The bank is the most important element of the country's financial system. The circulation of money in the world and in individual states is impossible without a special, well-functioning structure that would ensure the uninterrupted flow of funds. The concept of a bank, the classification of banks are associated with the definition of those diverse functions that are performed by these specific subjects of financial activity.
Bank concept
The movement of capital requires special services, and it is provided by banks. The essence of this enterprise is to issue and receive money from different persons. A bank is created in order to attract and place cash and make profit from it. Banks operate on an urgent, repayable and paid basis. What are the differences between banks and other financial organizations? Only they were given exclusive rights to raise funds from legal entities and individuals, to place finances on their behalf and to keep accounts of individuals and legal entities. Other organizations have the right to carry out only one of the listed activities. Banks always have their own funds and they provide part of their operations. Any classification of banks is associated with the specifics of their resources and with the functions performed.
Bank Functions
The initial and basic function of banks is to keep cash safe. Later, an important type of activity is added to this, such as providing settlements between different people and organizations. Bank customers do not need to worry about how the money will be delivered to the right place - this is the bank's concern. Collection of money and valuables is another function of banking institutions. Lending is a source of profitability for a bank and its important role in the financial system. The issuance of loans helps to increase the money supply in the economy and leads to its growth. The Bank performs the function of attracting money from individuals and legal entities for subsequent placement in order to achieve income. All this not only enables banks to earn money, but also affects the development of production and the economy as a whole. Depending on the market in which a financial institution operates, its functions and classification of bank finances may change. It can serve public cash needs or corporate needs. In the first case, the bank has a full range of possible functions, in the second case, usually the bank is required to perform a limited set of them.
The role of the central bank
Any classification of banks begins with a definition of their hierarchy. Supreme place in a two-level banking system takes the central bank. It performs special functions, so it does not fit into the classification of banks, in fact, it is a superbank. Its main tasks are the regulation of the country's economy, the control and management of monetary emissions, the management and supervision of the activities of credit organizations of the country, the accumulation of cash and values and the preservation of reserve funds and reserves of the country, providing commercial structures with money, financial support and servicing the activities of the government.
The central bank is a specific vertical system that covers all subjects of the country. It ensures the stability of the national currency and the banking system as a whole. The founder and owner of it is the state, it also delegates the Central Bank special rights, powers and duties.
Bank Operations
Commercial banks are an independent and significant link in the economy.Their main goal is to profit, and for this they can perform many different operations. In its most general form, the classification of bank operations is as follows:
- accumulation of funds, i.e., their attraction from various sources for servicing at the bank;
- allocation of funds, i.e., the performance of investment functions and operations;
- Settlement and cash operations for customer service.
Within each of these large groups of operations, various private actions stand out. Also, operations can be divided into two groups, in accordance with the object and objectives of the activity in this case, they are usually divided into passive, active and intermediary. Passive operations are aimed at forming the resource base of the bank. Active - to allocate resources for profit. Intermediary operations - a system of actions of the bank, promoting financial turnover in the institution.
From the point of view of the current Russian legislation, the classification of operations of commercial banks includes:
- raising funds in the form of deposits from legal entities and individuals;
- provision of loans from own and borrowed funds;
- issuance of bank guarantees;
- customer account service;
- settlement operations on behalf of customers;
- provision of information and consulting services;
- collection of money and valuables;
- operations for the sale and purchase of currencies;
- money management of a client under an agreement with him;
- operations with precious metals;
- surety for third parties in the performance of duties in cash;
- leasing operations.
Also, this circle of actions may include a small list of additional operations. For banks, some operations may be a priority and this may become the basis for their classification. For example, there are investment banks and mainly credit.
Classification of banks by ownership
All financial institutions can be divided according to the main owner. In this case, the classification of commercial banks looks like this:
- state banks, these include national and municipal institutions;
- private
- mixed banks, in such institutions a certain share belongs to the state.
The largest group in developed countries is private banks. For totalitarian states, the concentration of banking activity is only in the hands of the state, as was the case, for example, in the Soviet Union.
Geographic classification
It is also possible to classify banks according to their location and coverage of the service area. In this case, stand out:
- international or global banks, these include large international banks with representative offices in different countries;
- national, operating throughout the country;
- interregional, covering several regions, but not the entire state;
- regional or local banks operating in a particular area.
Scale
The volume of operations, the number of working capital and assets and the size of banks may also serve as the basis for their classification. In this case, it is customary to distinguish large, medium and small institutions. The presence or absence of branches allows us to talk about a single bank, banking groups and interbank associations.
Specialization
In accordance with the leading function, there are several main types of banks:
- Mortgage, primarily engaged in the provision of loans secured by acquired property;
- issuing, that is, having the ability to issue cash, most often they are the central banks of the country;
- investment, specializing in the provision of long-term loans for the development of various industries;
- trust, engaged in trust (trust) operations;
- clearing, the main operation for which is the provision of offsets in settlements;
- savings and loans, the main function of which is raising and disbursing funds for profit (classification of loans of this type of bank is related to the terms and subjects of lending, it can issue related and unrelated loans, individual and syndicated);
- exchange specializing in servicing exchange operations;
- accounting, primarily dealing with the accounting of bills;
- special banks created to serve certain programs of national and international scale.
Resources
Any bank is valuable in the first place for its resources, that is, the capital that is at its disposal and ensures the performance of active operations. Monetary resources carry out such functions in the bank's activities as:
- protective, that is, they guarantee the provision of operations - deposits, deposits, insure the interests of creditors;
- regulatory, legal and regulatory regulation of the bank's activities is carried out according to the assessment of its resources;
- operational, resources provide the material base of the bank.
The classification of bank resources can be carried out on several grounds. The main basis for allocating types of resources is their source, in this case we can talk about our own, borrowed and acquired resources. The first include authorized capital, bank funds (insurance, reserve) and retained earnings. The second - bank loans on a non-depository basis. The third group includes funds attracted from different persons (deposits and deposits). Also, resources can be divided, if possible, into permanent and temporary and at the place of mobilization — those received at other banks and mobilized by the bank itself.
Bank stability
A comprehensive characteristic of the bank, called sustainability, is associated with the ability of a financial institution to withstand economic fluctuations and develop confidently in accordance with forecasts. Stability factors can be external and internal order. The main indicator of stable development is the bank's profitability. The presence of sufficient assets and reserve funds allows the bank to withstand external destabilizing influences. The traditional classification of bank income distinguishes interest and non-interest income. The first type of income includes fees for the provision of loans, for operations with securities and settlement customer services. The second type includes income from operations with foreign currencies, precious metals, profits from the provision of various services (rental of safes, collection, settlement operations, issuance of bank guarantees). The higher the diversification of bank income, the greater its sustainability.
Bank Risks
Banking is a high risk area. There are external and internal threats that can destabilize the position of a financial organization. Traditional risk classification Bank distinguishes the following varieties:
- external, i.e., independent of the activities of the bank;
- internal, respectively, arising from the actions of the bank.
You can also name such types of risks as regulated and unregulated, complex and private, risks on balance sheet and off-balance sheet transactions.
