Money. Credit. Banks. Regulation of money circulation (lecture notes)

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Money. Credit. Banks. Regulation of money circulation (lecture notes)

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Regulation of monetary circulation

Money turnover - the movement of money in cash and non-cash forms, serving the circulation of goods, as well as non-commodity payments and settlements.

Types of money circulation;

- circulation of cash, that is, banknotes (banknotes and coins). The means of payment in this case are real banknotes transferred by one entity to another for goods, works and services or in other cases provided for by law (for example, fines);

- non-cash money circulation. It consists in debiting a certain amount of money from the account of one entity in a banking institution and crediting it to the account of another entity in the same or another banking institution, or in another form in which there are no cash as a means of payment.

The monetary system of any state is the object of legal regulation.

The Constitution of the Russian Federation refers financial and currency regulation, money issue, federal banks to the jurisdiction of the Russian Federation (see paragraph "g" of Article 71 of the Constitution of the Russian Federation). Consequently, the monetary system has a constitutional status, and the norms of the Constitution about it are both the norms of constitutional (state) law and the norms of financial law,

Financial Law detail the status of the monetary system. In addition, with the help of the norms of financial law on the signs of the solvency of banknotes, on ensuring the circulation of cash, the basics of organizing settlements, etc., the normal functioning of the monetary system is ensured.

Civil Law regulate the issues of ownership of money (banknotes) as an object of property rights, the procedure for settlements in transactions of a civil law nature.

Norms of administrative law establish responsibility for administrative offenses in the sphere of the monetary system, mainly in the process of monetary circulation.

Criminal Law provide for criminal liability for committing crimes against the monetary system (mainly counterfeiting). Thus, the norms of many branches of law are directly related to the monetary system.

A set of financial and legal norms, specifically dedicated to the monetary system, is contained in the Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)". In addition, certain norms relating to the monetary system are contained in the Law of the RSFSR "On Banks and Banking Activities", in the Civil Code of the Russian Federation (Part One) and in some other legislative acts of the Russian Federation.

Elements of the monetary system of the Russian Federation: official currency; the procedure for issuing cash; organization and regulation of money circulation.

Official monetary unit (currency) of the Russian Federation - ruble. The introduction on the territory of the Russian Federation of other monetary units and the issuance of monetary surrogates are prohibited.

Monetary regulation economy of the Russian Federation is carried out by the Bank of Russia. In accordance with this regulation, the Bank of Russia determines the norms of required reserves, discount rates on loans, establishes economic standards for commercial banks, and conducts transactions with securities.

In accordance with Art. 4 of the Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)" The Bank of Russia, in cooperation with the Government of the Russian Federation, develops and implements a unified state monetary policy aimed at protecting and ensuring the stability of the ruble.

Instruments and methods of regulation:

▪ interest rates on Bank of Russia operations;

▪ required reserve standards;

▪ open market operations;

▪ refinancing of banks;

▪ deposit operations;

▪ currency regulation;

▪ establishing benchmarks for money supply growth;

▪ direct quantitative restrictions.

Interest rates on Bank of Russia operations. The latter can set one or more interest rates for various types of transactions. The interest rates of the Bank of Russia are the minimum rates at which it carries out its operations. These are refinancing rates, rates on deposit operations, lombard rates, repo rates, etc. The Bank of Russia uses interest rate policy to influence market interest rates. An example is the deposit operations of this bank, which have been carried out since 1997. Free funds of commercial banks were accepted as a deposit in January-September 1999 at a fixed rate - from 0,6 to 28% per annum (the weighted average rate was 18,02% per annum) . In 1999, deposit operations were carried out on standard terms for one day, one week, two weeks. The Bank of Russia daily announces to the market interest rates for raising funds in deposits and concludes deposit transactions.

Required reserve ratios are interest-free obligatory deposits of credit institutions in the Bank of Russia. The amount of required reserves is set by the Board of Directors of the Bank of Russia as a percentage of the liabilities of credit institutions. The standards cannot exceed 20% of the credit institution's obligations and cannot be changed by more than 5 points at a time.

The reserves are used when revoking a license to pay off the credit institution's obligations to depositors and creditors. However, the main purpose of the required reserve ratios is the regulation of money circulation. Let us consider the mechanism of this regulation. The bank's actual reserves are equal to the sum of required reserves and excess reserves. The bank issues credit only in the amount of excess reserves. The banking system, as you know, creates money. The amount of new credit money is determined using the bank multiplier, which is the process of increasing the amount of money in the deposit accounts of commercial banks during their movement from one commercial bank to another:

M=1/R,

where М - bank multiplier; R - the required reserve ratio.

The maximum amount of new money (D) that can be created by the banking system is:

D=E*M,

where Е - excess reserves.

Knowing the required reserve ratio, it is easy to determine how much new money will be created by the banking system.

The Bank of Russia changes the norms of required reserves. An increase in the norms means the withdrawal of money from commercial banks, with a decrease in the norms, the excess reserves of commercial banks, which they provide on credit, increase.

The growth of the money supply occurs not only due to the issuance of money into circulation, but also due to the creation of new money by the banking system.

Open market operations - this is the purchase and sale by the Bank of Russia of government securities, short-term transactions with securities, followed by a reverse transaction. The limit of operations on the open market is approved by the Board of Directors. The purchase of securities means the release of money into circulation, the sale of securities - the withdrawal of money from circulation. This is the most powerful and effective method of regulating money circulation, which is used more often than other methods in world practice. Despite the temporary cessation of the functioning of the securities market after August 1998, the Bank of Russia did not abandon this method of regulating money circulation. In September 1998, the Central Bank of the Russian Federation issued bonds of the Bank of Russia (OBR) and began operations with them. These bonds were used as collateral for pawn, intraday and overnight loans, as well as for repurchase transactions.

Bank refinancing - this is lending by the Bank of Russia to commercial banks, including the rediscount of bills. The Bank of Russia sets the refinancing interest rate. An increase in this rate leads to an increase in the cost of loans and a decrease in the supply of money in circulation, a decrease in the rate - to a reduction in the cost of loans and an increase in the supply of money. The refinancing rate is set at the level of financial market rates. Until mid-June 1998, the Bank of Russia issued three types of loans to commercial banks:

- pawn shops - secured by government securities included in the Lombard List of the Bank of Russia;

- intraday loans provided to banks during the business day in the presence of unexecuted payment orders;

- one-day settlement loans (overnight loans) were provided to complete settlements at the end of the business day by crediting the loan to the bank's correspondent account with the settlement division of the Bank of Russia.

Loans were issued within the limits set by the Bank of Russia. Since March 1998, only secured loans secured by government securities have been issued to commercial banks. The condition for their provision was the preliminary blocking of government securities on the bank's "depo" account with an authorized depository. The market value of these securities, adjusted for the appropriate adjustment factor of the Bank of Russia, was the maximum possible amount for obtaining a loan.

The Bank of Russia began to carry out pawn operations in March 1996, first in the form of pawn credit auctions, and then - at the request of banks on any business day at fixed interest rates differentiated depending on the term of loans (from 3 to 30 calendar days). From February 2, 1998, Lombard loans at a fixed interest rate were issued at 42% per annum, regardless of the timing of their provision. The loan was credited to the correspondent account of a commercial bank with the Bank of Russia. In connection with the financial crisis since July 8, 1998 Lombard loans were provided for up to 7 calendar days inclusive through credit auctions.

The bids of the banks accepted for the auction were ranked by the level of the interest rate offered by the banks, starting from the maximum. The final decision on the cut-off rate and the amount of Lombard loans was made by the Credit Committee of the Bank of Russia after receiving and analyzing bank applications for loans. Lombard credit auctions were conducted in two ways:

▪ "American ", at which satisfied applications were satisfied at interest rates offered by banks in applications (they were equal to or exceeded the cut-off rate);

▪ "Dutch ", at which all satisfied bids were satisfied at the cut-off rate set by the Bank of Russia based on the results of the auction.

If the bank failed to fulfill its obligations to repay the Bank of Russia loan and pay interest on it, the payment was not deferred and the Bank of Russia began the procedure for selling the pledged securities. In addition, banks paid penalties for each calendar day of delay in the amount of 0,3 of the refinancing rate of the Bank of Russia on the established date of fulfillment of the obligation, divided by the number of days in the current year (365 or 366). At the expense of proceeds from the sale of pledged securities, first of all, the Bank of Russia's expenses for the sale of these securities were reimbursed, then banks' debt on loans and interest, and lastly, the amount of penalties for default on obligations.

After August 17, 1998, the Central Bank of the Russian Federation began to provide credit institutions with loans of the following types:

▪ loan to a reorganization bank carrying out reorganization of a credit organization (up to 1 year);

▪ loan to support measures to repay obligations to depositors (up to 6 months);

▪ loan to support liquidity (from 1-2 months to 1 year);

▪ loan to support measures to improve the financial stability of the bank (up to 1 year),

▪ stabilization loan (up to 1 year).

Interest rates on these loans changed with changes in the refinancing rate of the Central Bank. As the situation in the banking sector of the economy normalizes, the Bank of Russia will stop issuing these loans.

Deposit operations. These are operations to attract bank funds into deposits (deposits). They allow the Bank of Russia to attract temporarily free cash from banks and thereby neutralize their possible pressure on the foreign exchange market.

Currency regulation was carried out with the help of foreign exchange intervention, which is understood as the purchase and sale by the Bank of Russia of foreign currency on the foreign exchange market in order to influence the ruble exchange rate, the total demand and supply of currency. If the demand for the currency was greater than the supply, then the Bank of Russia sold the currency from its gold and foreign exchange reserves.

If the supply of currency exceeded demand, the Bank of Russia bought the currency. These operations became possible due to significant accumulation of foreign exchange resources at the Bank of Russia. Foreign exchange reserves must correspond to the world level, equal to the financing of three months of imports.

A new method of regulating the exchange rate was the introduction in May 1995 of a fixed exchange rate band. Its main goal is to de-dollarize the economy, stabilize the ruble exchange rate, and support domestic exporting manufacturers. At the beginning of 1997, the currency corridor was 5500-6100 rubles, at the end of the year - 5750-6350 rubles. for one dollar, from August 1998, the currency corridor was expanded to 9,5 rubles, however, due to the aggravation of the financial crisis, it was not possible to keep the ruble exchange rate within the currency corridor. The outflow of foreign capital from the government securities market led to a sharp reduction in the gold and foreign exchange reserves of the Bank of Russia and, as a result, to the abandonment of foreign exchange interventions. A transition to a floating exchange rate regime was made.

Establishment of benchmarks for the growth of the money supply. The Bank of Russia set the minimum and maximum limits for the growth of the money supply for the control period (targeting). Since 1995, the Bank of Russia has annually set two intermediate goals - the maximum growth rate of M2 and the maximum devaluation of the ruble/US dollar exchange rate.

Direct quantitative restrictions - the establishment of limits on the refinancing of banks, the conduct by credit institutions of certain banking operations. An example is the issuance of pawnshop, intraday and one-day settlement loans by the Bank of Russia to commercial banks within the established limit. Another example is restrictions on foreign exchange transactions. Foreign exchange operations can only be carried out by authorized banks that have received a license from the Bank of Russia to conduct such operations. There are three types of licenses: general, extended and internal. The general license gives the right to conduct foreign exchange transactions in the domestic and world markets, open correspondent accounts in foreign banks without limiting their number. The extended license gives the right to have correspondent relations with six foreign banks and former foreign banks of the USSR (Moscow People's Bank in London, Airobank in Paris, etc.). An internal license gives the right to work in the domestic foreign exchange market and enter the external market, subject to the opening of correspondent accounts in any other bank that has a general license.

In addition to the main methods of regulation, there are secondary methods.

prescribed by law margin - the minimum percentage of the initial payment for securities at the expense of the investor's own funds. Buying securities on credit is dangerous because banks are involved in it. Therefore, in all countries, transactions with securities on credit are strictly regulated. In Russia, the minimum margin is set by the Instruction of the Ministry of Finance of the Russian Federation "On the rules for making and registering transactions with securities" dated June 6, 1992 No. 53. It amounts to 50% of the total value of purchased securities.

If it is limited, then the amount of money in circulation decreases. If sales increase, then the amount of money in circulation increases.

Consumer credit - sale of goods on credit.

Due to the low incomes of the population, the development of consumer credit in Russia is possible only with a certain rise in the level of income. Currently, the development of such a loan is a promising direction in the activities of banks that are looking for new areas of capital investment. The use of this method is limited by the lack of infrastructure, legal framework, high level of credit risk. Despite this, consumer credit is a stimulus for economic growth and activation of aggregate demand.

Exhortation. This is when the Bank of Russia makes recommendations to legal entities and individuals, banks.

When and which of the above measures are used? If it is necessary to increase the amount of money in circulation, then the Bank of Russia buys up securities, reduces the required reserves, reduces the refinancing rate, etc. This policy is called the cheap money policy. In conditions of inflation, when it is necessary to reduce the amount of money in circulation, the Bank of Russia sells securities, increases the required reserves, raises the refinancing rate, etc. Such a policy is called the expensive money policy. Essentially, this is counter-cyclical regulation.

The inflow of funds from non-residents has its pros and cons. Advantages of the inflow of funds from non-residents:

▪ reduction of interest rates;

▪ meeting the budget's need for borrowed funds;

▪ increasing the liquidity of the banking system;

▪ stabilization of the ruble exchange rate;

▪ growth of foreign exchange reserves of the Bank of Russia.

Disadvantages of the inflow of funds from non-residents:

▪ unstable balance;

▪ destabilization of the exchange rate;

▪ the possibility of a financial crisis;

▪ the possibility of flight of foreign capital from the Russian market;

▪ the influx of money does not go into production, but ends up in the hands of the population.

Author: Shevchuk D.A.

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