The credit area of currency relationships has distinguishing features about the type of operation. The subject of the transactions is the right to use the funds. In simple terms, the owner of the money changes for a certain time. Therefore, the organization of financing banks has its own characteristics.
Financial credit organizations are used on the one hand for profit, but on the other hand – they are of macroeconomic importance.
The activities of these institutes are connected with the fluctuation of the money in the economy and guarantee the stability of the companies. This duality creates some characteristics of the finances of credit institutions.
Financial institutions of the Russian Federation have formed the basis of the federal law “About banks and banks”. A credit institution is a legal person that conducts a number of transactions with a license from the central bank. The form of ownership of the organization can be arbitrary.
The law provides for the creation of two types of organizations: banks and non-banks. The bank has the exclusive right to collect deposits from public and legal entities, to place funds on terms of payment and repayment, to keep accounts, to carry out transactions for the purchase and sale of securities, etc.
The law prescribes the minimum size of the law on the bank’s capital on the day of application. It is 300 million dollars. The Bank of Russia also regulates the maximum amount of contributions in kind and a list of properties that can be contributed to the share capital. In particular, the bank’s capital cannot be built up at the expense of loans from other institutions.
The composition of the shareholders must remain unchanged during the first three years of operation. The central bank has also developed a number of standards that are binding for all market participants. They regulate the minimum amount of own funds, solvency, and liquidity.
Redistribution of resources
Financial credit institutions participate in the redistribution of resources at the macro and micro levels. Banks raise funds from individuals and businesses and then use them to carry out financial market operations.
Creation of reserves
Banks hold funds from legal entities and the state. Even the financial system can suffer in times of crisis. As a result, banks create reserves for loans secured against transactions in securities to the accounts of the supervisory authority.
Financial signs from credit institutions
- Free use of funds in the legal framework.
- Urgency and Repayment – Funds are temporarily available for a period of time.
- Payment – you must pay interest to use capital.
- Risk – Minimal risk operations that can lead to long-term results are preferred
- Binding compliance with the standards developed for the stability of credit institutions.
Given the peculiarities of financing credit organizations, monetary relationships can be divided into two groups. The first reports to the implementation of activities by commercial organizations (the provision of banking services) and the second to the specifics of the system as a whole. Banks keep money, they act as intermediaries between the state and the population and also participate in the activities of the securities market.
There is a two-tier banking system in the Russian Federation. Financial credit organizations are organized on a decentralized basis. This is due to the nature of the market relationship. The freedom of enterprise guarantees the allocation of resources by credit institutions.
And this process should be monitored as banks not only use their own but also attract funds, including those from government agencies. Central banks in all countries of the world can be seen as mediators between the state and business. They combine the characteristics of credit institutions and government agencies.
Principle of operation of the Bank of Russia
The legal status of the central bank is laid down in the constitution and the federal law of the same name. At the constitutional level, the main task of the regulatory authority is to ensure the stability of the national currency. Federal law stipulates that the regulator’s activities are non-commercial since making a profit is not the ultimate goal.
The powers of the regulator are also divided into two groups. The first reports to the performance of public functions (regulation of monetary policy) and the second to the execution of banking transactions. The first is carried out free of charge, the second at the fixed prices.
The Bank of Russia capital and all property are part of federal assets, but the organization itself is legally and financially independent. The first condition is necessary to control monetary policy. Financial independence is that the Bank of Russia is not responsible for the state’s obligations and independently finances all operations.
After the annual financial statements have been approved, half of the bank profits are transferred to the federal budget. The rest is directed towards the creation of reserves and funds. The taxation of transactions is carried out in accordance with the Tax Code, with the exception of transactions that report to state regulations.
Organization of financial institution financing
The transition to a market economy has changed the structure of capital financial institutions. The main source for fund formation today is the share capital attracted by the financial market. In administrative management, the capital was created by banks at the expense of state resources. The product range was expanded over time. Banks also received revenue from GFI, metal, foreign exchange, leasing, factoring, and forfeiting transactions.
Organizing the financing of credit institutions is to temporarily raise free funds while meeting the resource needs of the population and the economy. A distinction can, therefore, be made in the structure of bank resources:
- Own funds: share capital, reserves, special funds, and profits;
- Liabilities are funds that are raised from passive transactions (customer deposits) to carry out active transactions (loans).
The size of an organization’s resources is affected by the volume of operations. With the transition to a market economy, the quality of capital has changed. Organizing the financing of credit institutions stipulates that profit is not only the ultimate goal but also an important social indicator. Its presence and size are related to the interests of various consumer groups:
- For shareholders, profit is the main indicator of profitability.
- for employees of the organization – the possibility of receiving remuneration for the quality of the work performed;
- For borrowers, profit growth means expanding the resource base and the possibility of cheaper loans.
Bank profit is calculated as the difference between farm income and the cost of carrying it out, the content of administrative staff. Income includes, in particular, interest, fees for cash and settlement services, income from transactions in securities, currencies, precious metals, guarantees, trust management, leasing, consulting
The expenses include expenses for payment: taxes on the budget, interest on collected deposits, commission for interbank loans, payment for correspondent banking services, expenses for transactions in securities, currencies, precious metals, the formation of reserves, maintenance of management staff