The attracted funds of a commercial bank are of interest both to the public (broad, if the financial and credit structure is large, and specialized, performing the role of civilian observers), and to the state. Why? What can be the structure of borrowed funds? Is it possible, having analyzed it, to draw conclusions about the future of the organization?
general information
Commercial banks, in the first place, are specific credit institutions. Their tasks include attracting temporarily free funds of individuals and legal entities, as well as covering the deficit in the financial resources of those entities that experience them (subject to return). There are many different ways to carry out such an activity. Attracted funds of a commercial bank can be taken from the following sources:
- Deposits from individuals.
- Various accounts of organizations and enterprises.
- Interbank deposits and loans.
- Placement of debt securities.
- Account balances of own funds.
Why is an analysis of attracted funds of a commercial bank necessary?
It allows you to disclose the sources of formation of cash resources, optimizing the costs that the organization incurs to attract and maintain them. Analysis of the state of the attracted funds of a commercial bank allows you to sort customers by ownership, terms of provision, interest. Thanks to this, it is possible to timely return funds and create forecasts.
This tool also allows you to regulate and control the liquidity of the bank. In this regard, private and borrowed funds of commercial banks are often allocated. Regarding the first, you can not worry. At the same time, maintaining a balance between them at the level of 20/80 allows you to ensure the safety and efficiency of the structure.
Part of its own funds goes to create a reserve within the Central Bank. The remaining money works for the owners' profit to a greater extent than attracted. After all, investors need to pay interest. But at the same time their presence allows to increase the coverage of the population.
Bit of theory
The most coveted attracted funds of a commercial bank are balances on current and settlement accounts of legal entities. They, as a rule, form the basis and client backbone of a financial and credit organization. After all, in fact - it’s practically free of charge. They are also essential for customers. Through them goes the whole turn. Therefore, in the presence of a significant customer base, an excess of practically gratuitous funds arises.
Another advantage is the conditional predictability of account balances and fluctuations in the amount of funds in them. As an example, this is information about the timing of payments, their approximate size, payments to the budget and so on. But one should not rely on such predictability. After all, their increase negatively affects liquidity. And with poor management, they can even turn into a burden.
Some more theory
The attracted funds of a commercial bank include such a popular tool for saving their funds as a deposit. Although money on balances can provide some savings, it is deposits that make it possible to cover the need for loans. Also, interest rate risks and the same problems with liquidity largely depend on them.
What is the catch here? The fact is that each bank seeks to attract more investors for the subsequent issuance of loans. To do this, they lure them with interest on deposits.But at the same time, loan rates are also rising. In this case, it is necessary to look for a middle ground, which will take into account the interests of all parties.
We should also talk about various areas. Thus, an analysis of the own and borrowed funds of a commercial bank classifies demand deposits as a more unsatisfactory category than account balances. Why is that? The fact is that the removal mechanism is no different. But in the case of legal entities, one can more or less confidently predict their behavior. Whereas it is not possible to predict the behavior of an ordinary person. His funds may lie on the account for more than one year or they will be withdrawn in a week. Who can confidently give an answer? Therefore, they are not considered the best option. After all, this is a rather expensive and risky source of funds.
About time deposits
These are expensive, in comparison with the rest, types of obligations. They are attracted for a certain period at a specific interest rate. Thanks to them, the risk of liquidity loss is stabilized. This fact is very important. But it does not mean that the client does not have the opportunity to demand his funds ahead of schedule.
True, certain penalties are envisaged for this, up to zeroing the accrued interest. In this case, they become much more dangerous for liquidity than demand deposits, because it is believed that the money will remain in the account until a certain date.
About large and small term deposits
Due to the presence of such a risk, fixed-term deposits are conditionally divided into large and small. The first include those that exceed the liquidity limit established by the bank. Because of their size, they are considered hazardous substances. Indeed, in the event of their unexpected withdrawal from the client, negative consequences like losses occur. Even bankruptcy is not ruled out.
Why does this happen? The fact is that owners of large deposits, as a rule, are profit-oriented. Therefore, they are very sensitive to changes in interest rates and its revision by the bank. And not necessarily this is done in the middle of the term.
Let's look at a small example. Man has one hundred thousand euros. He brings them to the bank and puts them on a term deposit. Time is one year. Then his situation satisfies, and he prolongs his contribution. Five more times. And although the bank considers the possibility of withdrawing these amounts, but if it comes for the eighth time and requires all its funds (and this will be about 130-140 thousand euros), then such amounts will not be in the department. They will need to be specially ordered from the central repository for transfer to the depositor through encashment.
Small deposits tend to be less sensitive to changes in interest rates. And in a difficult period, they, as a rule, do not leave the bank. The behavior of their owners is relatively predictable, which ultimately has a positive effect on the liquidity of a financial institution. The costs for this category are usually not very high.
Other fundraising tools
The basic structure of money in an average bank, which is not a cover for financial fraud, has already been considered. All other types of obligations are classified as non-deposit instruments for raising funds.
What can be cited as an example? These are transactions with bills of exchange, savings and certificates of deposit, and securities (stocks, bonds, debt). At the same time, there is a certain specificity of raising funds with similar tools. So, the initiator of their use is the bank itself. By external signs, such as urgency and withdrawal mechanism, they are very similar to term deposits. But in the analysis it is necessary to take into account the boundaries of their application.
About the specifics of other tools
Consider initially bills.When using them, one can encounter illiquidity, a drop in profitability or a change in priorities in the actions of investors. Therefore, when using them, there are significant dangers in terms of interest rate risk and liquidity.
How can one verify the stability of a financial institution? A structural element such as interbank credit can help in this regard. Why is it considered a positive factor? The fact is that if other banks provide their money to a financial-credit organization, it means that it has received recognition and is considered such that it can return the funds raised.
But you should not forget about the risk. Own and borrowed funds of commercial banks should create a balance to maintain the liquidity and profitability of the organization at a sufficient level. Excessive use of these tools can undermine the stability of the institution.
Best situation
Who has the potentially best chance of continuing? The organization of attracted funds of a commercial bank should be as diversified as possible. The best option is when no instrument exceeds 30 percent of the total amount of funds that a financial institution has at its disposal. To do this, study the asset portfolio of a particular institution.
Another indicator of the stability and reliability of their work is the interest rate policy when raising funds. It must satisfy two conflicting requirements. Firstly, deposit rates should be attractive enough for potential investors to carry their money. Secondly, it is necessary to ensure sufficient margin between the active and passive operations of the bank. That is, you should take care of active lending to solvent groups at rates that are significantly higher than those accrued on deposits.
About stability
The structure of attracted funds of a commercial bank should include not only interest restrictions on certain categories, but also offer interest not higher than industry average.
Why is that? Suppose, on average, in the Russian Federation, banks take deposits at 6%, and give loans at 20%. And then a financial and credit organization appears, offering as much as 25% for a contribution. Who will they be able to lend the funds received? Or very risky borrowers who are not the fact that they will return them or, in general, raising money, will be lost with them.
Such a bank cannot be judged as liquid and solvent, taking care of its financial stability. Most likely, he does not have a stable resource base, which is necessary for effective investments. Therefore, a commercial bank attracts funds of legal entities and individuals at a high rate. But, most likely, in the future, liquidation awaits him, and his primary creditors - problems with obtaining their funds. After all, the higher the percentage, the more risky the investment.
How is the resource base analyzed?
For this purpose, homogeneous bank accounts are combined into certain groups. The result is an informative and compact balance that can already be analyzed. Important in this matter are:
- Meter selection. If we calculate the amounts that accumulate as attracted and borrowed funds of a commercial bank only at the beginning of quarters and at the end of the year, it will be difficult to get a full-fledged dynamics of the funds received. More useful from an informative point of view, data on the average daily turnover on one account. But providing them is much more difficult for objective reasons, such as the need to work with specific dates, rather than summarizing.
- You should take care of the data collection and storage system that is used in financial analysis.In this case, each bank solves this problem, taking into account the specifics of its institution.
- Relative meters are widely used. So, indicators of the previous and base periods are used to display the picture.
At the same time, both quantitative and qualitative analysis are distinguished. What does it mean? Take, for example, a deposit. A person brings a certain amount and contributes it to his contribution. Thus, the bank has funds that it can use right now. And if a bill of exchange is used as an object? With its liquidity, certain problems may arise. And although formally, let's say, it will be equal to the deposit, the quality of these assets will be different.
What to do with the data?
Attracted funds of a commercial bank include both risks and opportunities. Analysis of the structure allows us to evaluate the significance of each source and the dynamics of its development. Thanks to this approach, you can monitor the degree of activity of the bank when interacting with other financial and credit companies, various organizations and individuals.
Based on the data obtained, management personnel can decide on a change in the company’s activities, adjust rates in certain areas, and change the principles of the system.
Of course, information on the structure of funds alone is not enough. But it allows you to make more successful decisions. In addition, a number of external factors also influence. For example, if there are too many deposits, then you can lower the rates on them. But with high inflation, doing the same with loans will be problematic, because in this case the bank will lose money. And for the commercial organization, which it is, it is the receipt of profit that is considered the final desired result.