Commercial Bank

Introduction

Banking system is one of the most important and inalienable parts of market economy. The development of banks, commodity manufacture and circulation went in parallel and was closely bound. Banks, making money accounts, crediting economy and acting as the intermediaries in redistribution of the capitals, essentially raise a general efficiency of manufacture, promoting public labor capacity growth.

Modern banking system is the major part of the national economy of any developed country. Its practical role defined as management of state’s paying and accounting systems. Greater part of banking system’s commercial bargains is carried through deposits, investments and credit operations. Along with other financial intermediaries, banks direct people’s savings to firms and manufacturing structures. Commercial banks, operating in accordance with the monetary policy of the state, regulate movement of money floods, influencing on the rate of their turnover, emission and general mass including the amount of cash, being in circulation.

Modern banking system is the sphere of diversified services to the clients: from traditional deposit-loans and calculation-cash operations, determining the base of banking, to the up-to-date forms of monetary and financial instruments, used by banking structures.

Nowadays the performance of banks is changing. The functions of one financial-credit institutions are being broadened. New financial institutions are being created. Banks become more independent. The system of intra-banking and inter-banking service is being developed.

In my work I’ll try to consider the functions and operations of commercial bank, to define bank product and bank service, to analyze the problems and prospect of banking system’s development on the basis of generalizing the experience of commercial bank’s performance.

I. The notion of commercial bank4

The notion of commercial bank4

Structure of commercial bank6

II. Functions of commercial bank and principles of its activity8

Principles of commercial bank’s activity8

Functions of commercial bank

III. The notion and classification of bank product and bank service

IV. Operations of commercial bank

Passive operations of commercial bank

Active operations of commercial bank

Factoring, leasing, trust

The notion of commercial bank

Bank - the organization, created for the attraction of cash resources and their arrangement from its name on the conditions of reflexivity, charge and urgency.

The basic appropriation of the bank is mediation in the circulation of cash resources from creditors to borrowers and from salesmen to buyers. At the same time with the banks the circulation of cash resources on the markets is realized by other financial and credit-financial establishments such as, the investment funds, insurance companies, broker, dealer firms, etc. But the banks as the subjects of financial market have two essential features that distinguish them from all other subjects.

First, for the banks the dual exchange of the bills is characteristic: they place their own bills (deposits, saving certificates and so forth, etc.) and mobilize thus resources, place into bills and securities, issued by others. This distinguishes banks from the financial brokers and dealers, who do not release their own bills.

In the second place, the adoption to itself of absolute covenants with the fixed sum of debt for legal and physical persons distinguishes banks. In terms of this banks are differed from various investment fund, which distributes all risks, connected with a change in values of its assets and liabilities, among its shareholders.

In Russia the creation and the functioning of commercial banks is based on the Russian Federation’s Law about banks. In accordance with this law banks in Russia act as the universal credit establishments, which accomplish the wide variety of operations on the financial market: the accordance of various in maturity and amount credits, purchase-sale and storage of securities, foreign currency, the attraction of means in the contributions, the realization of account, the issue of guarantees, sureties and other obligations, intermediary and confidence operations, etc.

Principles of commercial bank’s activity

Work in the limits of the actually existing resources is the first and fundamental principle of the activity of a commercial bank.

Work in the limits of the actually existing resources means that a commercial bank must ensure not only the quantitative correspondence between its resources and credit investments, but also to attain the correspondence of the nature of bank assets to the specific character of the resources mobilized by it. First of all, this relates to their maturity periods. So if bank draws resources mainly for the short periods, and invest them predominantly into the long-term loans, then its liquidity occurs under the threat. The presence in bank’s assets of a large number of loans with the increased risk requires the bank to an increase of specific weight of its own resources in the volume of its resources.

The second most important principle, on which the activity of a commercial bank is based, is the economic independence, which means the economic responsibility of a bank for the results of its activity. Economic independence assumes the freedom its own resources’ direction and drawn resources, the free selection of clients and depositors, direction of the incomes of a bank.

The current legislation allows all commercial banks economic freedom at the disposal of its funds and incomes. The profit of a bank, which is remained at its disposal after payment of taxes, is distributed in accordance with the decision of the general meeting of shareholders. It establishes standard and size of the deductions for different funds of a bank and also size of dividends on the shares.

On its obligations a commercial bank answers by all belonging to it resources and property. Entire risk from its operations a commercial bank is beret to itself.

The third important principle lies in the fact that the interrelations of a commercial bank with its clients are constructed as usual market