The banking system is a collection of national and commercial banks, as well as non-bank credit institutions. Thus, in addition to the Central, commercial and state banks, it also includes NPOs.
Classification of types of banking systems according to the degree of development
According to this criterion, there are three types of systems: administrative-command, market and transitional period.
Administrative systems characterized by:
- state ownership of banking institutions;
- the monopoly of the state to open new credit institutions;
- the presence of only one level;
- the formation of the interest rate by the administrative method;
- control over all credit institutions by the government;
- concentration of emission and credit functions in the Central Bank;
- conducting monetary policy by administrative methods.
A similar system was characteristic of the Soviet Union. At present, the PRC has followed its path, the banking system of which is also an administrative one.
Market type system characteristic mainly of developed countries. Among its distinctive features are the following:
- the presence of predominantly two levels: the first of them is the main bank of the country; on the second - credit institutions;
- a wide network of infrastructure institutions: rating agencies, credit bureaus, collection organizations;
- conducting monetary policy primarily by market methods;
- lack of state monopoly in the banking sector;
- formation of the interest rate on loans on a market basis;
- high level of competition;
- separation of credit and issuance functions between the Central Bank and credit institutions.
Some scientists also distinguish system of transitional level of development... It strives to move to a market type, but still retains some signs of a command-and-control system. According to some experts, the banking sector of our country is of a transitional type. This is due to the weak level of competition between credit institutions. Thus, more than 50% of assets are concentrated in banks with state participation.
Structural classification of systems
Banking systems can be classified according to structural features. According to this criterion, they are divided into:
- single-level;
- two-level.
One-tier systems are inherent in countries with totalitarian regimes. All operations are concentrated on one level, at which the Central Bank and credit institutions with the participation of the state (if any) are located.
The Central Bank is located at the first level of the two-tier system. He is responsible for the performance of the function of issuing money, that is, producing their release into circulation. At the second level, the banking system includes credit institutions. According to the scope of operations performed, commercial banks are divided into versatile and segmented. The first perform a wide range of operations. Their main advantage lies in the diversification of their activities, which allows them to reduce risks. Segmented institutions specialize in performing a narrow range of operations. This allows them to provide higher quality services. However, the activities of such institutions are subject to greater risk.
Some economists also distinguish three-tier systems. The banking system of the EU countries is a typical example. The first link is the European Central Bank, the second is the national banks of the EU member states (for example, the Central Bank of Austria), and the role of the third link is played by commercial banks.
Purposes and functions of the banking system: basic characteristics
To understand what a banking system is, one should study its goals and functions. The key goal of the banking sector of any state is to provide loans to the economy represented by the following entities: the state; business; population.
The main functions of the banking system include:
- ensuring the economic development of the national economy through the provision of credit funds and regulation of an uninterrupted settlement system;
- intermediation between persons who have money in abundance and subjects in need of them, which leads to cost savings and an increase in the efficiency of the functioning of resources in the economy;
- accumulation of funds and their mobilization;
These functions determine how the banking system works. The degree of their elaboration depends on the level of development of the banking system of a particular state. In Russia, its purpose and functions are not fulfilled in full. This is due to the weak level of development of lending for both businesses and households. In particular, high interest rates on loans turn them into an ineffective way of developing the economy.
In addition, commercial banks are reluctant to issue long-term funds to enterprises that represent the real sector of the economy. The reason for this is the absence of “long” money among their resources and the high level of risk of carrying out these operations.
Features of banking sector regulation
Currently, no one doubts the need to regulate the credit sector. However, this was not always the case. Until the Great Depression of 1929, which first hit the United States and then many other developed countries, government interference in the functioning of the economy was considered harmful. During this period, dominated the concept of monetarists.
However, the crisis showed the fallacy of this theory at that time. And already from the 30s of the 20th century. more and more attention is paid to strengthening the regulation of the banking system and the creation of specialized bodies. Thus, the central banks of developed countries are beginning to pay more attention to the conduct of monetary regulation.
The main institution that regulates the banking sector of any state is the Central Bank. It is also the first link in a two-tier system. Among the main possible goals of the activities of central banks, the following stand out:
- ensuring the stability of the credit sector;
- lower volatility of the national currency;
- ensuring the smooth functioning of the payment processing system, etc.
These functions are largely achieved thanks to the Central Bank's balanced monetary policy. In each state, the Central Bank independently chooses one or another goal, depending on the current economic situation. In particular, its goals may be: reducing inflation, ensuring balanced growth in welfare, reducing the unemployment rate, strengthening the country's currency ...
It is customary to refer to the main international regulatory body, first of all, the Basel Committee, which is located in Switzerland, in the city of Basel. Currently, the so-called Basel III standards have come into force. They regulate and limit the risks of banking activities, in particular the risks of transactions related to derivatives. It was the latter that served as the main reason for the latest global financial and economic crisis that hit the developed countries in 2008.
The standards of the latest Basel Agreement are being introduced in Russian banks. In particular, guided by these international requirements, the Central Bank of the Russian Federation has been applying new regulatory restrictions for banks since 2016. So, the minimum admissible level of capital adequacy for banks was changed - it was lowered from 10% to 8%.
Features and problems of the banking system of the Russian Federation
The banking system of the Russian Federation is a two-tier one and belongs to the market type. Although some economists are of the opinion that it is still in transition. The mega-regulator of financial markets is the Central Bank of the Russian Federation. It means that he controls not only the country's banking system, but the entire financial sector as a whole.
The Central Bank pursues an independent monetary policy. Although formally he is accountable to the State Duma, he determines the goal of monetary policy independently. It is currently inflation targeting. This means that the main goal of the Bank of Russia is to reduce inflation.
So, the target is to reduce it to 4% already in 2017.
Let's note the main problems of the Russian banking system at the present stage of its development:
- High level of monopolization, as a result of which the overwhelming majority of assets are concentrated in the four largest banks with state participation.
- Low level of banking concentration... In particular, most of the credit institutions are concentrated in the Central District, mostly in Moscow. At the same time, the banking presence in the Chechen Republic, Dagestan, remote corners of the North continues to remain insignificant.
- A small number of regional banks... At the same time, it is this group of banks that ensures the development of regions, in particular small business.
- The focus of monetary policy on lowering inflation... This ignores the need to ensure sustainable economic growth. Thus, it is impossible to simultaneously achieve a reduction in inflation and a sustainable level of economic development.
- Ineffective use of attracted banking system of investment funds.
- Instability of the Russian banking system... This is manifested, in particular, in a large number of general licenses revoked from commercial banks, which negatively affects the level of public confidence in credit institutions.
The current political and economic situation did not contribute to the development of the country's banking system. Domestic banks were “cut off” from the world community. This was manifested, first of all, in the fact that, due to the sanctions, Western banks stopped providing cheap loans to Russian credit institutions. Therefore, the latter were forced to resort to more expensive refinancing in the domestic market.
Interesting statistics: TOP-10 largest banks in the Russian Federation by assets
For comparison: the key rate in the EU, which directly affects interest rates in the economy, is 0%. And in Russia the level of this rate is currently 10%. This explains the high interest rates. They significantly hinder the economic development of the country.
Thus, we have considered what the banking system is shortly. The banking sector is the "circulatory system" of the economy of any country. Any upset will inevitably lead to economic problems.
