Bank (from Italian. Banco - bench, bench, table, which laid out the money-changers coins) - financial institution, which produces various types of operations with money and securities and to provide financial services to the government, businesses and individuals.
Bank - a legal entity of any form of property that:
- Created for profit,
- Has the right to conduct banking operations,
- Has the exclusive right to raise funds businesses and individuals with a view to their subsequent placement on its behalf; as well as to open and maintain bank accounts of legal entities and individuals,
- Acts on the basis of a special permit (license) authorized state bodies (in Russia - the Bank of Russia)
- Has no right to engage in manufacturing, retail, insurance activities.
The history of banking
Moneylenders provide money loaned at interest, appeared in ancient times. More Banking existed in Babylonia in the VIII century BC. e. Babylonian merchants was even known bank card, called the Hood (hudu) and had treatment on a par with gold.
In ancient Greece trapezity (table) took deposited contributions in order to make payments due to investors. They were given to the storage is also valuable documents, contracts, disputed amounts. Greek bankers gave entrusted to them capital loan secured by movable, slaves, houses and land. Serious competitors with the private bankers were the ancient Greek temples, which gave out of their temple treasures loaned large sums, both private individuals and public enterprises. Inviolability of the temple treasuries enables them to bring significant contributions from individuals, rulers and cities. Do let the churches in turn deposits entrusted to them and pay them whether any interest - is unknown.
In ancient Rome, the bankers called mensariyami (mensarii) and Argentario (argentarii). Mensarii, or mensalarii - is a literal translation of the Greek word. Argentario take deposits, lend, through them it was possible to transfer money to another city.
In the Middle Ages because of the diversity of local monetary systems was developed fishery changed. Then they started to give the deposit of money capital and entrusted the making of payments. Stalls changed located in the marketplaces where the table (banco), covered with green baize, they plied their trade. Moneychangers in Italy gradually became known as bankers, bancherii (from banco - table, counter). Make payments by cheating in the books of account of some bankers at the expense of others turned out to be the best way of payment, eliminating the inconvenience of carriage evaluation soschityvaniya various coins. Banking primarily engaged Italians and Jews.
However, the Popes have repeatedly threatened severe penalties to persons giving loans at interest, and relieve the debtor of its obligations to creditors. In 1179, at the Third Council of the Lateran, Pope Alexander III declared that the perpetrators of charging interest should be denied communion and Christian burial. Kings, driven by fear of papal threats and trying to usurp the wealth of bankers, expelled them out of their possessions. For example, in France the Italian bankers were expelled Saint Louis and Philip the Fair (1291), and from England Italians bankers were driven by Henry III (1240), but then were re-admitted to the country in 1250 at the urging of Pope needs money and wish to gain the bankers. Sometimes persecuted bankers bought their right to return and their pursuit for the rulers became profitable source of income.
The activity of individual bankers competed so-called montes pietatis (ital. Monte di Pieta, French. Montes de piete) - special banks established in different Italian cities to provide cheap small loans to the needy. They charge interest on loans only to cover their costs and their capital was formed from private or public donations. The first such institution originated in Orvieto (1463), the second - in Perugia (1467).
Senate of the Venetian Republic in 1584 issued a decree on the establishment of a public bank called Vanco della Piaza de Rialto. Banking has been declared a monopoly of the republic and individuals forbidden them to do, but soon the ban was lifted.
In Genoa lenders who gave credit to the Government of the Republic of Genoa in connection with the war with Algeria and Tunisia refers to 1148, amounted to a partnership, which the republic gave the collection of certain taxes for interest and repayment of the loan. Then, this process was repeated for the following loans; so there was a lot of associations, called compere, or scritte, the capital of which was composed of units (luogo). In 1250 all these associations were combined into one compere de capitolo. Soon, however, for the conclusion of new loans opened new partnership. In 1407 all of the partnership were again merged into one, called Compere di San Giorgio in honor of St. George, the patron saint of the city. He was allowed to accept private contributions, and it lasted until 1816.
In 1609, the City of Amsterdam was founded Bank of Amsterdam. He established the continued countable units representing the value of a certain amount of silver is equal to 211.91 aces pure silver and is called "bank florin" - the bank took in deposits various coins, but the score was conducted only in the banking florins. This bank lasted until 1795.
Englishman William Peterson, on the basis of carefully concealed from all the fact that Bank of Amsterdam was in cash only about a quarter of all deposits entrusted to him, came to the conclusion that does not require full coverage specie of all obligations issued by the bank. He proposed a project of the Bank of England, the main capital of which would be placed in the public interest securities as collateral its lending operations. In 1694, the British government, being in financial difficulty, to adopt the draft. The Bank of England was established as a joint stock company.
The supreme governing body of the bank is meeting of shareholders (participants). He accountable Board of Directors and the Audit Commission. The Board of Directors of the Bank:
- Determines the general direction of the bank,
- Considering plans to the bank's activities,
- Opening and closing of bank branches.
Executive management body directly governing the activities of the bank is the bank's board, which usually consists of representatives of the largest shareholders (participants) of the bank.
types of banks
- Central banks, carrying out state regulation of banking and monetary emission.
- Commercial banks engaged in business banking;
- Universal banks, provides a full range of banking operations;
- Investment bank specializing in investments, mostly in securities;
- Savings banks specialize in retail funds;
- "Retail bank" ("Retail Bank") - designed to work with individuals.
- "Captive bank" ("pocket banks") - a subsidiary bank or a large industrial bank structure, the main purpose of which is to serve the operations of the parent company.
- Historically, the first function of banks were safe storage of customers' money.
- Since the bank has a lot of customers who keep their money in it, the bank becomes able to transfer money from one of them to another by changing the entries in bank accounts (non-cash payments). Cashless payments are possible between customers of different banks thanks to correspondent accounts.
- Banks lend. In this case, actually creates additional money supply.
The essential features of banking activities (distinguishing it from the production, trade, etc..):
- The dominance of resource banks attracted and borrowed funds, entailing greater responsibility to creditors and depositors.
- Extreme mobility and volatility parameters of the financial markets caused not only economic, but also political, social and other reasons.
- The need for continuous and simultaneous work with clients from different spheres of industry and economy, have conflicting interests and objectives.
- The intangible nature of banking products (services) and the need to participate in almost all branches of the bank in the production of each such product.
Resources and assets of commercial banks
As already mentioned, the main business of a commercial bank is to attract free funds of legal entities and individuals and placing them on his behalf under the terms of repayment, urgency and payment. Thus, the resources of a commercial bank - an essential condition for carrying out banking operations.
- Shareholders' equity (a non-refundable in nature) - the main means of protection, allowing depositors and creditors receive compensation losses in case of loss of liquidity of the bank:
- Share capital,
- Funds formed due to the profit of previous years,
- Seigniorage (the positive difference between the price of the bank's shares and their par value).
- Deposits from customers - businesses and individuals,
- Inter-bank loans
- Bonds and notes of the bank.
Assets of commercial banks - are objects of the balance sheet reflecting the location and use of resources of the bank. Assets are grouped:
- For other purposes,
- According to the degree of risk,
- At maturity,
- On the subjects.
By appointment assets are divided into:
- Cash on hand,
- Precious metals and stones,
- Correspondent accounts at the central bank and other banks,
- Funds paid into the fund of obligatory reserves of the central bank.
Placed assets (operating; profitable; current; risky assets):
- Loans to businesses and individuals,
- Interbank loans issued,
- Short-term investments in securities.
- Shares acquired for investment,
- Funds made to the charter capital of legal entities
- Contributions to subsidiaries.
Capitalizing assets (non-current), that is the property of the bank.
Other assets (receivables, transit accounts, and so on. N.)
The bank's income
It is believed that the main source of income of the bank is the income derived from the difference between the interest on bank deposits (deposits) and interest on loans.
Income of the bank:
- Interest received on loans
- Interest earned on deposits,
- Interest received from securities transactions.
- Income from foreign exchange transactions,
- Non-interest income from operations with securities
- Commission for services rendered (settlement operations, renting safe deposit boxes, bank guarantees and others.)
- Income received from equity participation in the activities of legal entities
- Other non-interest income.
Less is known about senorazhnom income, which for some private banks, for example, a group of banks of the Federal Reserve or the Bank of England, is much greater than any other form of income.
Every business has both revenues and costs, banks are no exception. The bank's costs can be divided into obligations to depositors interest, taxes, costs of current activities and development expenses for the payment of bonuses and dividends, as well as the costs of establishing reserves for possible losses.
Use of the needs of the bank depositors' money can be viewed as taking a bank loan for these investors. The systematic use of such credit leads to an increase in domestic debt of the bank, and can lead to a default of the credit institution.
Banking operations are divided into passive and active. Called passive operations by which banks make money capital resources, active - operations by which they use these resources for profit.
Banking operations are:
- Raising funds from individuals and legal entities into deposits (demand deposits and fixed period);
- Placement of raised funds on their behalf and at his own expense;
- Opening and maintaining bank accounts of individuals and legal entities;
- Implementation of settlements on behalf of individuals and legal entities, including correspondent banks, on their bank accounts;
- Collection of cash, bills, payment and settlement documents and cash services to natural and legal persons;
- Buying and selling foreign currency in cash and non-cash form;
- Attract deposits and placement of precious metals;
- Issuance of bank guarantees;
- Make money transfers on behalf of individuals without opening bank accounts (except for postal orders).
A credit institution, other than those listed, shall be entitled to the following:
- Issuance of guarantees for third parties providing the fulfillment of obligations in cash;
- The acquisition of the right to claim from a third party fulfillment of obligations in cash;
- Trust management of cash and other property under contract with individuals and legal entities;
- Operations with precious metals and precious stones in accordance with the legislation of the Russian Federation;
- Leasing of natural and legal persons of special facilities or are they safe for storing documents and valuables;
- Leasing operations;
- Consulting and information services.
Banks issuing loans can create money. The process of money creation is called an extension of credit or credit animation (see article Money multiplier).
All employees of the credit institution are required to maintain confidentiality of transactions, accounts and deposits of its clients and correspondents, as well as other information set by the credit institution, if it does not conflict with federal law.
10 largest banks in terms of consolidated assets
Data on the balance sheet as of March 3, 2010 (billion dollars. USA).
1. Royal Bank of Scotland (UK) 3483
2. Deutsche Bank (Germany) 3068
3. Barclays (UK) 2971
4. BNP Paribas (France) 2891
5. Credit Agricole (France) 2303
6. UBS (Switzerland) 1881
7. JPMorgan Chase (USA) 1746
8. Societe Generale (France) 1574
9. The Bank of Tokyo-Mitsubishi UFJ (Japan) 1494
10. Bank of America (USA) 1471