Directions for using funds from the interbank market. Prospective development of the market for interbank lending of all types of legal entities. Need help studying a topic?
The interbank market plays an important role in ensuring normal conditions for the functioning of the money market. Its role is determined by the fact that the interbank market:
=> Is subject to government regulation;
=> Serves as a mechanism for the influence of government bodies on the activities of commercial banks, the state of the monetary and foreign exchange system and directly on the economy as a whole;
=> It is an important component of the financial market.
Interbank market - This is part of the loan capital market (money market), where temporarily free monetary resources of credit institutions are attracted and placed by banks among themselves mainly in the form of short-term interbank deposits for short periods.
The most common terms of deposits are 1, 3, 6 months, the maximum terms are from one day to 2 years. Funds of the interbank market are used by commercial banks not only for short-term, but also for medium-term and long-term active operations, regulating balance sheets, and meeting the requirements of central banks. Interest rates take into account the costs of commercial banks, credit risk, supply and demand, market conditions and other factors and are the basis for calculating interest rates on other, longer-term loans in the national and international capital markets.
Interbank deposits associated with active deposit operations of banks, that is, the investment of temporarily free funds of some banks in other credit institutions, including the Central Bank. Making deposits by commercial banks to the Central Bank within the framework of required reserves is one of the methods for regulating the country's total money turnover. According to current legislation, in Ukraine commercial banks have the right to receive loans from the NBU, as the bank of last resort, through credit auctions, pawnshop operations, and rediscounting of bills on the terms of bilateral agreements.
Interbank loans- one of the main sources of formation of bank loans. Obtaining loans from other banks allows banking institutions to replenish their own credit resources. If there is an excess of resources, the bank places them on the interbank market, and if there is a shortage, it buys them on the market.
In practice, the following main types of interbank credit are used:
=> Overdraft on correspondent accounts: the corresponding account records the amounts of debit (credit) balances on correspondent accounts of banks at the end of the operating day;
=> Overnight- provided (received) by another bank; are provided for a period of no more than one business day, used to complete settlements of the current day;
=> REPO operations- related to the purchase of securities for a certain period with the condition of their repurchase at a pre-agreed price or with the condition of an irrevocable guarantee of repayment if the term of the repo transaction coincides with the maturity of the securities.
=> "Short money"- short-term interbank loans, issued for a period of one day to two weeks, prevail in the credit market.
One of the most common forms of economic interaction between credit institutions is interbank loans. The current rate on interbank loans is the most important factor determining the accounting policy of a particular commercial bank for other types of loans. The specific value of this rate depends on the Central Bank, which is an active participant and direct coordinator of the interbank loan market. Lack of regulation on it could cause a crisis in interbank payments.
In Ukraine, the subjects of the interbank market are commercial banks, which act as financial intermediaries in the redistribution of funds and making payments in the financial market. The NBU carries out operations to refinance commercial banks. Credit resources are provided in the form of direct and pawnshop loans, rediscounting of bills and credit auctions. These operations are carried out when commercial banks are experiencing difficulties and cannot attract resources from other sources in a short time. The NBU plays the role of lender of last resort. Such loans are short-term, issued at high interest rates and require collateral.
Commercial banks, as economically independent credit institutions, independently set the level of interest rates on interbank loans depending on supply and demand in the interbank market and the level of the discount rate.
Credit relations between commercial banks are determined on a contractual basis by concluding loan agreements with the definition of the rights and obligations of the parties and the corresponding registration of rights from interbank loans. The provision of an interbank loan is accompanied by the opening of accounts in accordance with the chart of accounts of Ukrainian banks. Controversial issues are resolved by law or through arbitration.
Commercial banks receive loans from the NBU in the form of rediscounting and re-pledge of securities, as well as as a result of the purchase of free credit resources on the interbank market (primarily from the same NBU). The total volume of interbank loans is limited to twice the size of the bank's own resources. In this way, commercial banks solve tactical problems associated with current operations.
Banks conduct transactions in the interbank market through passive transactions, gaining access to credit resources to quickly increase the level of liquidity. This market has traditionally been the source of such resources. Commercial banks must use them for their intended purpose, otherwise it leads to a crisis of confidence and market decline. For banks, loans are urgent liabilities. These are the most expensive resources, but the profitability from operations with them is not very high. According to the legislation of Ukraine, banks can take out loans on the interbank market against government securities included in the NBU Lombard List. Since 1995, bonds of internal state loans and internal local loans have come into circulation in Ukraine. The NBU allowed pawn loans from commercial banks against their collateral (the amount of such loans should not exceed 75% of the nominal value of the bank's securities portfolio). The term of use of the pawnshop loan was 10 days. The payment for a pawn loan was set by a decision of the NBU Board and was higher than the discount rate. Since the first half of 1998, due to a sharp decrease in the volume of the government securities market, pawn loans were practically not provided in this form.
Pawn loan - a loan provided by the NBU to a commercial bank through refinancing secured by government securities, gold and foreign exchange reserves and other valuables, the list of which is approved by the NBU Board and which are the property of the commercial bank and are recorded on its balance sheet.
Conducting transactions on the interbank market affects the solvency of commercial banks due to the possibility of refinancing at the NBU. Resources of the interbank market relate to the sphere of ensuring liquidity of commercial banks, if we consider this liquidity as a flow of funds, taking into account the bank’s ability to obtain a loan in the interbank market and ensure cash flow from operating activities. The lack of liquid funds pushes commercial banks to operate in the interbank market and establish a liquidity norm at the reporting date.
The money market is a special sector of the market in which the purchase and sale of money as a specific product is carried out, the demand, supply and price for this product are formed. An important role in the market is played by loan interest, which is an important element of the entire monetary policy of the state, through the NBU it determines and regulates its level. The main instruments of the money market are short-term securities and money surrogates with a validity period of up to one year. The money market is characterized by high liquidity of financial assets traded on it, efficient use of temporarily available funds, and a relatively simple pricing system; the market carries out the accumulation, turnover, distribution and redistribution of money capital between spheres of the national economy. The state uses market resources to finance its expenses and cover the budget deficit. This is the market with the lowest level of financial risk. The main actors in the money market are lenders, borrowers and financial intermediaries.
1. What markets is the money market associated with?
2. What components form the demand for money?
3. What factors influence the money supply?
4. What objects and subjects form the money market?
5. What factors influence money market conditions?
6. Distribute money market instruments according to the degree of liquidity, urgency, and profitability. Give them a description.
7. What are the common and distinctive features of the accounting, foreign exchange and interbank markets?
8. What are the accounting market instruments? Reveal their features of rotation in the domestic market.
9. The essence of call and bill loans, common features and differences between them. Which of these loans is the most common in Ukraine?
10. How are funds in the interbank market formed?
11. What banking operations are interbank deposits associated with?
12. What is the main source of bank loans?
13. Name the main directions of using funds of the interbank market. How are these funds used in Ukraine?
14. How are the current rate on interbank loans, the discount rate of a particular bank on loans issued, and the official discount rate of the Central Bank interrelated?
Literature: 2; 7, 9; 13; 16; 21; 24; 26; 28; 33; 35; 38; 42; 45.
Is part of the loan capital market
Interbank market - currencies, rates and loans, development and problems of the interbank market
The interbank market is, definition
The interbank market is Forex currency market outside of exchanges, on which banks purchase and sell free monetary resources of credit institutions in foreign currency, mainly in the form of interbank deposits, based on supply and demand of credit institutions.
Any amount of funds in excess of the minimum bank reserve can be presented in the form of a loan for interbank market
Any funds in excess of the minimum reserve may be provided as loan on interbank market. The borrowing period varies from one day (overnight) to two years, but a significant part of such loans is a daily allowance with repayment at 15.00 the next day.
The interbank market is, once created for various currency exchange transactions among . The reason for its formation was that the American dollar was no longer backed by gold. Therefore, there is more of it from prices did not depend on this.
The interbank market is Part market loan capital, on which temporarily free monetary resources of credit institutions are attracted and placed banks among themselves mainly in the form of interbank deposits for short periods.
The interbank market is divided into direct and brokerage. Therefore, an integral link in the institutional structure Forex currency market are brokerage companies through which approximately 30% of foreign exchange transactions pass. Brokerage organizations charge a commission for intermediation (up to $20 for every million dollars or its equivalent bought or sold).
With the development of electronic means of interbank communication and foreign exchange transactions (Reuters-dealing, Telerate), the role of brokerage firms in the interbank market has decreased, although they continue to play a significant role in the transactions of individuals and small firms.
Structure and functions of the interbank market
The interbank foreign exchange market performs the following main functions:
1. servicing the international circulation of goods, services and capital;
2. formation of exchange rates based on demand and offers on currency;
3. Risk hedging (insurance) against currency and credit risks;
4. implementation of monetary policy;
5. making a profit in the form of the difference exchange rates and interest rates on various debt obligations.
From an organizational and functional point of view (as a result of the implementation of economic functions), interbank Forex currency markets provide servicing of international circulation of goods, services, works; timely execution of international payments; interconnection of various markets; spontaneous definition exchange rates by balancing demand and offers; providing protection mechanisms against foreign exchange risks; diversification of foreign exchange reserves of banks, enterprises and the state; currency intervention; exploitation of the market states for their purposes monetary and economic policy; receiving profits in the form differences exchange rates and interest rates; exchange rate regulation national currency to foreign currencies (state and market); carrying out monetary policy aimed at state regulation of this area of the economy and other activities.
From an organizational and institutional point of view, the interbank foreign exchange market is a set of authorized banks carrying out foreign exchange transactions.
From an organizational and technical point of view, the Forex currency market is a set of communication systems that connect banks of different countries carrying out international payments and other currency transactions.
So, on the one hand, the interbank foreign exchange market is the largest, decentralized financial market in the world, where foreign currencies are exchanged (the volume of transactions in the Forex currency markets is not published, however, according to experts, the total international Forex currency market has a turnover approximately 100 -200 billion. Dollars per day).
Interbank market participants
In addition to private banks, the most important participants in the interbank foreign exchange market are the central banks of developed countries. In addition to serving government needs, they conduct official government operations monetary policy. Representatives of the state may be foreign trade banks and other institutions.
To conduct foreign exchange transactions, large private banks have deposits in foreign financial institutions that are their correspondents. At the same time, not all even large banks in Western European countries act as permanent participants in the Forex currency market. For example, in France they are only a few banks: Crédit Lyonnais, Paribas, Banque Société Générale, Banque National de Paris, Endosuez and some others.
The international currency market Forex is primarily an interbank market. Therefore, its main actors are primarily banks and other financial institutions. They can carry out transactions both for their own purposes and in the interests of their clientele. In this case, participants can work in the market, coming into direct contact with each other, or act through intermediaries. In this category, private banks primarily stand out, with a special place in it occupied by the central banks of countries.
The group of participants operating in the Forex currency market includes central banks. They occupy a special position. First of all, by their status they are not commercial institutions and for this reason alone they differ significantly from private banks and other financial institutions. Central banks also have a dealing department within their structure. However, foreign exchange transactions occupy a subordinate place in the activities of central banks, since they primarily serve only as a means of performing basic functions and, as a rule, are not aimed at directly generating income.
In addition, central banks have different types of counterparties and perform different functions. On the one hand, they are guided by the orders of their government (in those countries where the Central Bank does not enjoy complete independence) or participate in carrying out activities agreed with it. economic policy(in states where central bank more independent). They also coordinate their activities in the Forex market with politics central banks of other countries (in particular when conducting currency interventions) and are guided by the provisions of regulatory documents of international financial organizations.
On the other hand, the function of central banks is to monitor the state of the interbank foreign exchange market and regulate it. First of all, this concerns the exchange rate of the national currency, the adjustment of which in the desired direction is carried out, in particular, through interventions on the international Forex currency market, as well as with the help of foreign exchange reserves central bank. In addition, this may also affect the operations of the country's private banks and other financial institutions, as well as brokers, who are obliged to unconditionally provide the central bank with relevant information.
Operations on the interbank foreign exchange market
On the interbank foreign exchange market, operations of various contents are carried out, which are united by the corresponding market segments. The main segments of the interbank foreign exchange market are the cash market (the market for transactions at the current rate, or telegraphic transfer operations, also referred to in Western literature as the " " market) and the derivatives market (or the market for time-based transactions).
In the cash market (spot market), the purchase and sale of currencies occurs on settlement terms within two business days after the date of conclusion of the contract and at the exchange rate at the time of its conclusion.
The cash market, being part of the interbank foreign exchange market, also operates continuously. This means that its participants can buy or sell currency during the entire duration of its operation.
Interbank market is
The exchange rate of any currency is set on the spot market in relation to American dollar, while between other currencies at a certain moment there may not be a direct relationship. Despite the continuous nature of foreign exchange transactions and the constant determination of exchange rates, in some financial centers there is a so-called “fixing” procedure, the duration of which varies in different countries. "Fixing is the official determination of the exchange rates of various currencies, i.e. their quotation during periodic meetings of the main market participants, which are held in each financial center. For example, in Paris, on the premises of the stock market since 1977, the fixing procedure takes place daily on weekdays for approximately 30 minutes (starts at 13.30 - in winter, and at 14.00 - in summer). exchanges announces rates of key currencies (rate sales and the purchase rate for each currency) in relation to the French franc, which are then published in the official publication France.
The exchange rate of any currency (usually against United States dollar) is expressed as a number including four decimal places, i.e. ten thousandths of a unit. In this regard, in the professional terminology of dealers, the concept of “pip” is used, i.e. "point" indicating 1/10000 of the exchange rate. For example, the exchange rate of the Swiss French currency against the United States dollar can be expressed as 5.5950-5.5958, where the first corresponds to the purchase rate and the second to sales. At the same time, the course Swiss franc can also be represented in the form of the following expression: 5.5950/08, where 08 is the number of “pips” that makes up difference between the selling rate and the buying rate, or "spread" (" ").
Currently, the cash market (spot market) is still the largest segment of the interbank foreign exchange market. Despite the fact that trading volume here has increased more slowly in recent years than in other segments (the foreign exchange futures and options markets), the cash market accounts for slightly less than half (about 49%) of the total turnover of the international Forex currency market.
The difference between the seller's rate and the buyer's rate is called "spread" or "margin" and represents profit bank that uses the mentioned quotes when conducting foreign exchange transactions. Such an official quotation of currencies allows the clientele of private banks to better navigate the conditions of the international Forex currency market and more accurately formulate their orders to banks.
Interbank market is
Another important segment of the international Forex market is the derivatives market (term transactions). Participants in this market undertake obligations to buy and sell currency at the rate established at the time of conclusion agreements, but with the condition of mutual supply of currencies within a specified period. Concessions are concluded either for a period of three to seven days, or for 1, 2, 3, 6, 9, 12 and 18 months, or for two or three years, for five years.
Currencies from delivery do not have an official quotation at a certain time, their rates are influenced by market forces, and therefore they differ from the rates of currencies with immediate delivery(spot operations). Concessions for any period longer than two working days are called forward operations. Moreover, if the exchange rate for them is higher than the current spot rate, then they say that such a currency is quoted at a premium, but if it is lower than the rate for cash transactions, then we are talking about a discount.
Interbank market is
The object of such transactions can usually be any freely convertible currency. However, the longer the concession period, the fewer currencies it may apply to. The fact is that one of the two main goals of forward transactions, in addition to extracting speculative profit, is primarily insurance against possible risk caused by changes in exchange rates. Therefore, with periods ranging from three days to six months, it is possible to conclude agreements on almost all convertible currencies used in international payments. In carrying out operations for a period for one and two years, currencies such as the Austrian schilling, the Belgian franc, the Spanish peseta, the Italian lira, the Portuguese escudo, as well as the currencies of the Scandinavian countries are almost not used. In contracts for a period of more than two years, only the leading currencies are used: United States, Swiss Franc, Japanese currency and British pound sterling.
In conditions of stabilization market conditions In the international Forex market, the volume of urgent transactions is reduced compared to cash transactions. On the contrary, with significant fluctuations in exchange rates on the spot market, the volume of forward transactions increases. Thus, in recent years, due to the intensification of destabilizing phenomena in the international Forex market, the volume of urgent transactions has increased faster than the volume of cash transactions.
The considered segments of the interbank foreign exchange market in modern conditions are undergoing further evolution. As already noted, the cash market still practically retains first place in terms of transaction volume among other segments in the overall turnover of the Forex market. At the same time, the forward market, which covers conventional forward contracts and the transaction market, is developing much faster than the cash market (“spot”). First of all, this applies to the transaction market" swap", which has become the second largest segment of the Forex market after the cash transactions market. The volume of transactions with currency options has also increased significantly, although relative to other segments its share in the total Forex turnover remains modest.
Interbank
Interbank interest rate- loan interest rate on the interbank credit market.
Interbank market is
According to most analysts, the reason for liquidity problems in the money and financial markets is quite simple. Foreign investors invested in developing financial markets using resources denominated in dollars and yen. Accordingly, all kinds of liquidity pools of central banks and national funds, which include Russian funds, were formed in these currencies. These foreign resources, which are the main source of funding for operations in emerging markets, were converted into national currency. And when lending tightened and there was not enough money supply in American markets, investors began to withdraw funds from national financial markets around the world.
One of the problems that emerged within crisis, -adequacy of reference rates. For example, as a rule, many financial products - loans, securities with floating interest rates and others - are tied to the LIBOR rate. Some banks deliberately lower the LIBOR rate in order to make price funding for yourself below. But the market needs a real benchmark for the interest rate, its real one, so that questions do not arise about the representativeness of the interest rate during the financial crisis. Part of the spread is calculated in relation to the LIBOR rate, but can be calculated differently, taking as a basis the twelve-month, three-month LIBOR rate or US treasuries. If many spreads on short obligations are calculated relative to LIBOR, but LIBOR itself does not reflect the true value money, then the situation becomes even more complicated and it is difficult to understand what value of money we are talking about.
Introduction
The specifics of a bank's operations to attract and place funds suggest that all banks may periodically have both a surplus and a shortage of credit resources. The interbank credit market (IBC) is a large segment of the financial market, where the purchase and sale of credit resources in the form of interbank loans and interbank deposits is organized. The main characteristic of the interbank loan is the redistribution of resources between the subjects of credit, which in this case are banks. In addition to the subjects of the loan, the essence of the interbank loan is determined by its elements - banking resources and collateral value, the nature of the movement of the interbank loan, which is a paid exchange of resources and collateral value; directions of movement when issuing interbank loans and repaying them. In general, the essence of interbank credit is the exchange of credit and collateral forms of value between the creditor bank and the borrower bank.
Interbank lending refers to the largest segments of the financial market, in which short-term credit resources are sold and purchased in the form of interbank loans and interbank deposits.
The market for credit resources differs from other segments of the financial market in its versatility in serving the needs of commercial banks, since it connects diverse interbank relationships and various banking operations. In addition, it is the most efficient source of funds for maintaining liquidity on the balance sheets of commercial banks, replenishing correspondent accounts and for conducting operations in other more profitable segments of the financial market. The interbank market is part of the loan capital market, in which temporarily free monetary resources of credit institutions are attracted and placed by banks among themselves mainly in the form of interbank deposits for short periods.
As is known, the interbank loan market in a developed market economy is one of the most important sectors of the financial market. But, unfortunately, this sector of the economy is going through quite difficult times.
When writing the work, I set myself the following tasks:
– study the essence of the interbank credit market, its formation, functions, types, as well as the current state and development;
– consider the main trends and prospects for the development of the interbank credit market in conditions of the economic crisis.
Thus, the purpose of the work is to analyze the essence and purpose of interbank loans.
The object of the study is interbank loans and the interbank lending market.
The subject of the study is interbank credit, functions and goals of interbank lending, participants in the interbank lending market and the organization of interbank lending.
interbank market credit crisis
1. The essence of interbank credit
1.1 The concept of interbank credit
At the beginning of the formation of the Russian banking system, for the overwhelming majority of banks, the main source of credit resources was not deposits, as is customary in world practice, but interbank credit (IBC). Free credit resources are usually available to banks that have a solid client base, or banks that pursue a balanced credit policy.
Interbank lending refers to the largest segments of the financial market, in which short-term credit resources are sold and purchased in the form of interbank loans and interbank deposits.
The market for credit resources differs from other segments of the financial market in its versatility in serving the needs of commercial banks, since it mediates diverse inter-bank relationships associated with various banking operations. In addition, it is the most efficient source of funds for maintaining liquidity on the balance sheets of commercial banks, replenishing correspondent accounts and for conducting active operations in other more profitable segments of the financial market.
The beginning of trading in credit resources dates back to 1991, when the Moscow International and Moscow Central Stock Exchanges began holding credit auctions. Further development of the interbank loan market is associated with the creation of the Interbank Financial House and the Interbank Association "Orgbank", on whose sites the auction form of trading also prevailed. They took place once a week, which created certain difficulties for participating banks in a rapidly changing market environment. To solve these problems, credit stores began to be used, through which it became possible to place daily requests for the purchase and sale of resources and quickly respond to changes in market conditions.
Problems solved in the interbank loan market:
1. Ensuring current liquidity (solvency) of the bank. The interbank loan market is a unique tool for quickly attracting resources in fairly large volumes, so the problem of ensuring liquidity is solved in this market in the most natural way. But it should not be confused with the task of “patching holes,” because if the resources raised in the interbank lending market do not work with sufficient efficiency, the bank falls into a vicious circle of rising debt servicing costs, loses its image and ultimately becomes insolvent.
2. Attracting resources for the implementation of short-term and medium-term projects of the bank. It is important to emphasize two circumstances here: the relevant projects must have a relatively short payback period (no more than a year) and high efficiency.
3. Making a profit by placing the bank’s temporarily free cash resources on the market. To correctly solve this problem, it is necessary, first of all, to determine the period for which interbank credits are provided.
4. Obtaining speculative profit on the interbank lending market, i.e. carrying out simultaneous purchase and sale transactions of interbank credits with a certain margin (so-called arbitrage). The most significant circumstance here is the correspondence of the terms of attracted and allocated resources.
5. Exchange of funds with other markets for short-term financial assets. The most important features here are the coordination of the timing of transactions (taking into account the flow of documents) and the existence of equal responsibility of counterparties for late payment.
6. Creation and maintenance of a positive image of the bank. It is obvious that a bank that constantly acts as a lender in the interbank lending market quite clearly demonstrates its solvency. No less important are the volumes of transactions on the interbank lending market and the accuracy in making settlements on the interbank lending market. The interbank lending market is very tight and any mistake on this site becomes known almost immediately to all its active participants.
7. Establishing partnerships with other banks. As a rule, loans in the interbank lending market are now provided under so-called general cooperation agreements. The presence of a large number of such agreements and regular work on them inevitably lead to real cooperation, mutual trust and partnership between banks.
8. Collection of information about the activities and development of other banks. The above-mentioned agreements between banks provide for the regular exchange of balance sheets and other documents that sufficiently characterize the activities of counterparties. A bank actively working in the interbank lending market gradually becomes the owner of unique data; it only needs to be able to competently process this information.
9. Making a profit through non-traditional interbank transactions.
Often, interbank loans can take a veiled form: depositing funds in a bank correspondent account; purchase and sale of bank bills, as well as overdue and non-overdue interbank loans (this is usually done after the next crisis). Such operations allow, in some cases, to avoid violating regulations or instructions of the Central Bank of Russia, reduce the tax base while maintaining the volume of profit, and simply receive additional profit (and sometimes, due to the non-trivial nature of the operation, excess profit).
The interbank loan market interacts most closely with the interbank currency purchase and sale market (primarily US dollars). The interconnection of these markets is due to the almost complete coincidence of their characteristic features. Almost all of the distinctive features of the ruble interbank credit market listed earlier also apply to the foreign exchange market, including:
– a large number of counterparties and significant volumes of transactions;
– closed market;
– use of counter payments;
– market liquidity;
– mobility;
– instability;
– personification.
A significant difference between the foreign exchange market and the interbank lending market is the presence of the Central Bank on it, which, if necessary, carries out its large-scale interventions here, completely changing the current trends and expectations of market participants. In other words, in fact, the Bank of Russia sets or even “prescribes” the exchange rate on the foreign exchange market.
The main task of the interbank lending market is to regulate the liquidity of financial institutions. Making a profit from placing temporarily free funds on the interbank lending market is secondary, since the issue of maintaining liquidity will always be one of the most pressing for banks. Any credit institution registered on the territory of the Russian Federation is obliged to comply with liquidity standards established by the Bank of Russia. They show the degree of reliability of the bank's financial position and its ability to fulfill obligations to clients. Failure to comply with standards is fraught with claims from the regulator and even revocation of the license.
When placing foreign currency deposits, as well as when issuing foreign currency loans, banks exchange financial statements with each other. Based on the analysis, the volume of foreign exchange transactions is determined and general agreements on interbank cooperation are concluded.
The increasing demand for foreign currency loans and deposits in the context of strict regulation of the exchange rate (establishment of a currency corridor) is explained by significantly lower interest rates compared to the cost of ruble resources and the high profitability of import transactions (especially for intermediary structures), many times higher than the cost of foreign currency resources.
Currently, interbank credit is the attraction and placement between banks of temporarily free funds of credit institutions. The subjects of credit relations are banks – commercial and central. Banks that have free credit resources sell them on the interbank loan market - the money market. With the help of interbank loans, banks can quickly manage their liquidity, quickly raise funds if necessary, or place temporarily free credit resources. Participants in the interbank loan market are banks that conduct their operations irregularly, depending on the prevailing financial conditions. The most active operators of the interbank loan market are dealer banks, acting on their own behalf and at their own expense, which can act as a borrower or lender; their income is the interest margin, the difference between the rates of placement and attraction of funds. Banks with reputable clients have free credit resources. Interbank lending is one of the largest segments of the financial market. Interbank loans are the most efficient source for maintaining liquidity on the balance sheet of second-tier banks, as well as for conducting active operations and replenishing correspondent accounts.
The provision and receipt of loans by commercial banks in the interbank market is regulated by the Law “On Banks and Banking Activities”, the Civil Code, charters of commercial banks and loan agreements. Credit relations between commercial banks are determined on a contractual basis by concluding credit agreements, which must provide for the rights and obligations of the parties, with proper registration of cases on interbank loans. The provision of interbank loans must be accompanied by the opening of accounts in accordance with the Chart of Accounts of commercial banks.
Attracting an interbank loan is determined by banks:
Independently - through direct correspondent relations;
Through financial intermediaries - settlements through the cash settlement center of the Central Bank of the Russian Federation.
The highly liquid interbank market allows you to use temporarily free funds for lending on favorable terms. The possible deficit that arises is covered by borrowing on the interbank market. The interbank market is not uniform; it consists of two distinct, although similar parts: national and international markets.
In the Russian interbank money market, short-term interbank loans are the most common. When carrying out transactions with interbank loans / deposits, the borrower pays interest, the amount of which depends on the following conditions:
Agreed interest rate;
The nominal or principal amount, that is, the amount of money borrowed;
The duration of the borrowing period, that is, the time for which money is raised;
The maturity date, which is the time when the principal and interest must be paid.
A separate issue in modern Russian banking practice is the solution to the problem of collateral. The exaggeration of this issue is explained by the absence of a practically functioning mechanism for filing a judicial penalty against an unscrupulous borrower.
Interbank loans are used by financial institutions mainly in order to “fit into” the regulations of the Central Bank. At the same time, large banks do not trust small ones and require collateral from them.
The main types of security for obligations are:
– bank guarantee;
- guarantee.
In modern conditions, commercial banks, in order to quickly attract funds, use the opportunities of the interbank resource market, where funds mobilized by other credit organizations are sold.
The interbank mechanism is the main source of borrowed credit resources of commercial banks, a source of funds to maintain the solvency of the balance sheet and ensure the uninterrupted fulfillment of obligations. It is provided, as a rule, within the framework of correspondent relations.
Attraction of interbank credit is carried out either by banks themselves through direct negotiations, or through financial intermediaries. If banks themselves agree on an interbank loan, then their relations are formalized by special agreements, which are concluded mainly for a certain period. Resources are also attracted in the form of centralized loans. Loans from the Bank of Russia are provided to commercial banks in the form of financing and on a competitive basis.
Thus, interbank loans are divided by:
Depending on the term, interbank loans are distinguished on demand and urgent. Term interbank loans are attracted and placed for the following terms: 1 day, 2 – 7 days, 8–30 days, 31–90 days, 9] -180 days, 181 days -1 year, 1–3 years, over 3 years. The form of an interbank loan on demand provides for the provision of an interbank loan for a minimum period established by the agreement, after which the loan becomes perpetual and can be claimed by the lender at any time with prior notice.
Depending on the loan payment criterion, loans with market, increased and preferential interest rates can be distinguished. The market interest rate is the rate that is formed at the time the loan is granted based on the relationship between supply and demand in the market. Interbank loans with a higher interest rate arise due to the high risk of providing funds to a given borrower. The preferential interest rate is an element of a differentiated approach to lending and is used extremely rarely.
Depending on the collateral of the loan, interbank loans are distinguished as secured, partially secured and unsecured. As a rule, all the borrower's property is used as collateral for an interbank loan. The majority of interbank loans are currently unsecured.
Interbank loans are also classified depending on the currency of the transaction (Russian rubles, foreign currencies); depending on the presence or absence of a loan debt limit; loan size. Large loans in the Russian Federation include loans whose size exceeds 5% of the capital of the lending bank.
Lombard loans are, in a broad sense, loans secured by securities deposited in a bank; in a narrow sense, short-term loans provided by the Bank of Russia to credit institutions secured by securities to meet the needs of banks for liquid funds in order to maintain and regulate the liquidity of the banking system.
Overnight loans are provided to credit institutions only if the latter cannot find the opportunity to obtain a loan on the interbank loan market. A loan is provided by debiting funds from the bank's correspondent account according to payment documents in the absence or insufficiency of funds in the bank's account in the settlement division of the Bank of Russia.
Intraday loans are provided by the Bank of Russia to banks located in regions with continuous processing of payment documents during the business day. The basis for issuing a loan is unexecuted payment documents presented to the correspondent account of a commercial bank during the business day.
In order to obtain an interbank loan, the debtor bank submits to the creditor bank, as a rule, the following documents: application; articles of association; a copy of the charter, certified by a notary; a copy of the license to conduct banking operations, certified by a notary; a card with sample signatures and an imprint of the official seal, also notarized; balance sheet as of the current reporting date; calculation of economic standards for the current reporting date; performance indicators of a commercial bank; form of security and urgent obligations. The main source of information for determining the creditworthiness of the borrower of interbank loans is the bank's balance sheet.
1.2 Current state of development of the interbank credit market
The interbank lending market in Russia is traditionally considered a heterogeneous and unstable market segment. This is a very personalized, “picky” and internally contradictory market. Banks, especially those operating in the same region or in the same sectors of the financial market, are natural competitors for each other, always ready to help “drown their neighbor.” But, on the other hand, they are all objectively interested in receiving interbank loans and deposits. As a result, in practice, banks closely monitor each other, and as for loans, they are not issued to everyone and are always in limited quantities.
In addition to users, the main participants in the interbank lending market are also the operators (organizers) of this market: dealer banks and operating systems. Non-main participants in the Russian interbank lending market include: banks whose operations in this area are irregular; domestic and foreign information and information-analytical (including rating) agencies and services serving this market.
Dealer banks as market organizers: take and issue loans (and take, as a rule, for resale), engage in currency conversion, operate in the stock market; act on their own behalf, at their own peril and risk (they bear full responsibility to their creditors and, in turn, require borrowers to unconditionally fulfill their obligations); receive income in the form of the difference in prices (interest rates) for the purchase and sale of monetary resources; To organize their operations, they use networks of correspondent relations (if there is a shortage of funds in the correspondent account of a bank, the latter can urgently purchase a loan from a dealer bank).
Operating systems (credit platforms) are understood as specialized non-profit organizations, subject to licensing by the Bank of Russia, which provide purely intermediary services to participants in the interbank lending market - they “bring together” client banks directly. Operating system: creates a common information environment and provides clients with standard information from other market participants (current quotes, additional conditions, reference information); allows clients to conduct transactions with a wider range of assets and in a wider range of maturities; receives income mainly in the form of commissions from borrowing banks (there is also a form of subscription fee for the services of the lending platform). The most well-known Russian operating systems are the Moscow International Currency Exchange (MICEX) and the Interbank Financial House (IFD).
Conducting operations on the interbank lending market requires good information support and the establishment in each bank of rational technology solutions related to activities on the interbank lending market. This refers to three types of information.
General information is news that can affect the state of the money market and is therefore necessary for bank employees to adequately assess the prospects of concluding transactions.
Analytical information is the result of an operational (current) analysis of the state of the financial market, including an assessment of short-term trends in its development. It is desirable that this information be as clear as possible.
Opportunistic information is considered to be information from specific market participants and operators, i.e. one that reflects the current supply of credit resources and their quotes, the results of trading on various platforms, and indicates the financial and economic situation of banks participating in this market. Such information allows you to quickly (although not always adequately) assess the conditions of a particular market (the apparatus for such an assessment should be contained in the block of analytical information). Market information is collected, compiled and distributed by dealer banks and operating systems (usually their special divisions do this) and specialized agencies or services. Each bank also collects and generates such information for its own needs.
The most important market information of interest to all banks and their clients is the current rates at which loans (deposits) are provided and attracted in the interbank market. These rates, if they are uniform and recognized by all participants in the interbank lending market, serve as a key objective indicator of its current state. It should only be borne in mind that such indicators become real tools for the operational activities of banks not at any stage of development of the financial market, but only when it is at least relatively mature.
In developed market countries there is a wide variety of current interest rates, which can be divided into several main levels.
Official rates (synonyms: discount rate, refinancing rate) - they are set by central banks for loans issued by them to commercial banks (such credit operations in a number of countries for a long time were carried out in the form of purchase or discounting, rediscounting of commercial bills by central banks, hence the name “ discount rate");
Interbank lending supply rates (LIBOR, PI-BOR, etc.) - rates at which leading banks provide loans in eurocurrencies to first-class banks by placing deposits with them (these rates are usually higher than the discount rate);
The “prime rate” rate (“base rate”, “first-class rate”) is the rate at which commercial banks issue loans to prime borrowers who are not credit institutions (it is usually higher than the first two rates).
LIBOR (London interbank offered rate - London interbank offered rate) - interest rates at which the most reputable banks in London give loans in eurocurrencies to first-class banks, as well as the average rate for these first-class banks (calculated as the arithmetic average). LIBOR rates are derived: for the currencies of several economically most developed countries; for several periods (one week; one, two, three, six, nine and 12 months). Typically, the term “LIBOR rate” refers to the rate on three-month (most widely used) sterling deposits. In second place in importance is the rate on dollar deposits (dollar LIBOR).
There is no officially fixed value behind the LIBOR rate, therefore each interbank credit agreement stipulates a specific rate. Each major London bank announces its rate depending on money market conditions. There has been a tradition of individually fixing LIBOR at 11 a.m. (London time) of each business day by each of the leading (“reference”) banks.
The decisive role of LIBOR in the international market developed historically after the Second World War. However, rates similar to LIBOR soon appeared: PIBOR (Paris); TIBOR (Tokyo); FIBOR (Frankfurt); SIBOR (Singapore); KIBOR (Kuwait); LUXIBOR (Luxembourg), etc. There are some differences in the methods of their calculation.
Technologies for making rational decisions in the interbank market
The development and application of technology for making rational decisions in the interbank lending market includes solving the following most important tasks:
Formation by the bank of its own policy in the interbank lending market;
Correct formation of prices for banking products - it is advisable to solve this problem based on the methodology of operational cost analysis;
Rationalization of the bank's organizational structure. It should be such that employees of the relevant departments can effectively solve the first two tasks.
In recent years, the interbank market has tried to find a guarantor in the person of state and non-state structures - the Central Bank, ARCO, ARB, etc. However, there is reason to think that their participation will still not solve the main problems of the interbank credit market. They can and should be solved primarily through the creation of a modern and effective technological structure for interbank lending.
Portfolios of claims against counterparty banks are part of the bank’s overall asset portfolio, therefore the risks that a bank assumes when working with other financial institutions cannot be considered in isolation from other risks that the bank is exposed to in the course of its operation. Consequently, the risk management policy in the interbank market and other markets must be linked to the entire risk management system in the bank. This, in turn, predetermines the need to revise approaches to minimizing credit risks that arise when making transactions with counterparty banks. Therefore, the main limiters of counterparty risks are limits. They can be installed as follows.
1. In accordance with the level of creditworthiness of the counterparty bank (compared to other banks), it must be assigned to a certain risk group. No limit is set for banks included in the group with the highest risk (i.e. the bank should not interact with such banks).
2. The maximum amount of claims against the counterparty bank (limit) should be determined based on its risk group, the maximum limit per borrower - the counterparty bank and the size of the counterparty bank. The maximum limit for one counterparty bank is a parameter that is formed based on the general risk management policy of the bank and depends on a large number of factors, such as: the planned size of the portfolio for placing excess (or attracting missing) liquidity, the number of dealers, historical established established mutual limits with certain permanent counterparties, the number of permanent counterparties, the level of diversification of the interbank loan portfolio required to implement the bank’s risk management policy, etc.
3. As a result, the system of limits will look approximately as follows (the counterparty bank is assigned a risk group - from 1st to 5th in ascending order): 1st group - banks with unquestionable creditworthiness; 2nd group – banks with above average creditworthiness; 3rd group – banks with average creditworthiness; 4th group – banks with satisfactory creditworthiness; Group 5 – banks with unsatisfactory creditworthiness.
Counterparty banks are usually assessed based on several groups of factors. Each group of factors is assessed on a 100-point scale and has its own weight, which determines the significance of this group in the overall assessment. The total number of points obtained as a result of the analysis is determined by the sum of the products of the points scored for each group of factors and the weight of this group. As a result, each bank receives a score on a 100-point scale. In accordance with this assessment, he is included in one or another risk group. The rules for assignment to a particular risk group, depending on the number of points, are based on the bank's risk management policy.
These assessment factors are divided into the following groups: “political” (all factors that can directly affect the counterparty’s ability to repay the loan, which are produced by the state through its institutions, including the Central Bank: monetary policy, taxation, costs that arise for banks in during contacts with these institutions); systemic (factors produced by the banking industry); group (their source is a group of enterprises to which the bank belongs or with which it has certain obligations); factors the source of which is the counterparty itself (its policies, risk management, qualifications of management and personnel, existing relations between managers and employees), credit history; the presence and amount of turnover on the Loro correspondent account in the analyzing bank, etc.
The analysis of the financial condition of the counterparty bank is carried out in stages.
Stage I – structural analysis of the balance and turnover of balance sheet accounts.
Stage II – calculation of bank capital.
Stage III – balance sheet rating. Its essence is to determine the place of the counterparty bank in the banking industry. In this case, the bank's rating is calculated separately according to standard groups of indicators (liquidity, capitalization, profitability, asset quality, state of the resource base, business activity). The bank's rating for each of these groups of indicators is the deviation of individual values of relative coefficients from the industry average. Bank ratings in each group of indicators for a certain period are assessed on a 100-point scale. After this, the scores of the group of indicators are weighed, which makes it possible to assess the condition of the bank on a 100-point scale.
A rating assessment of this kind has a number of features, including the following: financial ratios are calculated on the basis of indicators “cleared” of the amount of artificial increases and hidden immobilizations of capital; to select industry averages, information (financial statements) is required for a very wide range of banks (several hundred); the weights of the coefficients in each group are determined by the method of mutual comparisons.
After the bank has fully prepared in the above ways for a meeting with potential counterparties on the interbank lending market, the direct selection of a counterparty for a transaction can occur in two main forms.
1. In the form of participation in auctions, which are conducted either by the creditor bank itself (this option is used by the Bank of Russia) or by a dealer bank, or by a lending platform that itself is not a party to transactions, but only acts on customer requests.
2. In the form of direct interbank transactions, which can be carried out either directly by the banks themselves, entering into direct contact with those banks that are not on their “black lists,” or by the operating systems in which the banks are serviced.
Concluding a transaction involves establishing the mutual obligations of the counterparties. The more developed the market, the less individualized formalities are usually required to complete this procedure. In countries with rich banking traditions, it is so standardized that it often does not require formalization of credit relations between the creditor bank and the borrower bank by signing a loan agreement.
The borrower bank and the creditor bank, who know and trust each other, can stipulate in advance all the conditions for concluding future transactions in a general framework agreement, on the basis of which all specific purchases and sales of interbank credit between them will be made in the future. In current work, the parties may be limited to only sending protocols and ordinary accounting and information documents.
There are and are already being used, including by Russian banks, technologies for concluding transactions using electronic document management based on e-mail and electronic signature. An important role is played by legal support of electronic documents, including registration of signing a document, verification of the authenticity of a signature, maintaining an archive and resolving disputes regarding transactions.
Obtaining information about the market and negotiating the terms of a transaction is mainly (50–75% of transactions depending on the bank) carried out through “direct access” to the counterparty bank (the bank for which the corresponding limit has been opened and / or which has a counter open limit ) using telephone or Reuters information system. At the same time, due to the significant costs of servicing Reuters terminals, only large Moscow and largest regional banks use them.
The remaining part of transactions in the interbank credit market (25–50%, respectively) is concluded through “voice” (telephone) brokers, who monitor the interbank market and report information to the banks served, search for counterparties on their behalf (having information about limits) and agree on conditions transactions. At the same time, they receive a commission on each side of the transaction, depending on the individual terms of the agreement with the bank and the loan rate.
In addition to telephone brokers, intermediary services for concluding interbank loan transactions are also provided by several currently existing electronic platforms, which, however, do not provide market participants with sufficient advantages over existing technologies and provide for a small number of transactions compared to the total market volume. Consequently, these electronic platforms cannot ensure the creation of a single organized market for interbank credit on their basis.
Taking into account the above, it can be noted that all existing technologies of the interbank market have, to a greater or lesser extent, the following disadvantages that hinder the development of the market:
1. transactions can be made only within the limits of insufficient volume and number of mutual limits;
2. low liquidity, efficiency and transparency of the market - lack of reliable “firm” quotes, a long time before the application is satisfied, etc.;
3. lack of a credible legal framework, i.e. rules of a reliable and well-known participant in the financial market, establishing the procedure for concluding interbank credit transactions, their documentation, the responsibility of the parties to the transaction and the procedure for resolving disputes;
4. dependence on the integrity of telephone brokers, insufficient reliability and flexibility of electronic systems.
In addition, the functioning of the Russian interbank market over the past years has been characterized by two specific features:
Firstly, the Russian interbank market has been and remains segmented. A significant part of interbank lending transactions is carried out within the framework of so-called “credit clubs”, that is, between banks connected with each other by common business interests. This practice reduces credit risks in the interbank lending market, but at the same time slows down its development. If problems arise, such market segmentation becomes a catalyst that accelerates the development of negative phenomena
Secondly, since 2003, Russian banks have been net borrowers on the world market. In recent years, the volumes of external liabilities of domestic banks have significantly exceeded the volumes of their external assets. On the one hand, this gives them new sources of capital, on the other hand, it creates dependence on such sources of financing and thereby increases the vulnerability of the Russian banking sector to the effects of global economic shocks. In 2008, we all witnessed the implementation of this scenario.
The existing technologies and infrastructure of the interbank credit market are currently at a rather low level and do not allow us to count on the formation of a single, developed money market, which is an important goal of the Bank of Russia and an urgent need of participants. Currently, the volume of the interbank loan market is small, but there is a tendency towards growth in the volume of the financial market in Russia in general and the interbank loan market in particular.
Thus, interbank credit plays a specific role in the economy: it not only ensures the continuity of production, but also accelerates it. Credit helps save distribution costs. This is achieved by reducing the costs of production, accounting and storage of banknotes, because part of the cash turns out to be unnecessary, accelerating the circulation of funds, reusing available funds, and reducing reserve funds.
2. Main trends and prospects for the development of interbank loans in the context of the economic crisis
In modern economic conditions, it is very difficult for commercial organizations to work without credit lines, which allow them to quickly complete construction when funding is delayed, and to survive during periods of downtime when products or services are temporarily not in demand. Many people find it surprising, but many commercial enterprises, in particular banks, whose services each of us has definitely used, also need lines of credit. In essence, an interbank loan is a fairly short-term financing, which makes it possible not to violate the terms of the transaction with clients and to carry out large financial transactions profitably. The interbank loan market is quite large and its turnover can reach trillions of rubles within a year. And it did not appear by chance.
Once upon a time in our great country, the state type of ownership flourished well, which implied constant and stable sponsorship. Today, everyone spins as they want and some banks are happy to attract third-party capital to increase income and more. Quite often, almost on the verge of bankruptcy, financial organizations manage to restore their solvency in the most natural way.
Banks often turn to monetary resources from interbank loans in order not to lose their status and maintain the image of a very solvent organization. It is quite obvious that small banks, precisely by opening special correspondent accounts, which are the main elements of providing short-term financing, help them establish mutually beneficial cooperation and make a profit within a given region.
The crisis that began in the summer of 2007 in the mortgage lending segment in the United States quickly engulfed the entire financial system. The volume of funds associated with subprime mortgages is $500 billion. While this is a significant amount, it is still small compared to $31 trillion. losses of stock market capitalization or from 60 trillion. dollars of property owned by American households. The crisis took on enormous proportions because the losses associated with subprime, instead of being evenly distributed across many portfolios, were concentrated on the balance sheets of banks. The latter were attracted by the high yield of structured derivatives. In addition, banks themselves securitized the loans they issued in order to remove them from their balance sheets and thereby transfer the risks associated with them to investors.
This mechanism allowed banks to evade the requirements and rules of prudential supervision, created an atmosphere of euphoria and led to underestimation of risks. When the mortgage crisis broke out, interbank relations were blocked and mistrust arose between financial market operators. This development of events required states to develop plans to rescue financial systems, the collapse of which posed a threat to the real economy. However, despite these plans, the position of financial systems and especially banks remained very vulnerable. The increase in bank capitals (recapitalization), which saved them from collapse, did not provide them with additional resources to finance the economy.
The interbank lending market is one of the most important sources of short-term borrowing for credit institutions experiencing temporary liquidity difficulties. It is quite natural that during an economic downturn, the role of the interbank market in maintaining the stability of the banking system increases especially strongly.
In general, from January 2001 to June 2009, the volume of interbank loans on the Russian market increased from 104.7 billion rubles. up to 2314 billion rubles, or 22.1 times. The average annual growth during this period was 44.5%. The growth, as we see, is quite significant. For comparison, we note that over the same period, the volume of all other loans (both corporate and retail) in the Russian Federation increased by 21.1 times, that is, somewhat less. Thus, the annual growth in the volume of loans issued to corporate and retail clients over eight and a half years averaged 43.8%, or 0.7 percentage points. below similar data on the growth of the interbank loan portfolio.
True, unlike other lending segments, the interbank market is developing more volatile, since the volume of loans issued here depends both on the short-term need for liquidity that periodically arises from the banks being financed, and on the availability of temporarily free funds from creditor banks.
With the beginning of the recession in the Russian market, the role of the interbank market in stabilizing the banking system increased significantly. This explains the fact that from June 1, 2008 to June 1, 2009, the volume of interbank loans increased by 44.5%, while the total volume of corporate and retail loans increased by only 16.0%. As we can see, the volume of interbank lending grew almost three times faster during this period.
Obviously, this was due to liquidity problems that arose during the period of economic and financial difficulties, which contributed to a sharp increase in the share of interbank loans in the loan portfolio of banks.
However, in the period from January 1, 2001 to January 1, 2008, the opposite trend was observed in the market: the share of interbank loans in the total loan portfolio of all banks decreased from 11.5 to 6.4%, that is, by more than 5%. This indicates that over the course of eight years, the liquidity situation in the banking sector has gradually improved, which allowed banks to reduce the volume of borrowing on the interbank market. At the same time, the share of interbank loans in the total volume of loans from the five largest banks before the start of the recession was smaller (although this group was the undisputed leader in terms of the absolute volume of all loans and the volume of interbank loans) than in other groups of banks, with the exception of the smallest ones. The onset of the economic crisis and anti-crisis lending (unsecured loans from the Bank of Russia, auctions of the Ministry of Finance of Russia aimed at large banks, etc.) led to an increase in the share of interbank loans in the total volume of loans from the five largest banks more than doubling (as of January 1, 2009) – up to 13%.
However, by 1 2009, when the situation in the credit market had somewhat stabilized, the share of interbank loans among all banks decreased to 12%, and among five large banks - to 10.6%. A slight decrease in the share of interbank loans in the total volume of loans also occurred among banks that rank 21–50 in terms of assets. However, for other groups of banks, the share of interbank loans in the loan portfolio increased in the first five months of 2009. At the same time, the leaders in the share of interbank loans in the loan portfolio were banks occupying 6th–20th places in terms of assets - up to 13.7%.
If we look at the share of various groups of banks in the total portfolio of interbank loans of all banks, then this indicator changed as follows. From January 1, 2001 to January 1, 2008, the share of the five largest banks - depending on the liquidity situation in the market - ranged from 25 to 35% of all issued interbank loans.
However, with the start of anti-crisis lending, the five largest banks acquired 52% of the entire interbank market, while the share of interbank loans issued by other banks decreased significantly. True, as the circle of large banks participating in obtaining anti-crisis loans expanded, by June 1 of this year the share in the industry portfolio of interbank loans from the five largest banks decreased to 45.0%, while for banks occupying 6–6% in terms of assets 20th place, this share increased from 15.8 to 23.6%.
A slight increase in the share of interbank lending in the first five months of 2009 was also observed among the group of banks occupying 201–1000 places in terms of assets. However, in general, from January 1, 2008 to June 1, 2009, the market share in interbank lending of banks occupying 21–50th places in terms of assets decreased by 1.3 times; for banks occupying 51–200 places – 1.95 times; for banks occupying 201–1000 places – 3.4 times; for banks occupying 1001–1311 places – 5 times. Thus, with the exception of the top twenty banks, all other groups of banks have been forced to reduce their share in the total volume of interbank loans over the past year and a half. Moreover, the smaller the average bank’s assets, the more noticeably the scale of its participation as a lender in interbank lending has decreased.
An important role in a bank’s competitiveness in the interbank market is played not only by the cost of its credit resources and the conditions under which it is willing to allocate them, but also by the amount of credit that it is able to lend to another bank. According to this indicator, the top five largest banks are undoubtedly in the lead. Thus, here you can see the average volume of interbank loans issued per bank in each group of credit institutions.
Over the past nine years, the five leading banks have been the most successful in increasing their average portfolio – by 38.3 times. However, even for the smallest banks, the average portfolio of interbank loans increased 4 times during this period. However, if we compare the growth indices of the average portfolio of interbank loans for various groups of banks with a similar indicator for all banks, then only for the five largest banks this figure turned out to be higher than the industry-wide indicator, and significantly ahead. Thus, if at the beginning of 2001 the average portfolio of interbank loans in the group of the five largest banks was 2.33 times greater than that of banks occupying 6–20th places in terms of assets, then at the beginning of 2009 it was already 9.9 times higher times. However, as the circle of large banks receiving anti-crisis loans expanded, by June 1 of this year the average portfolio of interbank loans of the five largest banks exceeded the similar portfolio of banks occupying 6–20th places in terms of assets by only 5.7 times.
It is quite natural that market participants are interested in what the volume of interbank loans will be in the coming months. In order to answer this question, we take “the volume of interbank loans with a lag of one month” as an independent variable, and “the volume of interbank loans issued in the current month” as a dependent predicted variable. As a result, we got the following autoregressive equation (1):
Y 0 = 1.0231 x X -1 (1)
where Y 0 is the volume of interbank loans issued in the current month; X -1 – volume of interbank loans with a lag of one month.
The meaningful interpretation of this equation is as follows: growth by 1 million rubles. the volume of interbank loans issued last month contributed to an increase in the volume of interbank loans in the current month by 1 million rubles. and 23.1 thousand rubles. The trend based on the above equation turned out to be stable with a coefficient of determination equal to 0.989, which means that in 98.9% of cases, fluctuations in actual data are explained by this trend. Since in this autoregression equation the coefficient for X is greater than 1, this indicates the stationarity of the resulting deviations from the forecast, which improves the quality of forecasting. Nevertheless, so-called “disturbances” caused by external shocks may periodically appear in the residuals (deviations from the forecast). As a result, for example, as of February 1, 2008 (Table 2.1), the deviation from the forecast of the actual volume of interbank loans issued exceeded 44%, but in the vast majority of cases the deviations do not exceed ±7–10%.
Table 2.1 – Growth of interbank lending in 2008–2009 and forecast until January 1, 2010
| Volume of interbank loans (million rubles) | Forecast (million rubles) | Deviation (million rubles) | Deviation(%) |
|
| | | |
According to estimates, the volume of interbank loans by January 1, 2010 will increase to 2,715,255 million rubles, that is, an increase of 8.5% compared to June 1 of this year (the latest data from the Bank of Russia available at the time of preparation of the material). It is quite natural that this forecast is probabilistic in nature, and therefore its implementation depends on the continuation of the current trend in the market.
By the way, interbank loans also lead to negative results. A striking example is the global crisis that arose two years ago, which practically paralyzed the economy in our country. Most banks, completely lacking the necessary financial strength, were happy to take out cheap loans abroad and then open multiple lines of credit for large organizations. The unexpected termination of interbank relations instantly led to disastrous results. The global securities market was immediately paralyzed, and we are seeing the results of the financial deficit even now.
The interbank lending market is one of the most important sources of short-term borrowing for credit institutions experiencing temporary liquidity difficulties. It is quite natural that during an economic downturn, the role of interbank loans in maintaining the stability of the banking system increases especially strongly.
Operations carried out in the interbank market cover two main segments - the foreign exchange market (Forex market, Spot, Swap) and operations in the money market (interbank deposits, certificates of deposit, commercial paper). The daily turnover of the international interbank foreign exchange market, according to the Bank for International Settlements, is over $3 trillion. It has grown rapidly over recent years, but the financial crisis has hit hard the interbank market, which exists largely on trust-based relationships between banks.
The main problem of the interbank market is the deterioration of assessments of the financial condition of banks, the decline of credit ratings and the bankruptcy of banks. Due to the crisis of confidence in the interbank market, many credit lines were practically closed, mutual lending to banks almost stopped, and the flow of money between financial institutions decreased noticeably.
Today, the functions of providing money to banks have been taken over by monetary authorities (central banks), but how far should their guarantees extend to the risky transactions of market agents?
After all, the modern financial system is based on the principle of risk assessment, and when the state takes on risks, the main principles of risk taking - the principles of the functioning of lending in the banking system - are distorted.
What happened as a result of the crisis of confidence? There was a shortage of liquidity and turnover on the interbank market dropped significantly – significantly. Banks, having closed the limits, did not actually renew them, and central banks became the largest creditors of commercial banks through repo operations and secured lending.
According to most analysts, the reason for liquidity problems in the money and financial markets is quite simple. Foreign investors invested in developing financial markets using resources denominated in dollars, euros and yen. Accordingly, all kinds of liquidity pools of central banks and national funds, which include Russian funds, were formed in these currencies. These foreign resources, which are the main source of funding for operations in emerging markets, were converted into national currency. And when there was a liquidity crisis and lending tightened, when there was not enough money supply in American markets, investors began to withdraw funds from national financial markets around the world.
One of the problems that emerged during the crisis is the adequacy of reference rates. For example, as a rule, many financial products are tied to the LIBOR rate - loans, securities with a floating interest rate and others. Some banks deliberately lower the LIBOR rate in order to make their funding costs lower. But the market needs a real benchmark for the interest rate, a real interest rate index, so that questions do not arise about the representativeness of the interest rate during the financial crisis. Part of the spread is calculated in relation to the LIBOR rate, but can be calculated differently, taking as a basis the twelve-month, three-month LIBOR rate or the yield of US treasuries. If many short-term spreads are calculated relative to LIBOR, and LIBOR itself does not reflect the true value of money, then the situation becomes even more complicated and it is difficult to understand what value of money is being referred to.
The LIBOR rate is calculated based on transactions in the London market, but, for example, for US banks, the rate in their market is needed. Therefore, some American banks began to use an alternative rate, LIBOR, which is calculated by the international brokerage firm ICAP. For Russian banks, for the Russian currency, there is also a rate - MosPrime. The central bank announced recently that it may focus primarily on it. MosPrime is the basis for fixing rates on lending products or attracting resources; it is a reference rate for ruble loans. It is published on the website of the Central Bank of the Russian Federation. This rate was recently approved by the International Swaps and Derivatives Association and included in the ISDA Definitions (a document that describes rates for all currencies in the world, all markets, and how they are calculated).
Since turnover in the interbank market has dropped significantly and credit lines are poorly restored, then, according to most credit analysts, it will take a lot of time for this market to fully recover - months, if not years. Experts are also discussing the need to change regulation. The interbank market was poorly regulated; it was mainly self-regulated on the basis of various codes, rules for conducting transactions, and mutual agreements. However, now the moment has come when more serious government regulation of this segment is necessary.
It is impossible not to mention the increasing role of money brokers. But these are not brokers on the securities market, not brokerage companies, but the category of interdealer brokers, i.e. money brokers connecting buyers and sellers of financial instruments. The lack of credit lines, as well as banks’ distrust of each other, contribute to the increasing role of money brokers, who more adequately assess lending risks.
In all previous years, monetary resources were concentrated in the largest banks with state participation. This led to distortions in both interest rates and the money supply model from the Central Bank. Medium and small banks needed money for lending in order to directly fulfill their main task - investing in the real sector of the economy. Most of the money, as already noted, was concentrated in the accounts of the largest banks. Previously, the flow of resources was weak, but now it has decreased significantly.
Thus, we can conclude that in order to develop the interbank loan market, changes in tax legislation are needed. In a crisis situation, government authorities should be convinced of the need to introduce changes to the tax regime that will allow the interbank lending market to recover and continue operations. In addition, the existing technologies and infrastructure of the interbank loan market are currently at a rather low level and do not allow us to count on the formation of a single, developed money market, which is an important goal of the Bank of Russia and an urgent need of participants. Currently, the volume of the interbank lending market is small, but there is a tendency towards growth in the volume of the financial market in Russia in general and the interbank lending market in particular. In this regard, a necessary condition for the development of the market is to increase its technological effectiveness. The benchmark is the European organized interbank market, operating on the basis of e-MID, which is now the most technologically developed electronic interbank market and demonstrates enormous growth rates in trading volumes.
The implementation of the project to create an electronic interbank loan market will increase the efficiency and capacity of the Russian interbank loan market as a whole, increase the efficiency and capacity of the market, and attract new participants to it due to increased market liquidity. The creation of an electronic interbank lending market will also significantly improve existing technologies in the Russian interbank lending market and will contribute to the formation in Russia of a single, efficiently functioning money market, operations on which will be available to a wide range of participants.
Conclusion
Interbank credit plays a specific role in the economy: it not only ensures the continuity of production, but also accelerates it. Credit helps save distribution costs. This is achieved by reducing the costs of production, accounting and storage of banknotes, because part of the cash turns out to be unnecessary, accelerating the circulation of funds, reusing available funds, and reducing reserve funds.
The role of interbank credit in different phases of the economic cycle is different. In conditions of economic recovery and sufficient economic stability, credit acts as a growth factor. By redistributing huge amounts of money and goods, credit feeds banks with additional resources. Its negative impact may, however, manifest itself in conditions of overproduction of goods. This impact is especially noticeable in conditions of inflation. New means of payment, entering into circulation through credit, increase the already excess amount of money needed for circulation.
The bank, by attracting interbank loans, has the opportunity to improve its financial condition and establish itself in the banking market. Thus, interbank loans stimulate banks, providing benefits for both the lender-bank and the borrower, but the crisis has significantly reduced the already low flow of resources in the interbank loan market. To change this situation, the following measures are necessary:
– changes in tax legislation;
– development of technologies and infrastructure of the interbank lending market.
List of sources used
1. On banks and banking activities: Federal Law No. 395–1 of December 2, 1990 (as amended on July 27, 2006) – SPK Consultant Plus, 2010.
2. On the Central Bank of the Russian Federation (Bank of Russia): Federal Law No. 86-FZ of July 10, 2002 (as amended on June 12, 2006) Adopted by the State. Duma June 27, 2002 – SPK Consultant Plus, 2010
3. Abramova, M.A. Finance, money circulation and credit: textbook for universities / M.A. Abramova, L.S. Alexandrova – M.: 2006. – 537 p.
4. Balash V.A. Organization of monetary regulation: Proc. allowance / V.A. Balash, E.K. Guryleva, S.E. Prokofiev. – Saratov: Publishing house. Sarat center. state econ. Academy, 2007. – 258 p.
5. Berezina, M.P., Interbank settlements: analysis of practice / M.P. Berezina, Yu.S. Krupnov.-M.: Money and Credit, 2006. – 60 p.
6. Bukato, V.I., Banks and banking operations in Russia: textbook / V.I. Bukato, Yu.I. Lviv. – M.: Finance and Statistics, 2005. – 203 p.
7. Money, credit, banks: Textbook for universities / ed. O.I. Lavrushin. – M.: Finance and Statistics, 2005. – 521 p.
8. Zhukov E.F. Banks and banking operations: Textbook for universities / E.F. Zhukov, L.M. Maksimova, O.M. Markova.-M.: Banks and exchanges, 2004. – 400 p.
9. Practical aspects of bank lending / Bulova D., Nazarov A. // Banking Bulletin. – 2006. – No. 1. – P. 46–52.
10. Risk management / B. Gusakov // Banking technologies. -2005. – No. 6. – P. 122.
11. Interbank credit [Electronic resource]. -Access mode: http://www.creditorus.ru/corporate-credit/interbank.php
12. Interbank credit market [Electronic resource]. - Access mode: http://dic.academic.ru/dic.nsf/fin_enc/24965
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INTRODUCTION
CONCLUSION
INTRODUCTION
Modern interbank foreign exchange markets are characterized by the following main features.
1. Internationalization of foreign exchange markets.
2. Operations are carried out continuously throughout the day, alternately in all parts of the world.
3. The technology of foreign exchange transactions is unified; settlements are carried out using correspondent bank accounts.
4. Widespread development of foreign exchange transactions in order to insure currency and credit risks.
5. Speculative and arbitrage transactions far exceed foreign exchange transactions associated with commercial transactions; the number of their participants has increased sharply and includes not only banks and TNCs, but also other legal entities and individuals.
6. Instability of currencies, the exchange rate of which, like a kind of exchange commodity, often has its own trends that do not depend on fundamental economic factors.
Foreign exchange markets - official centers where the purchase and sale of foreign currencies into national ones takes place at the rate determined on the basis of supply and demand.
The specificity of international payments is that foreign currencies are usually used as the currency of price and payment. Meanwhile, every sovereign state uses its national currency as legal tender. Therefore, a necessary condition for settlements on foreign trade, services, loans, investments, interstate payments is the exchange of one currency for another in the form of purchase or sale of foreign currency by the payer or recipient.
1. Concept and role of the interbank foreign exchange market
The interbank foreign exchange market performs the following main functions:
1. servicing the international circulation of goods, services and capital;
2. formation of the exchange rate based on supply and demand for currency;
3. hedging (insurance) against currency and credit risks;
4. implementation of monetary policy;
5. making a profit in the form of differences in exchange rates and interest rates on various debt obligations.
From an organizational and functional point of view (as a result of the implementation of economic functions), interbank foreign exchange markets provide servicing of the international circulation of goods, services, and works; timely execution of international payments; interconnection of different markets; spontaneous determination of exchange rates by balancing supply and demand; providing mechanisms to protect against currency risks; diversification of foreign exchange reserves of banks, enterprises and the state; currency intervention; the use of the market by states for the purposes of their monetary and economic policies; making a profit in the form of differences in exchange rates and interest rates; regulation of exchange rates of the national currency to foreign currencies (state and market); carrying out monetary policy aimed at state regulation of this area of the economy and other activities.
From an organizational and institutional point of view, the interbank foreign exchange market is a set of authorized banks carrying out foreign exchange transactions.
From an organizational and technical point of view, the foreign exchange market is a set of communication systems that connect banks of different countries that carry out international payments and other foreign exchange transactions.
So, on the one hand, the interbank foreign exchange market is the largest, decentralized financial market in the world, where international trade and exchange of foreign currencies takes place (the volume of transactions in foreign exchange markets is not published, however, according to experts, the total foreign exchange market has a turnover of approximately 100 -200 billion dollars per day).
In addition to commercial banks, the most important participants in the interbank foreign exchange market are the central banks of developed countries. In addition to serving the needs of the government, they conduct operations within the framework of official monetary policy. Representatives of the state may be foreign trade banks and other institutions.
To conduct foreign exchange transactions, large commercial banks have deposits in foreign financial institutions that are their correspondents. At the same time, not all even large banks in Western European countries act as permanent participants in the foreign exchange market. For example, in France they are only a few banks: Crédit Lyonnais, Paribas, Societe Generale, Banque National de Paris, Endosuez and some others.
The foreign exchange market is predominantly an interbank market. Therefore, its main actors are primarily banks and other financial institutions. They can carry out transactions both for their own purposes and in the interests of their clientele. In this case, participants can work in the market, coming into direct contact with each other, or act through intermediaries. In this category, commercial banks primarily stand out, with a special place in it occupied by the central banks of countries.
The group of participants operating in the foreign exchange market includes central banks. They occupy a special position. First of all, by their status they are not commercial institutions and for this reason alone they differ significantly from commercial banks and other financial institutions. Central banks also have a dealing department within their structure. However, foreign exchange transactions occupy a subordinate place in the activities of central banks, since they primarily serve only as a means of performing basic functions and, as a rule, are not aimed at directly generating income.
In addition, central banks have different types of counterparties and perform different functions. On the one hand, they are guided by the orders of their government (in those countries where the central bank does not enjoy full independence) or participate in the implementation of economic policies agreed with it (in countries where the central bank is more independent). They also coordinate their actions in the foreign exchange market with the policies of central banks of other countries (in particular when conducting foreign exchange interventions) and are guided by the provisions of regulatory documents of international financial organizations.
On the other hand, the function of central banks is to monitor the state of the interbank foreign exchange market and regulate it. First of all, this concerns the exchange rate of the national currency, the adjustment of which in the desired direction is carried out, in particular, through interventions in the foreign exchange market, as well as with the help of foreign exchange reserves of the central bank. In addition, this may also affect the operations of the country's commercial banks and other financial institutions, as well as brokers, who are obliged to unconditionally provide the central bank with relevant information.
2. Operations on the interbank foreign exchange market
On the interbank foreign exchange market, operations of various contents are carried out, which are united by the corresponding market segments. The main segments of the interbank foreign exchange market are the cash market (the market for transactions at the current rate, or telegraphic transfer transactions, also referred to in Western literature as the “spot” market) and the derivatives market (or the market for term transactions).
In the cash market (spot market), the purchase and sale of currencies occurs on settlement terms within two business days after the date of the transaction and at the exchange rate at the time of its conclusion.
The cash market, being part of the interbank foreign exchange market, also operates continuously. This means that its participants can buy or sell currency during the entire duration of its operation.
The exchange rate of any currency is set on the spot market in relation to the US dollar, while at a certain moment there may not be a direct relationship between other currencies. Despite the continuous nature of foreign exchange transactions and the constant determination of exchange rates, in some financial centers there is a so-called “fixing” procedure, the duration of which varies in different countries. "Fixing is the process of officially determining the rates of various currencies, i.e. their quotation during periodic meetings of the main market participants, which are held in each financial center. For example, in Paris, on the premises of the stock exchange, since 1977, the fixing procedure takes place daily on business days days for approximately 30 minutes (starting at 13.30 - in winter, and at 14.00 - in summer). At the same time, a representative of the French Association of Exchanges announces the rates of the main currencies (the selling rate and the buying rate for each currency) in relation to the French franc, which are then published in the official publication of France.
The exchange rate of any currency (usually against the US dollar) is expressed as a number that includes four decimal places, i.e. ten thousandths of a unit. In this regard, in the professional terminology of dealers, the concept of “pip” is used, i.e. "point" indicating 1/10000 of the exchange rate. For example, the exchange rate of the French franc against the US dollar can be expressed as 5.5950-5.5958, where the first corresponds to the buying rate and the second to the selling rate. In this case, the franc exchange rate can also be represented in the form of the following expression: 5.5950/08, where 08 is the number of “pips” that makes up the difference between the selling rate and the buying rate, or “spread” (“margin”).
Currently, the cash market (spot market) is still the largest segment of the interbank foreign exchange market. Despite the fact that in recent years trading volume here has increased more slowly than in other segments (currency futures and options markets), the cash market accounts for slightly less than half (about 49%) of the total turnover of the foreign exchange market.
The difference between the seller's rate and the buyer's rate is called "spread" or "margin" and represents the income of the bank using the mentioned quotes when conducting foreign exchange transactions. Such an official quotation of currencies allows the clientele of commercial banks to better navigate the situation in the foreign exchange market and more accurately formulate their orders to banks.
Another important segment of the foreign exchange market is the derivatives market (term transactions). Participants in this market undertake obligations to buy and sell currency at the rate established at the time of the transaction, but with the condition of mutual delivery of currencies within the agreed period. Transactions are concluded either for a period of three to seven days, or for 1, 2, 3, 6, 9, 12 and 18 months, or for two or three years, for five years.
Currencies with delivery at a certain time do not have an official quotation; their rates are determined by market forces, and therefore they differ from the rates of currencies with immediate delivery (spot transactions). Transactions for any period over two business days are called forward transactions. Moreover, if the exchange rate for them is higher than the current spot rate, then they say that such currency is quoted at a premium, but if it is lower than the rate for cash transactions, then we are talking about a discount.
The object of such transactions can usually be any freely convertible currency. However, the longer the transaction period, the fewer currencies it can apply to. The fact is that one of the two main goals of forward transactions, in addition to extracting speculative profit, is primarily insurance against possible risk caused by changes in exchange rates. Therefore, with periods ranging from three days to six months, it is possible to conclude transactions in almost all convertible currencies used in international payments. In transactions for a period of one and two years, currencies such as the Austrian schilling, Belgian franc, Spanish peseta, Italian lira, Portuguese escudo, as well as currencies of the Scandinavian countries are almost never used. For contracts over two years, only the leading currencies are used: US dollar, German mark, Swiss franc, Japanese yen and British pound sterling.
In conditions of stabilization of the foreign exchange market, the volume of futures transactions is reduced compared to cash transactions. On the contrary, with significant fluctuations in exchange rates on the spot market, the volume of forward transactions increases. Thus, in recent years, due to the intensification of destabilizing phenomena in the foreign exchange market, the volume of urgent transactions has increased faster than the volume of cash transactions.
The considered segments of the interbank foreign exchange market in modern conditions are undergoing further evolution. As already noted, the cash market practically still retains first place in terms of transaction volume among other segments in the total turnover of the foreign exchange market. At the same time, the forward market, which covers conventional forward transactions and the swap market, is developing much faster than the cash market (“spot”). First of all, this applies to the swap market, which has become the second largest segment of the foreign exchange market after the cash transactions market. The volume of transactions with currency options has also increased significantly, although relative to other segments its share in the total turnover of the foreign exchange market remains modest.
3. Characteristics of the interbank foreign exchange market of the Russian Federation
Transactions in the foreign exchange market are carried out between banks (interbank foreign exchange settlements) and banks with their clients.
In the Russian Federation, the official exchange rate of the ruble is established using fixing.
The fixing rate is the unified rate of the Central Bank of Russia. Through it, using information about cross rates from the Reuters agency (REUTER), he displays the exchange rate of the ruble to other currencies. Currency fixing occurs twice a week - on Tuesday and Thursday. On the day of currency fixing, the Central Bank of Russia reports the exchange rates of the leading freely convertible currencies to the ruble through publication in the Rossiyskaya Gazeta, in the Russian News, etc.
The volume of currency swap transactions concluded by the Bank of Russia in 2002 - 2005 is presented in table. 1.
Fixing is carried out by the Central Bank of Russia on the Moscow Interbank Currency Exchange (MICEX) and is the determination of the US dollar to ruble exchange rate.
Table 1
Volume of currency swap transactions concluded by the Bank of Russia
(USD million)
| Reporting period | Reporting period | ||
| September 2002 | January 2004 | ||
| October 2002 | February 2004 | ||
| November 2002 | |||
| December 2002 | April 2004 | ||
| January 2003 | |||
| February 2003 | |||
| April 2003 | August 2004 | ||
| September 2004 | |||
| October 2004 | |||
| November 2004 | |||
| August 2003 | December 2004 | ||
| September 2003 | January 2005 | ||
| October 2003 | |||
| November 2003 | October 2005 | ||
| December 2003 | | |
Data on the average daily turnover of interbank cash conversion transactions in 2005 are presented in Table 2.
Table 2
Average daily turnover of interbank cash conversion transactions (millions of US dollars)
|
With Russia's transition to a market economy, forward trading in the field of foreign exchange transactions is gradually expanding, and this is facilitated by a number of factors:
Firstly, the market for fixed-term contracts allows producers and consumers of various products to avoid or reduce price risk when selling or purchasing goods;
Secondly, the futures contract market allows exporters and importers to avoid or reduce the risk of changes in exchange rates. Foreign investors interested in investing in Russian financial instruments and hedging the ruble exchange rate against foreign currencies in order to repatriate profits should also play an important role in increasing activity in this market;
Thirdly, the futures contracts market serves as one of the mechanisms that stabilizes the very functioning of a market economy, including its financial sector, as it allows owners of financial assets to insure the risk of a fall in their market value, and borrowers and lenders - the risk of changes in interest rates.
CONCLUSION
The interbank market is divided into direct and brokerage. Therefore, brokerage firms are an integral part of the institutional structure of the foreign exchange market, through which approximately 30% of foreign exchange transactions pass. Brokerage firms charge a commission for brokerage (up to $20 for every million dollars or equivalent bought or sold).
With the development of electronic means of interbank communication and foreign exchange transactions (Reuters-dealing, Telerate), the role of brokerage firms in the interbank market has decreased, although they continue to play a significant role in the transactions of individuals and small firms.
From a functional point of view, the interbank foreign exchange market provides:
Timely execution of international payments;
Insurance of currency and credit risks;
Interrelation of world currency, credit and financial markets;
Diversification of foreign exchange reserves of banks, enterprises, and the state;
Regulation of exchange rates (market and state);
Receipt of speculative profit by their participants in the form of differences in exchange rates;
Carrying out a monetary policy aimed at state regulation of the economy, and more recently - as an integral part of a coordinated macroeconomic policy within a group of countries (G7, OECD, EU). In terms of volume of transactions, the foreign exchange market significantly exceeds other segments of the financial market.
LIST OF REFERENCES USED
1. Galitskaya S.V. Money circulation. Credit. Finance. - M.: International relations, 2002. - 272 p.
2. Money. Credit. Banks / Ed. E. F. Zhukova. – M.: UNITI, 2002. – 623 p.
3. Liventsev V.K. International economic relations. – M.: INFRA-M, 2005. – 648 p.
4. Navoi A. Currency market // Securities market. - 2002.- No. 1. - With. 35 – 48.
5. Fedyakina L. N. International finance. – St. Petersburg: Peter, 2005. – 560 p.
In most major banking systems, banks are required to maintain reserve accounts with the central bank. At the end of each trading day, a minimum reserve must remain on them, usually 8% of the resources attracted by the bank. Any funds in excess of the minimum reserve may be provided as a loan for interbank market. The borrowing period varies from one day (overnight) to two years, however, a significant part of such loans are daily loans with repayment at 15.00 the next day.
Before 1963, only collateralized short-term loans were available on discount markets against financial assets such as Treasury bills. However, by 1963, in parallel with the emerging Eurodollar markets, merchant banks and discount houses began to trade with each other without collateral. By 1971, clearing banks entered the interbank market.
Clearing banks must close the balance every day and maintain a liquidity fund at a level that can cover any urgent withdrawals. When the bank's cash resources are less than the established reserve, the bank makes an overnight loan. Another bank with excess cash makes an overnight loan on the interbank market and receives interest on it. In the United States, such interbank transactions are carried out at the so-called “federal funds” rate (the rate used in transactions between banks that are members of the Federal Reserve System).
A highly liquid interbank market allows banks to reduce the liquidity support fund and use the freed-up funds for lending on favorable terms. The resulting deficit is covered by borrowing on the interbank market. In such an unsecured market, well-known banks can borrow on their own behalf and lend to lesser-known banks at a higher interest rate.
The interbank rate is often used by commercial banks to determine their base lending rate(base lending rate), or "prime rate"(prime rate).
The interbank market is also used by banks to convert short-term loans into long-term ones. Banks borrow from financial institutions, such as pension funds and corporations, for periods ranging from one day to two years. They then provide loans to their clients for up to five years, while they themselves borrow funds again on the interbank market, for example every six months, to service short-term loans.
Over 500 banks use the services of the interbank market in London every day. Fixed loan terms allow both parties to the transaction to plan their operations and manage cash flows.
Since the 1980s, multinational organizations that previously placed their excess funds in banks, as well as local government structures, etc. began to use the interbank market to meet their needs. Corporations can either issue their own sterling-denominated financial instruments themselves or use brokers to act on their behalf.
In the interbank market, money brokers act solely as intermediaries between borrowers and lenders. For this they receive commissions on completed transactions. There is a strict code of professional practice that governs the activities of brokers, including ensuring confidentiality in relation to their clients.
Brokerage houses have been actively established since 1963 and now offer a wide range of services, including interbank transactions, loans to local governments and transactions in other government financial instruments. The interbank market is not uniform; it consists of two separate, although similar parts:
- national markets;
- Euromarkets.
National markets
In a general sense, each country has its own national market in which financial instruments in national currency are traded. Participants in such markets include national and foreign financial institutions that are located in the country of that currency, such as participants in the federal funds market in the United States.
It is in national markets that local banks conduct their day-to-day operations, which include borrowing and lending to close accounts or test the market. National markets vary in size, ranging from huge ones, such as the federal funds market in the United States or the national yen market in Tokyo, to small ones, such as the Czech crown market in Prague.
In practice, trade in each country is concentrated in the main financial centers, where it is controlled by local regulators. Usually this central banks countries whose role was discussed above.
Euromarkets
Where did the Euromarkets come from? At one time, money deposit markets consisted exclusively of national markets, relatively loosely linked to each other through the global foreign exchange market. However, as a result of a series of political events and decisions in the 1960s, the Euromarket was created in London as a “safe haven” for investments in US dollars. Such a “harbour” was needed by the US’s Cold War opponents. These countries did not trust the American government because of its influence on the activities of the American banking system. They were inclined to conclude an agreement under which London banks would become a repository for their savings in American dollars.
Since London banks are not subject to US jurisdiction, it was assumed that dollar assets there would be insulated from political events occurring in the United States. Unexpectedly, all this created new conditions for the activity of financial markets. The central bank lost complete control over its currencies held in other countries. Eventually, Euromarkets were created for all major currencies.
One of the very first participants to operate in the new foreign market, borrowing and providing loans in American dollars, was a Russian bank located in Paris - the Commercial Bank for Northern Europe (Banque Commerciale pour L "Europe du Nord). Since the 50s years of the 20th century, it had the telegraphic address of Eurobank. Since it was one of the most active participants in the market, its operations began to be referred to as Eurobank dollars, and then they began to be called simply “Eurodollars”.
Subsequently, the term "euro" came to apply to any foreign currency loan/credit carried out outside the country of that currency or the jurisdiction of its central bank. Thus, if a bank located in London lends in French francs to a bank in Amsterdam, the transaction is called a Eurofranc transaction. The term was especially used in the 60s and 70s during a period of strict capital and exchange controls, when interest rates for European transactions or external entities could be several percentage points higher (for weak currencies) or lower (for strong currencies) than for corresponding national transactions.
As the new European Union currency is called the "euro", the use of this term to refer to these external transactions may become less common.
An important feature of European markets is that they are not subject to central bank reserve requirements.
Tax considerations are also pushing banks to expand beyond their home countries and open branches where tax rates are lower. It is for this reason that a number of offshore banking centers. Even American banks, in order to become inaccessible to the tax department, began to open their branches in the Bahamas and the Netherlands Antilles.
Euromarkets emerged and proved to be an accessible source of relatively cheap reserve-free financing for the rapidly expanding sphere of international lending. This growing pool of international lending has become the main source of financing for interbank market institutions. The size of the Euromarkets is enormous: the Eurodollar market is currently the largest deposit market in the world.
So, the following is typical for the interbank market.
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