Borrowed funds of commercial banks
Category: Concept of the Bank and the Banking System
In the total amount of banking resources attracted resources occupy the dominant position. Their share of different banks varies between 75% and above. With the development of market relations structure of borrowed resources has undergone significant changes due to the emergence of new non-traditional banking system to the old ways of the accumulation of temporary free funds of individuals and entities.
In the world of banking practice, all the involved resources in the way of their accumulation are grouped as follows:
— Deposits;
— Non-deposit borrowings.
The main part of attracted funds of commercial banks are deposits, ie funds deposited in bank customers — both individuals and legal persons, ie venture, partnership, joint stock companies on certain accounts, and used by them in accordance with the regime of invoices and banking legislation.
Non-deposit borrowings — it means that the bank receives in the form of loans or by selling its own debt in the money market. Non-deposit sources of bank resources differ from deposits that they have, firstly, nonpersonal nature, ie not associated with a particular customer of the bank, and sold on the market on a competitive basis and, secondly, an initiative to attract these funds belongs to the bank.
Non-deposit of attracted resources used primarily large banks. Acquired by non-deposit funds with large amounts, and they are considered the wholesale nature of the operations.
Modern banking practices has a great diversity of deposits deposits and deposit accounts. This is due to the desire of banks in a competitive market segmented best meet the demands of different groups of customers for banking services and to attract their savings and free cash capital to the bank accounts. The economic content of deposits can be divided into groups:
— call deposit, including balances in settlement and current accounts;
— deposit with fixed period;
— Savings;
— Securities.
Deposits can be categorized as on other grounds: by age, by type of depositors, the conditions of deposit and withdrawal of funds, pay interest, the possibility of obtaining benefits for active operations of the bank, etc.
The main source of funding for active operations of commercial banks are leveraging resources, which requires that commercial banks conduct active deposit policy and expansion of deposit operations. In organizing the deposit transactions, commercial banks must comply with the liquidity balance and take into account the following requirements:
— Deposit resources must be coordinated through the term and amount financed with active operations, which is especially important in an unstable economy and high inflation;
— Deposit operations should contribute to maximizing bank profits or to create conditions for a profit in the future;
— In the organization of deposit operations special attention should be given to raising funds to time deposits and savings deposits with a fixed term;
— To expand the types of deposit transactions, provide additional services or benefits in order to increase the number of depositors.