Banking and its regulation

Recent changes in the world economy show an increasing dependence of states on the functioning of the financial and credit sphere. Annually, the volumes of financing the interests of business, government and consumers grow significantly, to serve these needs and there is a banking system.

What is a bank

Banks are an integral part of any economy, be it global, state or regional. Individuals, business, government and other financial participants are connected by the banking sector.

The Bank is a financial and credit institution that performs operations with money, securities, metals and contractual obligations, the subject of which are cash or other financial instruments, for example, the assignment agreement.

There are, in the broadest sense, 2 types of banks :

• The central bank is a state institution that is separated from other authorities, deals with financial and monetary policy issues, supervises financial institutions, issues money and government securities, and lends to commercial banks. The banking sector is under the supervision of the Central Bank.
• A commercial bank is a private or public institution created for the purpose of extracting profits from the implementation of banking operations.

Requirements for banks

The legal basis for the establishment of the bank is the Law on Banking Activities, which provides the necessary requirements for obtaining a license:

• The amount of equity is 18,000,000;
• list of documents;
• "Clean" business and tax history of the founders;
• Availability of a risk and capital management system and an internal audit system.

It should be noted that failure to comply with the requirements of the law entails a motivated refusal of the Central Bank to issue a license. Also, if a legal entity carries out banking operations without the availability of a relevant license, it may be deprived of all profits received as a result of such activities and is forced to pay a double penalty from its size in favor of the Federal Budget.

The banking sector is also under the supervision of reputable rating agencies such as Fitch Rating, S & P, Moody's, etc. Their assessment determines the reliability and stability of the credit institution for several years ahead, high ratings increase the attractiveness of the bank to other financial institutions among investors.

Banking services

The totality of banking operations is very extensive, most banks make a priority on only a part of them, so the classification according to the type of activity is valid:

• Universal banks. They are engaged in almost all types of banking activities, for example, Sberbank, VTB24.
• Investment banks. Engaged in investment and speculation in financial markets, for example, BCS, FINNAM.
• Branch banks. They mainly deal with lending and business services, for example, Rosselkhozbank, Promstroibank.
• Specialized banks. They fulfill a narrow list of bank obligations or have a non-standard service system, for example, Gazprombank, Tinkoff.

The banking sector includes the following types of banking operations :

• Crediting.
• Depository storage.
• Transaction support.
• Brokerage services.
• Investments.
• Currency exchange.
• Placement of precious metals.
• Leasing operations.
• Trust management of financial assets.

Legislative regulation of banking activities: opportunities and limitations

The financial and banking sphere is under legislative and financial regulation. From the legal point of view, banks are subject to a set of legislative acts regulating banking activities. In Russia, the main one is the Federal Law "On Banking", and, for example, the relationship between the borrower and the bank is governed by the provisions of the Civil Code.

With regard to financial regulation, it is the supervision of commercial banks by the Central Bank. It issues and revokes licenses, checks the financial position of the bank, in particular, monitors the adequacy of the liquidity level, the transparency of transactions, the level of reserve funds on the balance sheet, establishes accounting standards, etc.

Russian law provides for the insurance of individuals' deposits in case the license is revoked by the bank, the amount is up to 1 400 000 rubles, while the percentage of the deposit accumulated at the time of revocation of the license also falls under insurance. For legal entities, this provision of the law is invalid.