The main functions commercial banks

We have to consider the major functions and operations of commercial banks.

The most valid from both an economic and from a legal point of view of the definition given in the Bank of the RF Law “On Banks and Banking Activity”. The law defines a commercial bank as a credit institution, which has the exclusive right to exercise together in order to profit the following banking operations: to attract monetary funds of natural persons and legal entities, to place these funds on its behalf and at his own expense on condition of repayment, maturity, interest payment; open and maintain bank accounts of individuals and entities. Perform banking transactions can only be a legal person having a license (permission) of the Central Bank of Russia. The banks are forbidden to engage in production, trade and insurance.


This definition allows you to emphasize the basic principles of commercial banks:

• work within the formed Bank of the resource base, which is based on borrowed money from clients;
• full economic independence and responsibility (including property) or for the results of its activities;
• relationships with clients on a contractual, market-based;
• regulation of banking activities should be mainly indirect (economic) means.

The main purpose of the bank as a commercial enterprise is profit. The main feature of the bank as a place of business is that for profit bank invests in profitable but risky operations funds from clients, which he must return them. In other words, it buys on the market cash customers on terms of repayment, maturity, and for a fee (in the form of interest) and sells them on the market on his own behalf at a higher price. At the same location (for sale) credit bank must be on the same principles of repayment, maturity, payment, and that involvement, whether in which financial and nonfinancial assets, he puts them. Therefore, it must place funds in loans, deposits, securities, precious metals or property, ensuring repayment of these funds. The consequence is a relatively high liquidity of bank aktivov1 compared to other commercial enterprises.

The main function of commercial banks is a function of financial intermediation, which consists in the accumulation of temporary free funds of some economic agents (people, companies, etc.) and redistribute them to other economic agents in need of additional funding. As a financial intermediary, the bank provides savings and savings play in loans and investments, as well as inter-sectoral, interregional and cross-country capital flows, allowing them to better productivity and pro use. The most important aspect of the performance of functions of financial intermediation by banks is to mediate in the implementation of cashless payments and accounts of economic agents.

It is through the lending institutions – banks – credit functions are implemented as an abstract economic categories: redistribution, emission, regulating, control.

The most detailed presentation on the functions of banks in the modern market economy theory of financial intermediaries makes eration, widely spread in 70s of XX century. The main reason for the existence of financial intermediaries, this theory considers information asymmetries, and the banks called “information processors.” In the current boom conditions of the information is constantly increasing costs of finding, collecting and analyzing information, the risk that important investment decisions made based on insufficient, outdated or distorted information. In the context of financial globalization and the massive flow of information appropriate to transfer the functions of collecting, processing and analysis of data banks. As financial intermediaries, banks are rewarded for making qualified investment decisions, risks associated with them, as well as information provision business.

The concept of “financial intermediary” – broader than the term “bank”, because there are different types of financial intermediaries. By way of formation of the resource base of financial intermediaries are divided into non-deposit institutions and deposit. Banks are a group of depository institutions, which is characterized by a double exchange of debt. Banks are attracted resources in exchange for their own debt obligations, such as promissory notes and the proceeds invested in its own name in bonds of other economic agents, such as bonds of Gazprom.
Banks – the only financial intermediaries, which not only guarantee a full refund of the debt to clients – individuals and legal entities, but also a fixed rate of return in the form of contractual interest on deposits (credits). In this case all the risks of investing money for clients and the associated loss the bank takes over, dividing among its shareholders.

The implementation of the basic economic function – the function of financial intermediation – is carried out taking into account that the bank at the same time is a commercial venture, the main purpose of which is profit. In this incarnation of his bank acts as a seller of financial products and services, competing with other credit institutions operating in financial markets.
The interests of the bank’s business may be in conflict with its macro-economic functions, such as house payments, resulting in the need for constant supervision of the bank’s management and its activities in the public interest. Control, supervision and regulation of commercial banks by the Bank of Russia, which imposes certain features of the functioning of the bank as a commercial enterprise.

Banks and other financial intermediaries operating in different financial markets and make the credit system of the country.
The credit system is a set of economic relations on the accumulation and redistribution of temporarily free money resources, forms, methods and instruments of credit, credit institutions and credit markets.

The core of the credit system of the Russian Federation is a two-tier banking system consisting of a central bank, credit bank and nonbank institutions such. In Russia there are three types of non-bank credit institutions, which can carry out certain banking operations, which establishes a valid combination of the Central Bank. This – the organization of collection, payment and deposit and loan zitno non-bank credit organizations (NGOs). At present, banks in Russia in 1189 (not including branches and subsidiaries) and 46 NGOs.
In addition to the organizations that form the banking system, there are structures that are the institutions of the credit system, but not in the bank. They’re called credit-specialized financial institutions (SKFI). These include investment companies and funds, pension funds, leasing and factoring companies and other commercial entities operating in the financial markets, but do not belong to a group of depository financial institutions.

Central Bank – is the issuing bank that performs specific functions in a market economy. Making a profit is not its purpose, that is, it’s not a commercial bank. The main objectives of this activity is to maintain stability of the exchange rate and purchasing power, strengthening the banking system, to ensure the smooth functioning of settlements and payments. CBR has the exclusive right to issue currency and regulate currency circulation, is the banking regulation and supervision of currency regulation and currency control, is involved in developing and implementing state monetary policy.

Regulation of commercial banks by the Bank of Russia are both direct administrative and indirect economic means. The former is the licensing of banking activities, establishing regulations governing the “limits and quotas, rules of conducting banking transactions, forms and deadlines for reporting. The latter include methods for regulating the supply and demand of funds in financial markets: the establishment of the official discount rate of Central Bank reserve requirement rules, the refinancing of commercial banks, the Bank of Russia on the open market.

The basic principle of improving the system of banking regulation and banking supervision is the introduction of internationally recognized norms of international experience and taking into account the characteristics of the organization and functioning of the Russian banking market.