Banking system: structure, functions and types

The banking system of the Russian Federation presupposes the presence of two subsystems, which were finally formed in 1991 after the adoption of a law regulating the activities of banking organizations. At the first level is the Central Bank or Bank of Russia, and at the second are the country’s commercial trading banks. This concept is not new for Russia; it was invented much earlier and was formed in England.

The main tasks of the country's main bank include issuing funds, ensuring the sustainable functioning of commercial banks within the state, as well as preserving and stable maintenance of monetary policy. An important task of the Central Bank is to establish a fixed rate, which should be supported by all structures subject to the Central Bank.

In 2009, a unified refinancing rate was announced - 8.5%, which increased the possibility of obtaining loans for the population. Until 2009, this rate exceeded 11%.

Within the Russian banking system, the second level includes commercial banks of various types. They can be multi-purpose, savings, special, mortgage or industry. To a number of such banks are added other structures that are non-banking in nature. These are unique credit and trading organizations consisting of investment funds (investment funds), insurance companies, trust firms and pension funds.

The legislation establishes the main levels of the banking system of the Russian Federation, which imply not only the presence of two degrees in the banking system, but also the compliance of each organization with the rule of universality. The second level is limited not only to well-known commercial banks, but also includes branches of foreign banks and non-banking organizations.

Concept of the banking system

The banking system is usually understood as a complex consisting of commercial and national banks of all types, which, in turn, adhere to a single monetary mechanism in their activities.
At the present stage, it includes the central bank, which acts as the main regulator, and commercial banks and other credit and settlement companies. The banking system as a whole must fully comply with specific requirements that ensure the consistency and efficiency of its functioning. These requirements include:

• stability of all levels of the banking system;
• operational efficiency;
• activity and efficiency in decision making;
• efficiency and financial feasibility.

In most countries of the world, the Central Bank is state-owned. Even when it does not legally belong to the state (an example would be the US Federal Reserve System or the Swiss National Bank) or when the state partially owns the capital of the Central Bank (for example, the Central Bank of Japan), its actions are still strictly regulated at the legislative level.

Banking system of Russia

The current banking system in our country is unique. He resembles a centaur, whose head is replaced by a multi-level organization of branches, and his body represents that same two-level correspondent system.

Such a mythical animal cannot be found in any other country. In fact, it appeared artificially , through a merger:

• the Sberbank branch system widespread in the USSR;
• European banking system on two levels.

The resulting combination, however, terrifies financiers all over the world, because no matter how harmonious and logical the banking system was under the Union, how perfect the Western banking organization was, their mechanical brainchild turned out to be so absurd.

The most difficult thing is that it is impossible to reliably determine the size of the payment supply in the Russian banking system. Cash flows are so intricate, complex and unreliable that the typical Western guarantees of reliability do not apply. The work of the Central Bank resembles a huge “money sucker”, which pumps out finances from all over the country day and night and transfers them into the hands of Moscow for use for its purposes.

Current status

On the one hand, one can notice positive trends:

• Consolidating the independence of the Central Bank of the Russian Federation from the government. Exactly the same model is present in almost all developed countries of the world, except that in some countries like Japan or Belgium the state owns shares of the Central Bank of the Russian Federation for a certain share. Thanks to this situation, the government of the country cannot use gold and foreign exchange reserves and issue cash to cover the budget deficit;
• A policy is being traced to reduce the overly inflated state budget: the plan is drawn up as if oil costs $45 per barrel (the real cost on the market is one and a half to two times higher). Almost all surpluses from these amounts are converted into gold and foreign exchange reserves. This creates a financial cushion in case of a new crisis.

But there are at least ambiguous actions on the part of the Government and the Central Bank of the Russian Federation in particular. For example, there is a clearly visible trend towards a decrease in the number of commercial banks in the country: from the beginning of 2008 to the beginning of 2018, their number decreased by half, i.e. from 1136 to 561 banks. This can be explained both as a result of normal healthy competition and as a result of growth curbs on the part of monopolists and legislators.

If we draw a line under the above prospects, it can be argued that the breadth of the market and the number of players will continue to decrease. However, the quality of services from each bank separately and the protection of citizens will only increase.

Problems

• insufficiently high level of bank capital;
• a large volume of non-repayable loans;
• high dependence of banks on the state of state and local budgets;
• insufficient level of development of promising banking technologies;
• high dependence of banks on large shareholders;
• insufficiently high professional level of bank employees;
• lack of current legislation for stricter control over the activities of banks, etc.

Explore availability

When choosing a bank, you should carefully study the location of branches and ATMs, online banking capabilities and correlate this with your needs.

Think about how often you have to go to a bank branch: perhaps its physical accessibility is an important criterion for you. And if you plan to frequently withdraw or deposit cash from your card, then make sure that there are ATMs of this bank in places convenient for you, not far from your home or work. This way you can top up your account and withdraw money from the card without commission.

Assess whether you are ready, for example, to travel to the bank on the other side of the city every month, because the interest rate on the loan is slightly lower there. Or is it easier for you to pay more at a bank near your home, but not travel anywhere.

Or maybe you don’t want to waste time at the bank and it’s easier for you to do everything remotely? Then check out the bank's online services. See if they are easy to use and if you can pay for the services you need on a regular basis.

Types of banks

By service sector

• international;
• national;
• regional;
• interregional.

By property type

• government;
• private.

By industries served

• diversified;
• single-industry (industrial, agricultural, construction, etc.).

By range of banking services

• universal (carry out almost all types of banking operations);
• specialized (provide one or two types of services).

By function

• Bank of issue - the Central Bank issues money and securities; commercial banks - securities.
• Mortgage – provide long-term loans secured by real estate.
• Investment – ​​provide financing and long-term lending.
• Deposit - carry out credit operations to attract temporarily free money.
• Trust - services in managing someone's property and capital.
• Clearing – implementation of non-cash payments.
• Exchange - servicing exchange operations.
• Accounting – accounting of bills, etc.
• Savings loans - attract small deposits for a certain period.
• Special – finance individual targeted, regional, state programs.

By terms of loans issued

• long-term;
• short-term.

By capital size

• large;
• average;
• small.

By organizational structure

• a single bank is a single legal entity;
• banking group – group of legal entities = parent bank + branches (legally independent, but managed by the parent bank);
• banking association - formed for the purpose of coordination and coordination of actions.

Structure of the credit and banking system

The Russian banking system is one of the most important elements of its financial system. Like the entire Russian economy, it is currently undergoing fundamental changes, affecting both its structural and functional parts. The changes are fixed by banking legislation, the development of which is carried out on the basis of foreign experience, the experience of the first years of economic reforms in Russia, and modern ideas about the essence and purpose of banking institutions.

Includes three groups of financial institutions:

• central bank
• Commercial banks
• Specialized financial institutions

At the head of the credit system is the central bank. It, as a rule, belongs to the state and performs the main functions of regulating the economy.

The Central Bank has a monopoly on the issue (issue) of credit money in cash (banknotes), provides loans to commercial banks, stores cash reserves of other credit institutions, performs settlement operations and monitors the activities of other credit institutions.

Commercial banks are credit institutions of a universal nature that carry out credit, stock, and intermediary operations, and organize payment turnover on the scale of the national economy.

Specialized financial institutions provide lending to certain areas and sectors of economic activity. They usually dominate narrow sectors of the capital market.

TSB RF

In Russia, the entire banking structure of the country is headed by the Central Bank . It is the only institution that manages the financial affairs of the state and stores all gold and foreign exchange reserves. Responsibilities include ensuring the security and stability of the ruble in relation to the currencies of other states. It also develops and strengthens the entire banking structure of the Russian Federation. They also supervise other financial organizations, issue and revoke licenses for their activities.

The Central Bank is the only institution in Russia that is allowed to issue monetary units of various denominations. The financial organization replaces old banknotes with new ones. Exercise legal control over other banks located in the general structure. Works only with financial companies that are part of the Central Bank structure. Does not interfere with the work of banks, but can take away the license previously granted to them. He can also help banks that find themselves in a difficult situation by issuing a loan to stabilize the situation, taking out loans for rehabilitation.

Development

The course of development of the banking system is influenced by a number of macroeconomic and political factors. The following can be distinguished from them:

• degree of maturity of commodity-money relations;
• social and economic order, its purpose and social orientation;
• legislative framework and acts;
• a general idea of ​​the essence and role of the bank in the economy.

The development of the banking system is influenced by the development of national international trade markets. The demand for banking services expands as production increases and the scale of exchange between commodity producers increases.

General ideas about the essence and role of the bank in the economy also have a huge impact. Social and economic order inevitably affects the nature of its activities. Political factors also affect its condition and current development. Here, first of all, the general political orientation of the state turns out to be important.

With the general progressive development of the banking industry, it can at the same time be restrained by wars that are associated with the destruction of material wealth and property. Protracted economic crises also have a negative impact on the banking system.

Legislative framework of the country. In some countries, banks are prohibited from performing certain transactions with securities and investing their capital in the capital of enterprises. In some countries, banks are not allowed to engage in insurance.

A noticeable factor determining the development of the banking system is interbank competition. The presence of a sufficiently large number of independent banks in the country and its individual regions creates a certain environment in which they are forced to compete for the client, improve the quality of service, expand services, and offer the market new products.

Development may be hampered by factors such as excessive tax pressure on banking profits, lack of sufficient resources for active banking operations, lack of qualified personnel, etc. In countries with economies in transition, it is often these factors that do not allow banks to take broader steps in their development .

Urgency or eternity?

When a bank decides whether to issue term subordinated bonds (with a specific maturity) or perpetual bonds, it is primarily guided by its current capital structure and how it may change in the medium term.

— Perpetual subordination is included in the calculation of additional capital, that is, in the standard N1.0 and N1.2 , but it is more expensive. The fixed-term subordination is taken into account as additional capital and is included only in the calculation of N1.0, explains Yulia Kolesova. — If the bank has a sufficiently large profit and, due to this, the N1.1 and N1.2 standards are high, with a good margin above the regulatory requirements, then there is no need to overpay for a perpetual instrument.

When additional capital is required, this problem can be solved with the help of a perpetual subordination and the high price is justified. For a bank that needs to increase its total capital at the moment, regulated by the N1.0 standard, it is enough to attract second-tier subordinated instruments, which have a lower cost.

Infrastructure

The banking financial system cannot function without the necessary infrastructure, which includes:

1. a deposit insurance system that prevents Russian citizens from losing their savings stored in banks. This encourages people to keep their money in bank accounts. Not only deposits are insured, but also funds placed on debit bank card accounts, although this rule does not apply to all card products of Russian banking institutions. The functions of the insurer are assigned to a government agency called the Deposit Insurance Agency (DIA);
2. independent systems for making payments between corporate and private clients of banks, as well as banking organizations themselves. The main such system is SWIFT, although due to international sanctions against Russia, the country has already developed an alternative SPFS system, which Moscow proposes to switch to the states of the Eurasian Economic Union;
3. payment systems for carrying out transactions using plastic and virtual bank cards - MasterCard, VISA, MIR, American Express, etc.;
4. audit organizations designed to conduct an independent audit of the functioning of not only commercial banks, but also the Central Bank of the Russian Federation itself, and not only verification, but also confirmation of finished financial statements;
5. legal and consulting organizations that provide assistance to banks in developing their business, representing their interests in interaction with authorities, corporate and private clients;
6. suppliers of technological and information solutions, developing and implementing, together with banks, modern settlement and processing technologies aimed at increasing the level of security of settlements and other processes;
7. educational organizations that are engaged in the training and retraining of banking personnel, conducting various seminars, trainings, advanced training courses, which also have a positive impact on the functioning of banks, since their employees must acquire new knowledge, skills and abilities in the context of updating modern technologies and introducing the latest standards of banking services .

Historical summary

If you go back and look at how everything happened in the Russian Empire, the original state system in the Russian Empire began its operation on May 31, 1860, at the time when Emperor Alexander II signed the decree on the creation of the state bank of the Russian Empire. At the same time, the first charter of a state bank was approved. The periods of activity of a state bank are divided into two periods. During the first period, the state bank was an auxiliary body

institutions of the Ministry dealing with finance. The main share of the bank's resources was absorbed by direct financing. The State Bank had a number of functions, which included conducting redemptions, office work, and supporting the nobility and peasant banks. In the second period, the activities of the state bank differed in many ways from the first period. This was characteristically noticeable because monetary policy changed, as well as the sources of funds, its financial relations, the Treasury and the Ministry of Finance. All bank operations had to have the purpose of accounting for bills, as well as other most urgent government and public interest-bearing securities, buying and selling gold and silver, receiving bills, as well as purchasing government securities for one’s personal account. Management of all ongoing operations was entrusted to 6 directors and 3 deputies, who were selected from the council of state credit institutions. The management of the bank was entrusted to the board of the bank, as well as to the manager of that bank until the beginning of the 20th century.

The State Bank was inclined to occupy a leading position among all other banks. In 1911, provisions were formulated according to which the bank opened loans to other private banks :

• private banks could use loans received from a state bank only by rediscounting bills, as well as on the basis of special accounts drawn up, as well as securities;
• loans were opened only with the approval of the bank’s board;
• the size of the loan was based on the working capital of the credit institution, based on its activities, which showed the position of the credit institution;
• bills of exchange were accepted that satisfied all the requirements of the state bank issued for 1990.

Legislative regulation

The activities of the Central Bank are regulated by the federal law “On the Central Bank of Russia” No. 86-FZ , as well as the Constitution of the Russian Federation (more precisely, Article 75). Banking activities, as well as banking infrastructure in a general sense, are regulated by the following documents:

• Civil Code of the Russian Federation;
• Federal Law “On Banks and Banking Activities” dated December 2, 1990 No. 395-1;
• Federal Law “On Deposit Insurance” No. 177-FZ;
• Federal Law “On microfinance activities and microfinance organizations” dated July 2, 2010 N 151-FZ;
• Federal Law “On Consumer Credit” No. 353-FZ;
• Federal Law “On the National Payment System” No. 161-FZ;
• Federal Law “On the Development Bank” dated May 17, 2007;
• Federal Law “On the insolvency (bankruptcy) of credit organizations” dated February 25, 1999.

Intermediary function

A commercial bank acts as an intermediary, attracting funds from some entities in the banking services market and, in the meantime, lending to others. When performing these operations, commercial banks can change the following transaction parameters:

• Terms of money capital . Thus, a bank can accept funds for a long term and issue them for a short term;
• Amounts of these capitals . Credit institutions can accumulate funds from several clients in a small volume, and provide them to one large client in a large volume;
• Financial risks.

Taking this into account, the mediating function is rather a transforming function.

Reference! The intermediary function can be performed not only by commercial banks, but also by the Central Bank. In this case, it acts as a “bank of banks.”

Don't forget about the quality of service

Try to evaluate the quality of the service. Read reviews on the Internet, ask friends who use the bank’s services if they are satisfied with the service. Carefully study the bank’s website: does it have all the necessary information, and is it easy to find answers to your questions. Call the bank's hotline and check how long you will have to wait for an answer. It wouldn’t hurt to go to a bank branch and evaluate how they work with clients, for example, you can pay a receipt or ask the manager about a service that interests you.