Functions and operations of commercial banks

The main link in the credit system consists of a network of independent banking institutions that directly serve the national economy and providing a wide range of financial services on commercial basis. This is a commercial, cooperative and private banks, combined with banking laws under the name of commercial banks.

Commercial banks are organized on a mutual (stock) basis and ownership share in the government, shareholders, co-operative. Regardless of ownership of commercial banks are autonomous economic actors. Their relationships with customers of a commercial nature.

The main purpose of the operation of commercial banks - to maximize profits.

The main functions of commercial banks are:

- mobilization of temporarily free funds and turn them into capital;

- mediation in the loan;

- intermediation in payments between separate autonomous entities;

- issue of credit money;

- investment activities;

- other financial services.

For the first function of banks accumulate income and savings in the form of deposits. The depositor shall receive remuneration in the form of interest or rendered by the bank. In doing so they effectively manage them to ensure their safety, and provide the basis for profitable loans to borrowers, because concentrated in deposits savings are converted into loan capital. Borrowers invest in expanding production, purchase of goods and real estate. Eventually, with the help of commercial banks savings are converted into capital.

The second function of commercial banks - lending to enterprises, government and the public. By providing a loan to its customers, commercial banks act as financial in termediaries, as the direct provision of loan capital available cash to holders of the practical business of life is almost impossible. Cash can be transferred from lenders to borrowers and without the mediation of banks, but at the same time, dramatically increasing the risk of loss of money loaned in the loan, increasing the overall cost of their relocation, as lenders and borrowers are not aware of the solvency of each other, and the size and timing supply of funds does not match the size and timing of demand. Commercial banks attract funds that may be issued in the loan, according to the needs of borrowers and on the basis of broad diversification of its assets reduce the overall risk owners of money placed in bank accounts. Banks act as financial intermediary, receiving money from lenders and allowing end-to end-borrowers.

For many clients, keeping money in bank deposits in the form of more attractive than investing them in bonds or stocks. As a bank loan more convenient form of financial services, which allows flexibility to accommodate the needs of each borrower and adapt to them the conditions for obtaining a loan (as opposed to, for example, from the securities market, where timing and other loan terms are standardized.)

The third function of commercial banks - the issue of credit money - a specific feature that distinguishes them from other financial institutions. It is directly related to the credit function. When the credit functions of commercial banks to issue credit money in circulation, that is, when granting loans to borrowers in the total money supply increases, and at maturity the borrower of the loan decreases the money supply. The fact that the loan provided by the customer shall be credited to his account in the bank, a bank creates a deposit (demand deposit) this increases the debt of the bank. Owner may deposit in the bank to get cash in the amount of the contribution, resulting in a increase in the amount of money in circulation. Thus, when performing its functions Lending - Commercial banks provide deposit-credit issue, the issue is credit money, which distinguishes them from other financial institutions.

One of the functions of commercial banks is to organize and conduct cashless payments, ie providing settlement and payment mechanism. Acting as intermediaries in the payments, the banks do for their clients operations-related settlements and payments.

Investment activity in relation to commercial banks means investing money on the initiative of the banks for a period of income (profit). In a narrower sense, investment banking - is investing in securities which operate in a relatively long period of time. Feature of investment transactions from credit operations is that the initiative for them came from the bank, and not his client. This investment activities of the bank.

Functions of commercial banks specifically manifested through their ongoing operations.

In a market economy, all operations of a commercial bank can be divided into two main groups:

Дата добавления: 2015-11-14