Operations of commercial banks

In the activities of banks are the following types of operations: passive, active and commissions, including brokering.

Using passive banks accumulate operations necessary for its functioning money - their own, borrowed and issued. Source of equity are: the contributions of founders (long-term loan); proceeds from the sale of stocks and bonds; deductions from current profits to the reserve fund; retained earnings. Borrowed funds are formed and issued by banks at the expense of customer deposits on current, term and savings accounts, as well as a result of the issuance of credit money. An important role in raising funds play interbank loans, discounting and rediscounting of bills.
Own funds make up a small part of the funds held by the Bank. Usually large banks share of equity does not exceed 10%, and the larger the bank, the less the share of its own capital in comparison with borrowed.
Active operations are directed to the use of a monetary fund for profit. They are divided into credit and investment. In turn, the credit operations are classified according to:

    grounds of urgency - on loan demand (on-call), short-term (up to 1 year), medium-term (1 to 5 years), long-term (over 5 years);
    The nature of security - on accounting bills, loans secured by promissory notes (promissory notes), the security of goods and trade documents (AOS), real estate (mortgage), securities (equity and unsecured (blank)).
Depending on the method of repayment of the loan is isolated with bullet repayment and returning in installments. Interest is payable immediately upon issuance of the loan in installments on the attraction of the entire term or at maturity. Along with the loans with fixed interest rates, have developed medium- and long-term loans with floating interest rates. Loans are classified by type of borrower: loans to entrepreneurs, state, public, stock exchange brokers, banks.
Brokering, closely intertwined with the credit, has created a complex form of banking, factoring; In addition, a significant development was leasing.
Factoring - resale rights to debt collection; commercial operations by proxy; Services related to getting money for the sale on credit.
Leasing - a form of long-term lease. Banking operations are carried out with the bills in the following settings: discounting commercial bank when the bank pays the holder of a bill amount marked on the bill, minus the interest on the current discount rate; loans secured by promissory notes, acceptance, aval promissory notes and bills of exchange commission operations.
Commercial credit is closely related to bank loans and is transformed into the latter through accounting and security of bills, thereby arises on the basis of indirect commercial bank loan. A similar mutual economic credit is closely related to bank loans and is transformed into the latter through operations with the bills. However, because of this fact does not imply that the restoration and development of commercial loans and promissory note loans clearance in cash entails a sharp increase in bad debt, the rise in goods not covered by the money supply. Transformation of commercial and mutual economic loans in bank credit is a transformation of one form into another loan, which in itself does not create inflationary pressures, as registration and pledge of commercial bills in the bank loan are not new capital. In addition, a bill may serve several trading and lending transactions before it is taken into account in the bank.