The basic concept of a credit institution: signs, types, goals and rights

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

An integral part of the modern economy is the banking system. Its role in the development of market relations is enormous, since with the help of financial structures there is an accumulation and redistribution of cash flows of state subjects, which ultimately leads to the development and growth of the national economy. The banking system is a united community of credit institutions.

What is a credit institution?

A financial structure that has the status of an economic entity and aims to make a profit from its main activity defines the concept of a credit institution. In most cases, such institutions are legal entities whose occupation is strictly regulated by the current legislation of the state. Financial institutions must be accredited and obtain a license to conduct their activities. In other words, the concept of a credit organization is as follows - a legal entity created for the purpose of making profit, which is accumulated from the implementation of operations and transactions with business entities, legalized andregulated by the highest authority - the Central Bank of the Russian Federation.

Types of credit institutions

In our country, the banking system has a structure consisting of two levels. The first step is the Central Bank of Russia. This institution occupies a dominant position, since it is the main regulatory body of the entire financial holding of the country. The Central Bank does not carry out operations related to the provision of services to the population, but is engaged in monetary regulation of the country's budget, issue of funds, and coordination of the actions of structural divisions.

The second level of the system is occupied by credit institutions, the concept of which is more extensive, in contrast to the first echelon of power. Credit institutions are divided into two types:

• banks - their functions include a full range of financial services to economic entities and the population of the country in accordance with the licensed list;
• non-bank credit companies - carry out a narrow type of operations, also regulated by a license.

In turn, banks are divided into universal, specialized and state-supported institutions.

Non-banking structures include settlement, deposit and credit companies and organizations associated with the collection of valuables.

Banking institutions

The concept of a credit institution and a bank are identical, since a bank is one of the varieties of a financial structure. What are the features of this institution? What typestransactions has the right to make a bank?

The concept and features of a credit institution that determine the conduct of banking activities:

• a bank can only be a legal entity established in accordance with legal requirements and rules;
• this institution must be accredited and obtain a license to conduct banking operations, the type of which is indicated in the corresponding list;
• a banking organization does not have the authority to carry out trade, manufacturing, insurance and other similar activities.

As mentioned above, banks specialize in providing financial services to all economic entities of the country, including the population. The main types of such transactions include:

• opening, maintaining current accounts for both legal entities and individuals;
• attracting cash flows of the above entities in deposits and deposits;
• placement of attracted assets on behalf of the institution and at its expense;
• settlement and cash operations, collection of valuables;
• currency, factoring, leasing operations, transactions with securities and precious metals;
• issuance of bank guarantees.

Non-bank credit structures, types and differences

The concept of a non-banking credit organization is defined as a financial institution that has the right to carry out only a narrow range of banking transactions and operations in accordance with the established regulations and a valid license. The main difference isthe fact that such companies have the authority to work only with legal entities and provide the following types of services:

• attraction and placement of financial flows of legal entities;
• implementation of internal and external settlements on behalf;
• Foreign currency transactions are allowed only in cashless form;
• issuance of bank guarantees;
• collection of cash and other valuables;
• provision of advisory services.

The concept and types of non-bank credit organizations are as follows:

• settlement structures are engaged in opening and maintaining current accounts of legal entities, making settlements on their behalf, placing finance in government securities;
• deposit and credit companies carry out operations related to attracting and placing financial assets of legal entities, issuing bank guarantees, non-cash foreign exchange transactions;
• collection organizations are engaged only in the collection of cash flows, securities, settlement and payment documents.

Goals, functions of credit institutions

The main purpose of creating a financial structure, as, indeed, most of the country's economic entities, is to make a profit from activities. To achieve the final result, credit institutions perform the following functions:

• implementation of the movement of cash flows of legal entities and the population of the country through the provision of settlement and paymentservices;
• creating favorable conditions for saving, accumulating and increasing the population's money by attracting finance to deposits;
• providing the needs of legal entities, as well as individuals in financial resources through the provision of loans and loans.

Conclusion

In conclusion, let's summarize all of the above. In general, the concept of credit organizations is that their activities are aimed at the implementation of functions that ultimately lead to the development and growth of economic relations in the country and abroad, improving the welfare of the population.