned to the second level in accordance with the nature and structure of the banking system.
- Non-bank lending institutions, which are also located on the second level of the system.
Banking institution classification criteria
Of essence and structure of the banking system the conclusion suggests itself that banks, which play an important role in the economy of any country, implement various kinds of functions and are classified in accordance with several currently known methods. Among them, it is important to note the following points:
- Classification of banking institutions by ownership in private, mixed, joint-stock and state.
- Classification by type of banking institution, as well as by functional purpose, to issue (central banks, which are mainly engaged in filling turnover, periodically made in cash), deposit (banking institutions, more focused on the accumulation of cash deposits of the population), as well as commercial (banking institutions that form the core of the second level in accordance with the essence of the banking system and implementing strictly according to laws related to banks and banking activities).
What else?
In addition to the above criteria for the classification of banking institutions, it is important to highlight the following points:
- Classification according to the type of procedures performed, according to which financial structures are divided into specialized (mainly oriented to one direction, for example, mortgage or deposits) and universal. Besides, essence of the banking system involves the allocation of diversified banking institutions, as well as mainly focused on activities in one industry, for example, in agriculture or the automotive industry.It is important to note that banking structures of a universal nature, according to society, are the most preferable due to the minimal degree of risk of operations.
- Classification by volume, in accordance with which it is customary to distinguish large, medium and small credit organizations, interbank associations and consortia of banks.
Unconventional banks
What else can you solve? essence of banking? Banking system It suggests that, along with traditional banking institutions, today banks that play a special (special) role, as well as credit structures of a non-bank plan, are actively operating. It is important to note that enterprises of the first type are financed through specialized state programs and act in accordance with the orders of the executive authorities of the Russian Federation. Institutions of the second type, or non-banking organizations, provide certain services provided that there is no right to carry out banking activities in a full-fledged manner.
Banks as elements of the banking system
In accordance with the essence of the credit and banking system, banks should be understood as a special kind of entrepreneurial activity, which is somehow related to the movement of loan capital, its mobilization and further distribution. Unlike the investor, the banker is an entrepreneurial capitalist. It is important to note that industrial-type capitalists invest their own capital in industry, commercial capital in trade, and accordingly, bankers in banking. It is necessary to add that the loan capitalist directs his capital into the loan, while the banker performs some operations on other people's capital. In addition, the income of the first is equal to the loan interest, the income of the second is bank profit (income from securities, interest, commissions, and so on).
Functions of banks in a market economy
The economic essence of the banking system involves the following classification of the bank's functions that it performs in a market economy:
- Credit intermediation between functioning and money capitalists.
- Mobilization of cash savings and income, as well as their conversion into capital.
- Mediation in terms of payments.
- The formation of credit circulation instruments.
Analysis
It will be advisable to analyze each of the presented components in accordance with essence and types of the banking system of the country. So, the direct provision of free capital by their owners on a loan to commercial and industrial entrepreneurs in one way or another encounters a number of obstacles. For example, the amount of capital that is offered on a loan may not correlate with the amount of demand directly on loan capital. In addition, the terms for the release of capital from direct owners, as a rule, do not coincide with the terms in accordance with which these capital is required by the borrowers.
It is important to note that according to the essence of the banking system intermediation of banking institutions in credit helps to eliminate the mentioned obstacles that stand in the way of direct lending. Banking structures mobilize cash deposits of various urgency and size. That is why they are endowed with the opportunity to provide functioning capitalists with loans necessary in terms of amounts and terms. In addition, specializing in the implementation of credit plan operations, banking institutions can competently identify the creditworthiness of their own borrowers.
Payment Intermediation
By the essence of the Russian banking system, another function of banking institutions is closely related to intermediation in terms of credit - intermediation in relation to payments.It is important to note that in the process of operations, commercial and industrial capitalists need to maintain cash registers: receiving cash from customers, paying money, storing cash, recording absolutely all cash disbursements and receipts in accordance with certain accounts and so on. Banking structures, being intermediaries in payments, put on their shoulders the implementation of the presented operations for their own customers. You need to know that commercial and industrial capitalists in one way or another show interest in banking intermediation in payments, because the concentration of settlements in banks and cash transactions in any case reduces the costs associated with maintaining the staff of accountants, cashiers, accountants, and so on.
Raising money
The next function, revealing the essence of the banking system of the Russian Federation, is the mobilization of cash savings and income, as well as their further transformation into capital. You need to know that various segments and classes of the population receive certain incomes, some of which are accumulated for long or short-term expenses for future periods. These cash savings and income, in their essence, are not capital. So, in the absence of banking and other credit institutions, they would certainly turn into an empty treasure.
Banks and other institutions of credit nature mobilize these cash savings and income, as a result of which they become loan capital.
Promoting Enhanced Reproduction
In the implementation of the functions listed above and described above, banking institutions in one way or another promote expanded reproduction through:
- The provision of loan capital at the direct disposal of entrepreneurs who use them in order to somewhat expand the enterprise.
- Reduction of distribution costs of a non-productive nature by concentrating the development of non-cash payments, the concentration of cash transactions and replacing metallic money with credit instruments.
- Mobilization of cash savings, as well as part of personally consumed income; their transformation into capital of additional importance.
What in the end?
Having fully examined the essence and functions of the banking system, we can conclude that the credit system is nothing more than a combination of credit relations, methods and forms of credit that exist within a particular socio-economic formation. It is important to note that in a narrower plan, the credit system should be understood as a combination of banking and other credit and financial institutions that are engaged in the mobilization of free capital and cash income, and also provide them with a loan.
Bank as an independent category
Despite the fact that banking institutions have existed for too long, the issue affecting the essence of the bank is controversial. Different sources have different interpretations. It will be advisable to give the most striking examples:
- A common point of view is a cash repository.
- Organization, institution (presentation of the mass plan).
- The structure of economic management.
- Exchange agent.
- Mediation Association.
- Credit company.
Nevertheless, the considered variety of opinions on the essence of the bank comes down to two of the most important elements: “bank-enterprise” and “bank-institution”. How important is this dispute? Is there any difference on what point of view you need to pay attention to? In reality, the relevance of the presented problem lies not only in theory, but also in practice. The manner in which the essence of the bank is perceived by those who work in it largely determines the policy of the banking institution, as well as its relationship with the clientele.
In the case of a “bank-institution”, a bank employee is the head clerk, an official, while the client is none other than the petitioner. This provision is fully consistent with administrative relations between customers and the bank (typical for the economy of the administrative-command type).
In the case of a “bank-enterprise,” the bank employee is the seller, producer, and the client is the buyer. This is a fundamentally different type of partnership, which is characteristic of a market economy.
Such an analysis suggests the conclusion that the banking structure is an enterprise, but such an opinion is nothing more than a product of hasty thinking. Everyone knows that the modern banking system contains two main types of banks - central and commercial. It is important to know that their functionality varies greatly. If we take into account that functions are nothing more than a manifestation of essence, it becomes clear: only talking about the essence of the central bank, as well as the essence of a commercial bank separately, is competent.