Banking. Investment activity of banks and its directions (the most important)

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Banking. Investment activity of banks and its directions (the most important)

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Topic 57. Investment activities of banks and its directions

Investments are usually long-term investments in industry, agriculture and other sectors of the economy within the country and abroad in order to make a profit (Investment). Investment operations of a commercial bank are the activities of a bank for the placement (investment) of bank resources in securities, real estate, authorized capital of enterprises, precious metals, etc. The main factors that determine the direction and goals of the bank are the need for income and liquidity, the willingness of management to sacrifice liquidity in the name of profit and vice versa (Organization and financing of investments).

According to the purpose of investment, bank investments are divided into:

1) Direct investments - for the purpose of direct management of the investment object (controlling stake of securities, investment of capital in production by purchasing patents, licenses, know-how, etc.) 2) Portfolio investments - carried out in the form of creating portfolios of securities. b., owned by various issuers and not providing controlling participation and direct management of the investee. So, goals investment operations of the bank: - expansion and diversification of the bank's income base, - increase in financial stability and risk reduction, - expansion of the client base, types of services, - increased influence on clients (through control of their securities) Safety of funds + diversification + liquidity

In addition, the bank's investment activities must satisfy the needs of clients in various forms of investment, ensure the bank's competitiveness and have a social orientation, i.e., maintain the image of the bank as a socially significant element. The main difference between investments and other areas of placement of bank assets is that funds are invested not to meet current needs, but to meet the needs of the future period (Corporate Finance).

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

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