Reserves of banks and their formation. Required reserves of the bank and their norm

With the advent of the Central Bank and the development of the system of financial regulation at the state level, reserves of commercial banks and credit organizations were created. At their expense, the amount of balances on the corresponding (reserve) accounts or the conditions for their replenishment are monitored. Let's consider what the required reserves of the bank represent.

General information

Bank reserves provide the availability of funds for the smooth execution of payment obligations related to the return of depositors to deposits and settlements with other financial structures. In other words, they act as a guarantee. Reserves should be kept in cash in cash as deposits in the Central Bank or in the form of securities to secure obligations.

Requirements

Today, in almost all states with market economies, the norm of mandatory reserves of the bank is introduced. The effectiveness of this instrument of financial and credit regulation is confirmed by fundamental research and world practice. In Russia, the minimum requirements also serve as a source of repayment of obligations to creditors and depositors in the event of the revocation of a license from an organization for the conduct of operations. In practice, the return of funds that make up the reserve of the Central Bank is clearly regulated. The minimum requirements are mainly used within the framework of financial and credit regulation in solving long-term problems in stabilizing money turnover and in combating inflation. This instrument acts as a constraint on the growth rates of the available mass and regulates the demand for banks' reserves. Its specific purpose is given in Regulation No. 342. In accordance with the definition given in this act, the application of this instrument ensures regulation of the overall liquidity of the banking structure of the Russian Federation. Control of the cash masses is carried out by reducing the monetary multiplier.

primary goal

In the practice of financial organizations, there is always the risk of unplanned losses. No institution is 100% insured against them. In this connection, during the functioning and in the process of risk management, each financial institution needs to ensure the formation of the bank's reserves. To guarantee its reliability, the organization must create various funds, the funds from which will be used to cover the probable losses. The order in accordance with which the formation and subsequent use of them is carried out, in most cases is established by legislative acts and the Central Bank. The amount of deductions from profit before tax is regulated by the Federal Law on Taxes. The minimum amount of banks' reserves is set by the Central Bank. Practice shows that the use of the "stock" is appropriate if there is an objective need to reduce the money supply in circulation (to suspend or control growth) in order to prevent "overheating" of the economy if for this purpose the credit facilities of financial institutions are restricted, Means (or increase of this part). It follows that the reserve of the Bank of Russia is the funds of financial organizations that accumulate as indefinite deposits, which must be excluded from any turnover.

Classification

Reserves of banks, as a whole, have one purpose - to compensate for probable expenses or losses in case of need. However, they are divided into species. Thus, a mandatory reserve is an instrument through which the overall liquidity of the system is regulated. It is used by the Central Bank to ensure control of funds by reducing the cash accumulation in commercial banks. This mechanism limits the credit capabilities of financial companies and supports a certain amount of money in circulation. Essentially, mandatory reserves are means that commercial banks must keep in the Central Bank. They act as a guarantee financial fund, ensuring reliability in the performance of obligations to their customers. Such reserves of banks are created not so much in the interests of the organization itself. They act as an instrument of state monetary policy. Being highly liquid, these assets can not be used by financial institutions to the full extent in case of unfavorable circumstances. For example, if an outflow of depositors' funds has started in the institution, the reserve can be used exclusively within the limits of the established standard.

Fund

It is presented as part of equity capital, formed by annual deductions from profit. The reserve fund is necessary to cover losses arising in the course of activities of a financial institution. It is also created to increase the share capital. The rate of deductions is determined at the general meeting of shareholders. The value can be any within the established size of the authorized capital. A financial company has the right to deduct funds to a reserve fund only when there is a profit. Its replenishment, therefore, is carried out at the expense of the increase in the net asset. The fund accumulates funds received by the financial institution in the course of its activities. Carrying out transfers from the profits to the fund, the banking organization provides for the use of a share of its assets exclusively in certain areas. As the main of them is the coverage of the loss.

Reserves of banks for probable losses on loans

Their creation is conditioned by credit risks that may arise in the course of activity. Such reserves can prevent the fluctuation of profits when writing off losses on loans. Thus, the effect on the size of capital is effected. Such reserves are formed from deductions that are attributed to expenses for each loan. These funds are used only when covering the outstanding debt on the underlying obligation. Due to these reserves, write-offs of losses on loans that are unenforceable for recovery are carried out. With a shortage of funds, the debt, recognized as unreal or hopeless, is included in the losses of the reporting period. Due to this, the taxable base of the financial institution is reduced.

Funds for depreciation of securities

Monthly on the last working day revaluation of investments in shares at market value is carried out. The latter should be understood as the weighted average price of one paper for transactions that were made during the last day on the exchange or with the help of the auction organizer. In some cases, the market price can be taken as the actual purchase price of a security for the last working day, reduced by half. If it is below the book price, the financial institution should create an allowance for impairment. Its value should not be more than 50% of this value. Formation is carried out on the last working day of the month in which the security was bought. Its write-off is carried out simultaneously with the retirement of shares. The creation of these reserves, as was said above, is carried out separately for each paper, regardless of the increase or preservation of their total value.

Specificity of the reserve for impairment

When reassessing investments, it becomes necessary to form reserves. However, the book value of securities remains unchanged. In this regard, these funds, rather, are considered not so much a reserve as they act as an adjustment to the stock price for accounting. At the end of the reporting month, credit institutions should re-evaluate previously created inventories for the depreciation of investments taking into account the market value and the number of securities.

Other types

In addition to these, there are other reserves of banks. They are grouped into a group of probable losses for the remaining assets. They include, in particular, reserves:

• Under balance sheet assets with the risk of losses.
• For a number of instruments reflected in off-balance sheet accounts.
• On urgent transactions.
• Under other losses.

Classification of losses

Under the possible losses of the financial organization, which determine the formation of reserves, it is necessary to understand the hypothetical risks in the forthcoming periods associated with the occurrence of the following circumstances:

1. Increase in the amount of expenses or liabilities compared to those previously recorded in accounting.
2. Decrease in the value of the assets of the credit company.
3. Non-fulfillment of obligations accepted by the counterparties of the financial institution for the transactions (concluded transactions) or in connection with the failure to fulfill the promises of the subjects, the proper repayment of which is provided by the servicing banking organization.

Of the above bank reserves, only the fund is considered to be the most effective. This is due to the fact that at the expense of the funds that make it, the financial institution can control its expenses. All other bank reserves are not considered to be so effective. This is because the increase in their size will not contribute to strengthening the organization's ability to withstand unfavorable circumstances.

Gold and currency reserves of the bank

They are financial assets characterized by high liquidity. Gold and foreign exchange reserves are managed by the Central Bank and the Ministry of Finance. They include:

1. Monetary gold.
2. Specialization of borrowing.
3. Reserve position in the World WF.
4. Foreign currency.

The cost of these stocks is shown at the reporting date in terms of the US dollar.

Appointment

Gold and exchange currency reserves act as a financial reserve, due to which, if necessary, payments of public debt or budget expenditures can be made. Their presence, in addition, allows the Central Bank to exercise control over the dynamics of the ruble exchange rate through interventions in foreign exchange markets. The size of this stock should largely overlap the volume of money in circulation, provide both private and sovereign payments on external debt and guarantee a 3-month import. If this amount of gold and foreign exchange reserves is reached, the Central Bank gets an opportunity to exercise effective control over the movement of the ruble and interest rates.