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Banking. Loan capital market: structure and functions (lecture notes)

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Loan capital market: structure and functions

Loan capital is money lent for a certain percentage subject to repayment.

The modern structure of the loan capital market is characterized by two main features: temporary and institutional.

On a temporary basis, they distinguish between the money market, in which loans are provided for a period of several weeks to one year, and the capital market itself, where funds are issued for longer periods: from a year to five and from five or more.

On an institutional basis, the modern loan capital market implies the presence of two main links: the credit system (a set of various financial institutions) and the securities market, which is divided into the primary market, where new issues of securities are sold and bought, the exchange (secondary) market, where previously issued securities are bought and sold, as well as the over-the-counter (street) market, where securities are sold that cannot be sold on the stock exchange.

The temporal and institutional features of the loan capital market are characteristic of all countries. At the same time, the state of the national market is judged on an institutional basis, that is, by the presence of two main tiers: the credit system and the securities market.

The functions of the loan capital market are determined by its essence and the role it plays in the system of the capitalist economy, as well as by the tasks of reproducing capitalist production relations.

There are five main functions of the loan capital market (Denis Shevchuk):

1. Maintenance of commodity circulation through credit;

2. Accumulation or collection of monetary savings of enterprises, population, state, as well as foreign clients;

3. Transformation of monetary funds directly into loan capital and its use in the form of capital investments to service the production process;

4. Servicing the state and the population as sources of capital to cover government and consumer spending;

5. Accelerating the concentration and centralization of capital, promoting the formation of powerful financial and industrial groups.

These functions of the loan capital market are aimed at maintaining the capitalist mode of production and ensuring the functioning of the economic system of state-monopoly capitalism. Reflecting the accumulation and movement of monetary capital, the loan capital market is organically connected with the movement of value in its monetary form, with the formation and use of various monetary funds in the form of credit resources and securities. Through the market of loan capital as an economic category, it is possible to measure and determine the movement, volume, direction of monetary funds used for the development of capitalist reproduction, to establish the class spectrum of the use of monetary capital, and its impact on socio-economic relations.

Author: Shevchuk D.A.

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