Banking. Bank's own capital (SC), its composition, procedure for formation and regulation (the most important)

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Banking. Bank's own capital (SC), its composition, procedure for formation and regulation (the most important)

Lecture notes, cheat sheets

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Topic 28

IC - a set of authorized, reserve and other funds of the bank, formed at the expense of the owners and profits, insurance reserves for operations and retained earnings. In a market economy, the UK plays an important role: - it serves as a guarantee for the bank's obligations to depositors-creditors and can be considered as a value that guarantees the protection of the interests of depositors-creditors; - is a reserve of funds that allow the bank to maintain solvency. SK is not subject to return to shareholders; - the amount of own funds available to the bank determines the scale of its functioning, the volume of operations; - IC is a source of development of the material and technical base of the bank (at the expense of it, buildings, equipment, computer technology are purchased).

Essence of the IC: IC is a financial and economic category and can be considered as a system of relations:

a) between the founders and the bank regarding: - accumulation of funds for the creation of the bank; - regarding the distribution of part of the bank’s profit among its owners through the payment of dividends on shares or income, in accordance with the amount contributed. b) the relationship between the bank and its partners in active operations regarding the effective use of bank funds. c) regarding the formation and use of bank reserves, protecting it from losses and guaranteeing the interests of depositors-creditors d) the relationship between the bank as a whole and its staff to create social conditions, as well as possible material incentives. e) administrative and economic relations between the bank and the Central Bank to regulate banking activities, compliance with mandatory standards related to the bank’s insurance system.

The size of the SC is determined by the CB independently, depending on a number of factors: - the volume of the SC limits the maximum size of the bank's active operations; - the value of the SC is determined by the nature of active transactions, i.e., an increase in the share of high-risk transactions requires an increase in the SC; - the amount of SC required by the bank depends on the specifics of its clients, in particular, working with several large borrowers requires more SC than servicing numerous small clients; - the level of the required SC depends on the degree of development of the credit market; - the size of the required SC is largely determined by the credit policy pursued by the Central Bank. The composition of the UK: UK, reserve capital, additional capital, economic incentive funds, bank profit.

Gross Equity = funds + reserves + book profit

Net = funds, reserves + retained earnings

Fixed capital \uXNUMXd MC + share premium + gratuitous deductions + part of profit, funds, reserve for operations with securities. - intangible assets - treasury shares - uncovered losses

Additional capital = revaluation of property + reserve for operations with securities. + part of the profit + received loans + attracted shares - overdue receivables

SC = Primary + Secondary

Real SC = SC - issued loans - MC funds placed

Functions of the IC bank

1. Protective function - the possibility of compensation to depositors in the event of liquidation of the bank; maintaining the solvency of the bank by creating reserves included in the UK. A bank is considered solvent as long as its SC remains untouched. 2. Operational. It consists in allocating funds at the expense of the IC (created reserves) for the purchase of bank buildings, special equipment, special vehicles, storage equipment, expanding the network of branches, creating financial reserves in case of potential losses. 3. Regulatory. It is associated with the special interest of society in the successful functioning of the banking system, as well as the exercise of control over banking operations. The regulatory function is implemented: - through the procedure for establishing a credit organization and its licensing; - through the regulation of the minimum size of the UK, as well as the UK; - through the establishment of mandatory economic standards for the activities of credit institutions (Instruction No. 1); - through the approval of the rules for conducting specific banking operations, accounting and reporting; - through the regulation of the limits of the open currency position, etc.

Authors: Shevchuk D.A., Shevchuk V.A.

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