Banks are financial intermediaries, since, on the one hand, they accept deposits (deposits), attracting money from savers, i.e., they accumulate temporarily free funds, and on the other hand, they provide these funds at a certain percentage to economic agents who need them, i.e. i.e. give loans. Thus, banks are intermediaries in credit, so the banking system is part of the credit system.

The credit system consists of banking and non-banking (specialized) credit institutions. Non-bank credit institutions include funds (investment, pension, etc.), insurance companies, savings and loan associations, credit unions, pawnshops, etc., i.e., all organizations that perform the functions of intermediaries in credit. The modern banking system has two levels. The first level is the central bank (CB), the second level is the system of commercial banks.

). International practice knows several types of banking systems:

· distributive centralized banking system;

the market banking system;

· Banking system of the transitional period.

Distribution (centralized) banking system : the state is the sole owner, the state monopoly on the formation of banks, a single-level banking system, a single bank policy, the state is responsible for the obligations of banks, banks are subordinate to the government and depend on its operational activities, credit and emission operations are concentrated in one bank, the head of the bank is appointed by the central or local authorities by higher authorities.

In contrast to the distribution (planned-administrative) system, the banking system market type characterized by the absence of a state monopoly on banking activities. Banking competition is typical for the banking system in market conditions. Issuing and lending functions are separated from each other. The issue of money is concentrated in the central bank, lending to enterprises and the population is carried out by various business banks - commercial, investment, innovative, mortgage, savings, etc. Commercial banks are not liable for the obligations of the state, just as the state is not liable for the obligations of commercial banks.

functions of the central bank. The Central Bank is the main bank of the country. In the US, it is called the FRS (Federal Reserve System), in the UK - the Bank of England, in Germany - the Bundesbank, in Russia - the Central Bank of the Russian Federation (Bank of Russia).

The Central Bank has the monopoly right to issue banknotes, which provides it with constant liquidity. The money of the Central Bank consists of cash (banknotes and coins) and non-cash money (accounts of commercial banks in the central bank).

As the government's banker, the Central Bank services the government's financial transactions, mediates payments to the treasury, and lends to the government.

The Central Bank is also a bank of banks, that is, commercial banks are clients of the Central Bank, which keeps required reserves, which allows it to control and coordinate their domestic and foreign activities. In addition, he acts as a lender of last resort to struggling commercial banks, providing them with credit support by issuing money or selling securities. In addition, the Central Bank performs the functions of an interbank settlement center and a custodian of the country's gold and foreign exchange reserves. In this last capacity, the Central Bank services the country's international financial transactions and controls the state of the balance of payments, acts as a buyer and seller in international currency markets.

The Central Bank determines and implements monetary (monetary) policy.

The second level of the banking system is made up of commercial banks. There are universal and specialized commercial banks. So, banks can specialize, for example: 1) according to their goals: investment (lending investment projects), innovative (issuing loans for the development of scientific and technological progress), mortgage (issuing loans secured by real estate); 2) by industry: construction, agriculture, foreign trade; 3) by customers: serving only firms, serving only the population, etc.

Commercial banks are private organizations that have the legal right to raise free cash and make loans for profit.

Therefore, commercial banks perform two main types of operations: passive - to attract deposits and active - to issue loans. In addition, commercial banks perform settlement and cash, trust (trust), interbank operations (credit - for issuing loans to each other and transfer - for transferring money from account to account), operations with securities, operations with foreign currency, etc.

The main part of the income of a commercial bank is the difference between interest on loans and interest on deposits (deposits). Additional sources of income for the bank may be commissions for the provision of various types of services (settlement and cash, trust, transfer, etc.). Part of the income goes to pay the bank's expenses, which include the salary of bank employees, the cost of equipment, the use of computers, cash registers, rent of premises, etc. The amount remaining after these payments is the bank's profit, dividends are accrued from it to holders shares of the bank, and a certain part can be used to expand the bank's activities.

Creation of money by commercial banks. bank multiplier. The process of creating money by commercial banks is called credit expansion, or credit multiplication. It occurs if money enters the banking sector and the deposits of a commercial bank increase, that is, if cash turns into non-cash . If the amount of deposits decreases (the client withdraws money from his account), the opposite process occurs - credit contraction.

When considering the credit extension process, keep in mind that:

> firstly, only universal commercial banks can create money. Neither non-bank credit institutions nor specialized banks can create money;

> secondly, universal commercial banks can only create money under a fractional reserve system. If the bank does not issue loans, the money supply does not change, since the amount of cash received on deposit is equal to the amount of reserves stored in the bank's safe. Therefore, there is only a redistribution of funds between money outside the banking sector and money inside the banking system within the same value of the money supply.

Thanks to the fractional reserve system, the maximum increase in the money supply occurs on the condition that: a) commercial banks do not keep excess reserves and lend the entire amount of funds in excess of required reserves; this means that they use their credit opportunities in full and the reserve ratio is equal to the required reserve ratio; b) once in the banking sector, the money does not leave it and, being issued on credit to the client, does not settle with him in the form of cash, but again returns to the banking system (credited to a bank account).

Thus, the change in the money supply depends on two factors: the amount of reserves of commercial banks issued on credit, and the size of the bank multiplier. By acting on one or both factors, the Central Bank can change the value of the money supply by pursuing a monetary (credit and monetary) policy

bank multiplier- this is an increase in the money supply (multiplication of money) as a result of deposit and credit operations of commercial banks. This process is regulated by central banks in the framework of monetary policy with the help of reserve requirements.

The process by which commercial banks create money is called deposit extension, or deposit animation.

It occurs in the event that money enters the banking sector and deposits of a commercial bank increase, some of which the bank issues on credit. If the deposits decrease (the client withdraws money from his account), then the opposite process takes place - credit squeeze.

Let's say in some country there was no money, but there was a central bank. He printed money in the amount of $10,000 and handed it over to Citizen A. In turn, Citizen A deposited the funds he received into an account at Bank No. e. gg= 10%. Then the balance sheet of bank No. 1 will look like this:

In this case, 900 dollars, bank number 2 will store in the central bank, and the remaining 8100 dollars will be loaned to citizen B, who will place it in bank number 3. Accordingly, the money supply will increase by 10,000 + 9,000 + 8,100 dollars. bank number 3 will look like:

Reserves 810 Credit 7290	Deposit 8100

Bank No. 3 will keep $810 in the central bank, and will again lend $7290 to citizen G, who will place the money received in bank No. 4. Thus, the money supply will increase again and will be 10,000 + 9000 + 8100 + 7290 dollars, etc. until the amount of reserves held by the central bank reaches $10,000.

So the money supply created by the credit multiplication

10 000 + 9 / 10 10 000 + (9 / 10) 2 10 000 + ... + (9 / 10)" 10 000,

equals the sum of an infinitely decreasing geometric progression with the denominator (9/10) and the first member 10,000;

In this case Ms is determined by the formula for the sum of terms of an infinitely decreasing geometric progression.

The additional money supply resulting from the appearance of a new deposit is determined by the formula

where /r obligation - the norm of required reserves; D- initial contribution.

The coefficient 1 /yy is called bank multiplier, which shows how many times the sentence Ms exceeds the initial deposit.

The central bank that controls the money supply cannot directly influence the entire supply of cash and demand deposits:

since it does not determine the amount of deposits (this is done by the population). It regulates only the amount of cash M 0(because he himself puts it into circulation) and the amount of required reserves of commercial banks R(since they are stored in his accounts), i.e. monetary base.

monetary base (monetary base), or high power money 5, is the sum of cash and reserves controlled by the central bank:

The central bank can control and regulate the money supply in the country through the regulation of the monetary base, since the money supply is the product of the monetary base and the monetary multiplier:

To derive a money multiplier, it is necessary to take into account the ratio in which the population keeps money in the form of cash (M 0) and in bank accounts (deposits D), called deposit rate cr (currency-deposit ratio - ratio of cash to deposits):

Dividing the first equation by the second, we get

where ( cr+ 1 )/(cr + n)- money multiplier, or monetary base multiplier, i.e. coefficient showing how much the money supply will increase (decrease) with an increase (decrease) in the monetary base per unit:

If we assume that there is no cash (M 0 = 0) and all money circulates only in the banking system, then from the money multiplier we get the bank multiplier

The value of the money multiplier depends on the reserve rate and the deposit rate. The higher they are, i.e. the larger the share of reserves that banks do not lend, and/or the higher the share of cash that the population keeps on hand without investing it in bank accounts, the smaller the value of the money multiplier.

The central bank only controls the supply of money in the economy. Commercial banks create money.

The process by which commercial banks create money is called credit expansion or credit animation. It occurs if money enters the banking sector and the deposits of a commercial bank increase, i.e. if cash turns into non-cash. If the amount of deposits decreases (the client withdraws money from his account), then the opposite process will occur - credit squeeze.

Commercial banks can create money only under partial redundancy. If the bank does not issue loans, the money supply does not change, since the amount of cash received on deposit is equal to the amount of reserves stored in the bank's safe. There is only a redistribution between the money outside the banking sector and the money inside the banking system within the same value of the money supply. The process of deposit expansion begins from the moment when the bank issues a loan.

Maximize the money supply takes place provided that:

Commercial banks do not keep excess reserves and the entire amount of funds in excess of the required reserves is issued on credit, i.e. use their credit opportunities in full and the reserve ratio is equal to the required reserve ratio;

Entering the banking industry money do not leave it and, being issued on credit to the client, do not settle him in the form of cash and again returned to the banking system (credited to a bank account).

Assume that the required reserve ratio rr obligatory= 20% and banks fully use their credit opportunities, so the reserve ratio is equal to the required reserve ratio ( rr= rr obligatory). If Bank 1 receives a deposit of $1,000, it must deposit $200. to the required reserves R obligatory = D*rr= 1000 * 0,2 = 200 ), and its credit capacity will be $800. (TO- D* (1-rr) = 1000 * (1 - 0,2) = 800 ). If Bank 1 lends this entire amount to a customer, the result will be that its balance sheet will look like

Bank balance 1

Assets	Liabilities
R obligatory = 200 K=800	D=1000

and the money supply, calculated by the formula M=C+D will be 1800 dollars. ($1,000 on bank deposit and $800 in bank-issued cash), i.e. will increase by $800. In this way, the basis for increasing the money supply is the issuance of loans by commercial banks.

The funds received ($800) are used by the client to purchase the goods and services he needs (the firm - investment, and the household - consumer or housing), creating income (revenue) for the seller, which will go to his (the seller's) current account in another bank (for example , jar 2). After receiving a deposit of $800, Bank 2I will allocate $160 to the required reserves. (800 * 0.2 =160), and his credit capacity will be 640 dollars. (800 * (1 - 0.2) = 640):

Bank balance II

By providing a loan for this amount, bank 3 will create a prerequisite for increasing the credit capacity of bank 4 by $409.6, bank 5 by $327.68. etc. We get a kind of pyramid (Fig. 8.2), reflecting the process of deposit expansion.

Rice. 8.2. The process of deposit expansion

The total amount of money (total deposits of banks 1,23,4 and 5, etc.) available in the entire banking system will be:

We get the sum of an infinitely decreasing geometric progression with a denominator (1 - rr)< 1, which is equal to:

In our case M= 1000 * 1/0.2 = 1000 * 5 = 5000. Thus, if the deposits of commercial banks increase, then the money supply increases to a greater extent, i.e. valid multiplier effect

Value 1/rr called banking (credit) multiplier (mult bank) or deposit expansion multiplier(deposit multiplier):

The bank multiplier shows the total amount of deposits that the banking system can create from each monetary unit invested in a commercial bank account:

In our example, each dollar of the initial deposit provided $5. funds in bank accounts.

The multiplier works in both directions; the money supply increases if money enters the banking system (deposits increase), and decreases if money leaves the banking system (they are withdrawn from accounts). And since, as a rule, in the economy, money is both invested in banks and withdrawn from accounts, then the money supply will not change significantly. Such a change can only occur if the central bank changes the reserve requirement ratio, which will affect the lending capacity of banks and the value of the bank multiplier. It is no coincidence that the change in the required reserve ratio is one of the instruments of monetary policy (policy to regulate the money supply) of the central bank (see topic 9).

Using the bank multiplier, you can calculate not only the amount of money supply ( M), but also its change ( ΔM). Since the value of the money supply is made up of cash and funds in current accounts of commercial banks (M= C + D)), then the deposit of bank 1 received money ($1,000) from the sphere of cash circulation, i.e. they already formed part of the money supply, there was only a redistribution of funds between C and D). Consequently, the money supply as a result of the process of deposit expansion increased by $4,000. (ΔM \u003d M - D 1 \u003d 5000 -- 1000 =4000), i.e. commercial banks have created money for this amount due to the issuance of loans. The process of increasing the money supply began with the provision of a loan by bank 1 to its client in the amount of its credit capabilities, equal to $ 800. and the resulting increase in the total deposits of Bank 2. This, in turn, provided Bank 2 with the opportunity to issue a loan in the amount of $640. and, as a result, an increase in the amount of deposits of the bank 3, etc. Therefore, the change in the money supply can be calculated as follows:

The process of deposit expansion also occurs when banks do not fully use their lending capabilities and keep excess reserves, and when the population only invests part of the funds on a bank deposit, and keeps part of it in cash, however, the increase in the money supply will be less.

So, for example, if banks keep 5% of deposits in the form of excess reserves without lending them, which means that the reserve ratio will be 25% (20% required reserve ratio + 5% excess reserve ratio), then the money supply multiplicatively increase, but not by 4000 dollars, but only by 3000 dollars, since the loan of bank 1 will be 750 dollars. (1000 - 1000 * 0.25 = 750), and the value of the deposit multiplier will be 4 (1/0.25 = 4).

Similarly, if the seller does not transfer the funds received from the client of bank 1 in full to his account in bank 2, leaving himself, for example, 100 dollars. cash, 700 dollars, not 800, will fall on the deposit, so bank 2 will be able to lend not 640 dollars, but only 560 dollars. (700 - 700 * 0.2 = 560). As a result, the money supply will increase, but not by the maximum amount.

If banks keep excess reserves, then lending them out can provide an additional increase in the money supply, which is calculated by the formula:

In our example, if the bank issues its excess reserves of $50. (800 - 750) on credit, then an additional increase in the money supply will be 250 dollars. (50 *(1/0.2) = 250).

So, the change in the money supply depends on two factors:

The amount of reserves of commercial banks issued on credit;

The value of the bank multiplier.

By acting on one or both of these factors, the central bank can change the money supply by pursuing monetary (monetary) policy.

The central bank only controls the supply of money in the economy. Commercial banks create money.

Money creation process called commercial banks credit expansion or credit animation. It begins if money enters the banking sector and the deposits of a commercial bank increase, that is, if cash turns into non-cash money. If the amount of deposits decreases (the client withdraws money from his account), then the opposite process occurs - credit contraction.

When considering the credit extension process, keep in mind that:

money can only create universal commercial banks. Neither non-bank credit institutions nor specialized banks can do this;

universal commercial banks can create money only under the conditions of the system partial reservations. If the bank does not issue loans, the money supply does not change, since the amount of cash received on deposit is equal to the amount of reserves stored in the bank's safe. Therefore, there is only a redistribution of funds between money outside the banking sector and money inside the banking system within the same value of the money supply. Thanks to the partial reservation system maximizing the money supply takes place if:

commercial banks do not keep excess reserves and the entire amount of funds in excess of the required reserves is issued on credit. This means that they make full use of their credit and the reserve ratio is equal to the required reserve ratio;

entering the banking industry money is not leave it and, being issued on credit to the client, do not settle him in the form of cash and again returned to the banking system (credited to a bank account).

Assume that Bank I receives a deposit of $1,000 and that the reserve requirement is 20%. In this case, the bank must allocate $ 200 to the required reserves (R about. = Dx rr = 1000 x 0.2 = 200) and his credit capacity will be $ 800 (K = Dx (1 - rr) = 1000 x (1 - 0.2) = 800). If he lends this entire amount (he fully uses his credit possibilities), then his client (any economic agent, since the bank is universal) will receive $ 800 on credit.

The client uses the funds received to purchase the goods and services he needs (the company - investment, and the household - consumer or housing), creating income (revenue) for the seller, which will go to his (the seller's) current account in another bank (for example, Bank II) . Bank II, having received a deposit of $800, will contribute $160 to the required reserves (800 x 0.2 = 160) and its lending capacity will be $640 (800 x (1 - 0.2) = 640).

By issuing this amount on credit, the bank will enable its client to pay for the transaction (purchase) for this amount, that is, it will provide revenue to the seller. The sum of 640 dollars in the form of a deposit will go to the settlement account of this seller in Bank III. Bank III's required reserves will be $128 (640 x 0.2 = 128), and credit opportunities - $512 (640 x (1-0.2) = 512).

By providing a loan for this amount, Bank III will create a prerequisite for increasing the credit capacity of Bank IV by $409.6, Bank V - by $327.68, and so on. We get a kind of pyramid:

This is the process of deposit expansion, which began from the moment the Bank issued 1 loan to its client.

The total amount of money (the total amount of deposits of banks I, II, III, IV, V, etc.) created by commercial banks will be:

Thus, we got the sum of an infinitely decreasing geometric progression with a denominator (1 - rr), that is, a value less than 1. In general terms, this sum will be equal to:

In our case M= 1000 x 1 / 0.2 \u003d 1000 x 5 \u003d 5000.

Value 1 /rr is called banking(or credit) multiplier.

Another name for it is deposit expansion multiplier. All these terms mean the same thing, namely: if the deposits of commercial banks increase, then the money supply increases to a greater extent.

M=D Xmult bank .

In the US, for example, the bank multiplier is 2.7.

bank multiplier shows the total amount of deposits that the banking system can create from each monetary unit invested in a commercial bank account. In our example, each dollar of the initial deposit created $5 of funds in bank accounts.

The multiplier works in both directions. The money supply increases if money enters the banking system (deposits increase) and decreases if money leaves the banking system (they are withdrawn from accounts). And since, as a rule, in the economy, money is both invested in banks and withdrawn from accounts, then the money supply will not change significantly. Such a change can only occur if the central bank changes the reserve requirement ratio, which will affect the lending capacity of banks and the value of the bank multiplier. It is no coincidence that the change in the required reserve ratio is one of the instruments of monetary policy (policy to regulate the money supply) of the central bank.

Using the bank multiplier, you can calculate not only the amount of money supply (M), but also its change (). Since the value of the money supply is made up of cash (C) and non-cash money (funds in current accounts of commercial banks), that is M=C+D, then the deposit of Bank I money ($ 1000) came from the sphere of cash circulation, that is, they already constituted part of the money supply, and there was only a redistribution of funds between C and D. Consequently, the money supply as a result of the process of deposit expansion increased by $4,000 (= M-D I = 5000-1000= 4000), that is, commercial banks have created money for this amount. This was the result of their lending, so the process of increasing the money supply began with an increase in the total deposits of Bank II as a result of Bank I lending to its customers in the amount of its lending capacity equal to $ 800. Therefore, the change in the money supply can be calculated by the formula:

Thus, the change in the money supply depends on two factors:

on the amount of reserves of commercial banks issued on credit;

on the value of the bank multiplier.

Influencing one of these factors or both factors, the central bank can change the value of the money supply, pursuing monetary (credit and monetary) policy.

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The process of creating money by commercial banks is called credit expansion or credit multiplication.

It occurs in the event that money enters the banking sector and deposits of a commercial bank increase, some of which the bank issues on credit. If deposits decrease (the client withdraws money from his account), then the opposite process occurs - a credit contraction.

Commercial banks can only create money under the system partial reservation. If the bank does not issue loans, the money supply does not change, since the amount of cash received on deposit is equal to the amount of reserves held by the bank. There is only a redistribution of funds between money outside the banking sector and money within the banking system within the same value of the money supply.

Maximize the money supply takes place provided that:

Commercial banks do not keep excess reserves and the entire amount of funds in excess of the required reserves is issued on credit, i.e. make full use of their credit and the reserve ratio is equal to the required reserve ratio;

- entering the banking industry money do not leave it and, being issued on credit to the client, do not settle him in the form of cash and again returned to the banking system (credited to a bank account).

Let's pretend that rr obligatory= 20% and banks fully use their credit opportunities, so the reserve ratio is equal to the required reserve ratio ( rr = rr obligatory) . If bank1 receives a $1000 deposit, then it must deduct $200 to the required reserves ( R obligatory = D × rr= 1000 × 0.2 = 200), and his credit capacity will be $800 thousand ( To = D× (1 - rr) = 1000 × (1 - 0.2) = 800).

1 bank received 1000 thousand, of which ® 20% in reserve - 200 thousand.

¯ 80% for loans - 800 thousand rubles

Bank 2 received 800 thousand, of which ® 20% in reserve - 160 thousand.

¯ 80% for loans - 640 thousand rubles

Bank 3 received 640 thousand, of which ® 20% in reserve - 128 thousand.

¯ 80% for loans - 512 thousand rubles

By lending this amount, Bank 3 creates the precondition for an increase in the lending capacity of Bank 4 by $409.6, Bank V by $327.68, and so on, and a further corresponding increase in the money supply. We get a kind of pyramid, reflecting deposit expansion process:

I bank D 1 = 1000

K 1 R 1 K 1 \u003d D 1 × (1 - rr)

II bank D 2 = 800 200

K 2 R 2 K 2 \u003d × (1 - rr)

SH bank D 3 = 640 160

K 3 R 3 K 3 \u003d × (1 - rr)

IV bank D 4 = 512 128

K 4 R 4 K 4 = × (1 - rr)

V bank D 5 = 409.6 102.4

K 5 R 5 K 5 \u003d × (1 - rr) etc.

The total amount of money (the total amount of deposits of banks I, P, III, IV, V, etc.) will be: M \u003d D I + D P + D W + D IV + D V + ... \u003d D 1 + D 1 × (1 - rr) +

+ × (1 – rr) + × (1 – rr) + × (1 – rr) + + × (1 – rr) + … = 1000 + 800 + 640 + 512 + 409.6 + 327.68 + …

We get the sum of an infinitely decreasing geometric progression with a denominator rr<1 , the sum of which is: M \u003d D 1 × \u003d D 1 ×,

D 1 - initial contribution (deposits)

rr is the required reserve ratio of a commercial bank.

In our example M= 1000 × = 1000 × 5 = 5000. Thus, If deposits of commercial banks increase, then the money supply increases to a greater extent., i.e. valid multiplier effect.

The money multiplier and the bank multiplier show how many times the money supply will change (increase or decrease) if the value of commercial bank deposits changes (increase or decrease, respectively) by one unit. So the multiplier works both ways. The money supply increases as money enters the banking system (increases in deposits) and decreases as money leaves the banking system (i.e., withdrawn from deposits). And since, as a rule, in the economy, money is both invested in banks and withdrawn from accounts, the money supply cannot change significantly.