The composition and structure of assets
Category: Concept of the Bank and the Banking System
Active operations of the bank account for a significant and decisive part of its operations.
Under the structure of assets refers to the ratio of different quality asset balance of the bank’s balance sheet total. The quality of bank assets, determines whether the structure of its assets, the diversification of active operations, the volume of risky assets, the volume of critical and substandard assets and signs of volatility of assets.
Commercial bank assets can be divided into four categories: Cash and equivalents funds, investments in securities, loans, buildings and equipment.
However, every bank is experiencing a problem in setting and observing the rational structure of assets. In addition, the asset structure is largely determined by the prevailing national circumstances.
In European countries (France and Germany), the UK share of the most liquid asset is about 3%. This is due, firstly, different reserve requirements, central banks of individual countries and, secondly, the differences between banks in different countries in the classification of assets.
Investments in securities were as follows: the Banque de France — 16.17%, Germany — 15,5%, Italy — 23.82% UK — 7.75% -23.87% Spain, USA — 2.15% Belgium — 6,4%, Japan — 10.15%, Russia — 9%. Thus, the highest share of investments in securities from the banks of Spain and Italy. The lowest — from the banks of Belgium, Britain and Russia.
In this case, the bulk of investments in Treasury bonds are using banks: Spain (10.05%), France (9.44%), Italy (5.34%). The highest proportion of transactions with promissory notes was found in the Bank of Spain 12.78%), Russia (9%), Italy (5.87%), Belgium (4.70%). The highest investments in the eligibility and securities subsidiaries are found in banks in Germany (4.03%).
The largest proportion of assets invested in the loan business, is observed in the Bank of Japan (83.25%), Germany (78.65%), France (66.06%), Italy (62.31%), Belgium (62.95 %), Russia (47%).
The smallest amount of credit operations — in U.S. banks (19.90%), Spain (25.28%), UK (28.14%).
High proportion of loans to legal entities and households in Bank of Japan (58.25%), Germany (49.83%), Belgium (37.32%), Russia (33%). The lowest — in the UK — 4,4%, USA — 7.53%, Spain — 14.57%.
On active interbank leading bank of France (35.12%), Italy (30.63%), Germany (28.82%), Belgium (25.63%) and Japan (25%). The smallest volume of such transactions in the banks of Spain (10.71%), USA (12.37%), Russia (14%).
Proportion of buildings and equipment is the highest in the U.S. (5,68%), Japan (6.60%) and Russia (5,0% o). In other countries it is less than 1%.
Large differences in the specific bank balances of other assets attributable to differences in classification of assets, in particular the transit operations of banks.
Nevertheless, one can see the overall picture of active diversification of banks’ operations and the challenges facing the definition of a rational structure of a country. In many respects it is determined by the peculiarities of law and accounting.
For example, the low activity of banks in Spain, the United States and Russia on the interbank markets is associated with different trends. For example, in Spain there is a situation shortage of money in banks in general, and because of the required reserves (12.94% o), dilatory money from the interbank market. The situation is compounded by the fact that in this paper in the banks Spain additionally taken into account and vouchers for payment and in circulation accounted for by banks in other countries in other assets. In the U.S. the situation is largely due to a reflection fraction of the required reserves in other assets (66.12%). It also diverts funds from the bank’s interbank markets. In Russia, this situation is not so much with a high proportion of required reserves (6%), but the consequences of payment crisis of August 1995, 1998. the interbank market.
Large volume of interbank transactions from Italian banks due to accounting features of the article, including the cash through correspondent relationships.
High proportion of interbank UK banks also follows from the fact that they contain, and cash, on demand and on short notice, and placed in the bank for more than 30 days.
Large volume of interbank transactions in Belgium due to light in this section of transit operations of the bank.
With regard to investments in Treasury bonds, their high share in the Bank of Italy is associated with a reflection on this article, not just Treasury bonds, and all obligations the Italian state for less than a year in all currencies.
In Britain, by contrast, banks accounted for this article only unaccounted for British Treasury bills and discounted bills reflect on the line «Notes». In the U.S. banks under «Treasury Bonds» reflect the federal funds sold or purchased under an agreement with the subsequent purchase.
High proportion of other securities in the Bank of Italy, because their composition are included, and certificates of deposit, unlike banks in other countries.
In the article documents the right to participate in the Bank of Italy included Collecting translations. A similar procedure in UK banks. In Spain, banks in these amounts are reflected additional transit operations. In Belgium — the accepted and other values, the amounts payable and receivable. These differences and variations are explained by the specific weight of the article in the asset structure of banks in different countries.
Part of transit operations, the UK banks, Spain, USA, Belgium, reflected in other assets, which explains the high proportion of this article.
High proportion of other assets at the Bank of France is associated with the strong influence of checks in the process of collection. The low proportion of these operations from banks in Germany (0.81%) derives from the high proportion of the transfers and almost absent checking traffic.
A high proportion of investments in securities from banks in Spain and Italy reduces their ability to loan clients.
From the above we can conclude that the structure of assets is largely determined by the peculiarities of the banking law and accounting, as well as the influence of the external environment.
However, if we use a larger grouping of assets of the main types of banking activities, we can draw the following conclusions:
1. Main place of active operations of the bank took credit. Their weight ranges from 19.90 to 83.25%.
2. Second place among the banking assets hold investments in securities (from 2.15 to 23.87%).
3. In third place — cash assets (from 0.2 to 12.94%).
4. The share of other assets due to the peculiarities of accounting and includes a wide range of operations from investment in fixed assets (buildings and equipment) to various accounting operations of the bank.
Nevertheless, despite the general trends in the composition and structure of assets of Russian banks and banks in other countries, each bank should strive to create a rational structure of assets, which depends primarily on the quality of assets.
Structure of gross assets
I-Assets that do not yield income:
funds, and correspondent accounts with other banks, FORT, fixed assets, intangible assets, receivables, funds in the computations, the use of budgetary and extrabudgetary funds, funding of capital expenditure, capital costs, operating expenses, prepaid expenses, revaluation of currencies and securities diverted funds from the profit loss for the year and past years.
II. Assets, income:
long-term, medium-and short-term loans to customers, banks and households, arrears on loans and interest, factoring, leasing, part, securities issued by the warranty.
III. Total assets, gross.
The structure of the balance of net assets are reduced by the amount of regulatory, storage and transit accounts.
The structure of net assets:
I. Assets that do not yield income:
funds, and correspondent accounts with other banks, FORT, fixed assets and intangible assets at net book value, debtors in the amount of excess lenders.
II. Assets, income:
long-term, medium-and short-term loans net of provisions for losses on loans to customers, banks and individuals in rubles and foreign currency. Factoring and leasing, net of previously established provisions for impairment of value of these transactions. Securities, net of allowance for impairment of securities, bills, frozen obligations.
The ratio of net assets to total assets, gross gives an idea of the rational structure of assets, which depends primarily on the quality of assets.