2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
The topic touched upon, in principle, cannot be presented on one page of printed text. Therefore, we will schematically and fragmentarily show a joint-stock commercial bank with foreign investments. Do banks always develop or do they often degrade (hidden behind bright advertising booklets)? Is the fate of the sold institution a private affair only of the buyer? Is the existing supervision of the Central Bank over the activities of the top management of a particular commercial bank sufficient?
Brief coverage of the macroeconomic role
The global economy is dominated by two-tier banking systems led by central state banks. Their first level consists of commercial banks - multifunctional agents of the state economy. Under the leadership and in cooperation with the Central Bank of their country, the activities of commercial banks are carried out. Money circulation is made (cash and non-cash).
An important economic function of commercial banks is lending to businesses and households. They, under the control of the Central Bank of their country, carry out the circulation of currency. In other words, commercialbanks are the "workhorses" of the financial system, because they provide most of the entire cash and settlement services of the economy, servicing numerous accounts of their clients.
"Bad" foreign management. His strategy
The joint-stock form of organization of commercial banks often involves the purchase of a controlling stake by large foreign banking concerns. They come to our markets because of the high discount rate - the main reference point for "cheap" and "expensive" money. Our money is super expensive.
Our commercial banks are a real Klondike for making profits on loans. Suppose commercial bank A, which has a regional network of 500 branches, has become a subsidiary of a foreign banking group. How to consider possible threats to the domestic banking system? When making a sale, it is important to lay down standards for adequate management of the purchased property complex.
It's bad when greed exceeds talent
The bank is a fragile structure, and it should develop with adequate management. For some reason, the Central Banks have let commercial planning take its course. This is a very important point. Inadequately planning commercial banks are a threat to the integrity of the banking system. Here, all the tricks are good: for example, the high cost of rent. At the same time, the foreign manager gets everything he needs - short-term profit. But foreign managers do not think about the integrity of our banking system, their area of responsibility coincides with the term of the contract. This, by the way,international problem.
Do not forget that commercial banks are large employers that provide income for hundreds of thousands of families. But the employees of the branch of bank "A" are unemployed, and the "daughter" is weakening, losing another "workhorse" among its branches. And in our bank "A" according to the results of the quarter, they cut 20 such branches. For three years of such work, only half of the branches will remain with good profitability. Where is the Central Bank? He's on the sidelines.
Indicators of professional management incompetence
Excessive focus of management on making a profit for its foreign boss should not objectively reduce the attractiveness of the bank's tariffs. The principle of non-deterioration of tariffs can be fully stipulated when selling an organization. After all, domestic commercial banks are a structure that should not degrade its quality from the very beginning.
The Central Bank and the state should be interested in the real reason why the bank's deposits suddenly began to resemble current accounts in their interest, and loans became objectively uncompetitive. The state should develop a scale of personal responsibility of top management for the deterioration in the quality of bank rates - the basis for its further development and a sign of excessive "squeezing" of financial resources from the bank, violating the harmony of its development.
If the leadership has led to an objective deterioration in the state of Bank A, it would be logical for the Central Bank to havereal leverage to remedy the situation.
Finishing the article, I would like to note that commercial banks are institutions that daily and steadily work to ensure that the financial system of the state lives and develops.
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