What is a bank in modern life

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

The answer to the question, what is a bank, will not be unambiguous. In general, it is a storehouse of money. But such a definition does not reveal the full purpose of this institution. And the terminology can be confusing. "Banquo" is a bench for monetary transactions.

General concept

The activities of such financial institutions are very diverse. They organize credit relations, the circulation of money, finance the national economy, purchase and sell various securities, insurance operations, intermediary transactions, and manage property. They can be consultants, keep statistics, organize auxiliary enterprises. Most people, if asked what a bank is, will answer: an institution or an organization.

This is a common notion. Indeed, one can speak of it as an association that eventually became small, large or medium. The development of banking activity is very important for the market. For a long time they were organs of the state. Consider what a bank is from the point of view of economics. It is an enterprise that is an economic (independent) entity, it has the rights of a legal entity. This organization canproduct, implement it, provide services, acting on the basic principles of cost accounting. Its activities are connected not so much with production as with the sphere of exchange. The bank must have a license - permission.

There is an opinion that he is a trade organization. Such associations arise due to the fact that the bank, as it were, acquires resources, sells them, functioning in the field of redistribution, and exchanges goods. Such organizations have their own inventory, sellers and storage facilities, their activities are dependent on turnover. This is where the similarity of banks with the sphere of trade ends. They sell not a product, but a special kind of product. So what is a bank? This is an organization that was created to attract funds, place them on the terms of payment, repayment and urgency.

Main purpose

Banks are intermediaries in moving funds to borrowers from lenders and to buyers from sellers. Of course, in the market other financial institutions are also involved in such transfers of money: insurance, investment funds, brokerage firms. But banks differ in two ways.

1. They are characterized by a double exchange. They can place their debt obligations (certificates, deposit certificates, deposits, etc.), and invest the funds mobilized at the same time in securities of other organizations. This is the difference between banks and dealers and brokers operating in the financial market.
2. They also assume unconditional obligations with a certain (fixed)the amount of debt to people and organizations. This happens, for example, when clients' funds are transferred to their accounts, when special certificates of deposit are issued.

Some Features

If we talk about such a concept as a Russian bank, then according to the rating of American agencies, it receives a low rating due to the level of stability. But financial and credit institutions in Russia have been developing and improving in recent years, they have recently begun to show good results in risk management, which is good.

Commercial banks differ from state banks in that their main goal is to make a profit. In accordance with the law, they operate as credit institutions, performing such transactions in the financial market as:

• storage of securities, currencies, their purchase and sale;
• provision of loans, different types, terms;
• calculations;
• work with deposits;
• issuance of guarantees and guarantees, as well as other obligations;
• trust and intermediary activities.

Let's note an important detail: according to experts, the size of a bank is not an indicator of its financial stability! The market is quite cruel, it requires constant changes.