The Central Bank of the Russian Federation and its functions

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The main financial institution of the country is the Central Bank of the Russian Federation, Moscow. This is a special organization, the main purpose of which is the regulation of the financial and credit systems. The Central Bank of the Russian Federation (Moscow, Neglinnaya street, 12) is the link between the executive branch and all areas of the economy.

This institution was established on July 13, 1990. It is the successor to the USSR GB.

What is an institution and who owns it?

The Central Bank does not affect the activities of individuals. The main counterparties are all banks of the country, regardless of the form of ownership. It is a legal entity, has its own capital and Charter. But at the same time it is completely in Federal ownership. In other words, owned by the state.

Performed functions

The Central Bank of the Russian Federation is an organization responsible forincludes more than twenty analytical and practical functions:

• Monopoly issue (issue) of funds.
• Setting up settlement rules and monitoring their implementation.
• Development and development of the monetary policy concept.
• Development and implementation of the procedure for settlements with non-residents.

• Control of banking operations.

  

• Paying deposits to individuals in the event of bankruptcy of financial institutions that were not members of the mandatory deposit guarantee system.
• Serving budgets of all levels. In some cases - off-budget funds.
• Registration of credit institutions and partnerships, issuance, as well as suspension and revocation of licenses, control of activities.
• Registration and control of non-state pension funds.
• Keeping cash reserves of commercial banks.
• Issue and registration of securities. Reporting on the results of the issue.
• Combating the spread of insider information (obtained by criminal means) and market manipulation.
• Lending to organizations and their refinancing.
• Management and control over payment systems.
• All banking operations necessary for the normal functioning of the institution.
• Administration of gold and foreign exchange reserves.

• Regulation and control of foreign exchange activities.

  

• Operationsobtaining and servicing public debt, including obtaining a loan to cover the budget deficit.
• The procedure for reorganization (recovery) of troubled banks.
• Setting exchange rates for the corresponding banking day.
• Performing operations and transactions agreed with the International Monetary Fund.
• Forecast and development of the balance of payments.
• Banking supervision functions for credit and non-credit financial institutions, as well as banking groups, joint-stock companies and the corporate sector.
• Foreign investment statistics.
• Analysis and forecast of the state of the economy.

Regional structure

The Central Bank of the Russian Federation has offices in each of the nine federal districts. In addition, there is a developed network of branches in almost every major city.

The most significant federal representative offices are the Southern Head Office of the Central Bank of the Russian Federation, as well as the North-West and Ural Branches.

What is the refinancing rate of the Central Bank of the Russian Federation?

One of the main tasks of the main financial institution is lending to the banking system. The refinancing rate of the Central Bank of the Russian Federation is the amount of the interest rate in terms of one calendar year, which is subject to reimbursement by credit institutions for the granted loan. This value is subjected to constantadjustment depending on the situation in the country's money market, as well as on inflation and gross domestic product indicators. This is the main instrument of macroeconomic regulation in the state.

Central banks' targets for inflation

The task of the Central Bank of the country is to keep a constant balance using this indicator. Too high a value will undoubtedly stop the price jump, but at the same time slow financial growth. Conversely, too low figures will help to saturate the economy with a lot of cheap money, but at the same time inflation becomes dangerously uncontrollable, which will inevitably lead to a change in the strategic planning model.

However, the discount rate is an indicator for investors. Data can either attract or repel a potentially interested company. It is one thing when you can always count on the help of the country's banking system. And it is quite another when it is necessary to use only your own funds for investments. Risks rise accordingly.

Worldwide discount rates

Currently, the refinancing discount rate set by the Central Bank of the Russian Federation is eleven percent per annum.

This is far from the lowest in the world. Thus, the size of the discount rate up to two percent is fixed by the financial institutions of Denmark, Norway, New Zealand, Australia, Canada, Japan, Great Britain, the Eurozone and the USA.

In banksSwitzerland and Sweden, the key figure is generally negative. These innovations are associated with almost zero inflation in the countries. Export volumes have been declining catastrophically for a long time, which created a serious risk of depreciation of national currencies - the Swiss franc and the Swedish krona. It also often led to a decrease in the interests of potential investors.

A negative discount rate implies that the country's institutions pay the Central Bank for the services of keeping funds in its depositories. Developed countries are seriously considering the introduction of this innovation for deposits of individuals.

The discount rate of the Central Bank of the Russian Federation for the period of activity

The size of the refinancing rate of the Central Bank of the Russian Federation fluctuated seriously depending on the ongoing processes in the country.

Since the formation of the new state, this indicator has changed significantly, sometimes several times a week.

Until 2003, it exceeded the value of twenty percent. The refinancing rate of the Central Bank of the Russian Federation in different periods reached up to two hundred and ten percent (in 1994, the value lasted until the end of April of the following year). In general, from June 1993 to July 1996, the value exceeded one hundred percent per annum. The coordinated efforts of the government and bankers allowed the financial storm to calm down gradually. And in June 1997, the value reached a completely acceptable twenty-one percent. But a crisis broke out, and the ensuingdefault events again repeatedly strongly pushed the value up to one hundred and fifty percent. This figure was recorded on May 27, 1998. But a week later, he dropped to sixty.

From January 2004 to this day, the main indicator of the country did not exceed fifteen percent.

On June 1, 2010, a record was set by the Central Bank of the Russian Federation - the rate was only seven point seventy-five hundredths of a percent.

Emission of money

One of the most important functions implemented by the Central Bank of the Russian Federation is the issue of money - the release of funds into circulation, which increase their total mass.

The tasks of the main institution in this area are to control the amount of money in circulation, exchange unusable (dilapidated) banknotes, as well as timely change the design of banknotes to effectively counter counterfeiters.

This function of the Central Bank is difficult to overestimate, because the ruble is the only possible means of payment in the country.

Money is issued in cash and non-cash form.

The Russian currency is not backed by precious metals and has no other equivalence ratios.

Cash ruble issue

Cash paper money is banknotes in denominations of five to five thousand rubles. They have all the necessary modern protective equipment - watermarks, security thread, thin line patterns, microtext, fibers glowing in ultravioletradiation, designation of the denomination with metallic paint, relief elements, color shades that change depending on the viewing angle.

The minimum denomination of a coin issued by the Central Bank of the Russian Federation is one kopeck. The maximum is ten rubles.

They are minted at the Moscow and St. Petersburg mints from such metals and alloys as cupronickel, steel, copper, zinc, nickel, brass.

Issue of non-cash money

This form of issue is the basis of non-cash accounts. The pursued goal is to meet the necessary needs of market participants in working capital. Often the capital of the organization is not enough to perform a certain function. In some circumstances, additional money may be released to meet the financial objective. The process operates on the basis of a bank (deposit) multiplier.

This is a unique method, since the issue of electronic money, along with the Central Bank, can be carried out by banking institutions and even credit organizations. Of course, under the strict control of the supervisory authority.

It is extremely difficult to abuse the process, because such an issue is made solely for the purpose of lending to the market economy.

Bank of banks

The Central Bank of the Russian Federation performs a supervisory function over the entire banking system.

First of all, this is the issuance of licenses. And subsequently - constant control over the activity of the subjectmanagement, its liquidity. If necessary, rehabilitation is practiced by introducing a curator. Deprivation of the right to conduct foreign exchange activities or complete cancellation of a banking license is carried out in case of impossibility to work in the financial market.

The Central Bank creates a favorable environment for the functioning of credit institutions, regulates cash flows and provides loans.

Conclusion

The activity of the Central Bank of the Russian Federation is an important component of the domestic economy. It is designed to maintain the financial stability of the country, using a wide range of opportunities for this.