The Banking System (стр. 2 из 3)
The FDIC was established in 1933 to insure commercial bank deposits and help restore confidence in a banking system heavily shaken by the Great Depression and help and the resulting financial collapse of the early 1930s.Currently commercial bank deposits are insured up to $100,000 per account by the Bank Insurance Fund (BIF) of the FDIC.A non-Federal Reserve member bank insured by the FDIC is subjects to periodic examination by the FDIC to ascertain whether it is meeting requirements,including minimum levels of capital, and following appropriate lending rules.Insured banks that are members are similarly examined by the federal Reserve System.In addition, state banks are subjects to examination by state banking officials.
The previos discussion indicates that a number of agencies can be involved in chartering, insuring, examining, and setting rules for commercial banks.Numerous proposals have been made for reducing or reorganizing the regulatory structure of commercial banking.These proposals have included vesting all examination responsibility in the FDIC because virtually all commercial banks have deposits insurance, one agency could provide uniform examinations standarts.These proposals tend to encounter considerable opposition from regulators and bankers, however, and have not been enacted.IN contrast to giving the FDIC more power, the U.S.Treasure proposed in February 1991 that many bank regulatory activities be combined in a new agency, removing much regulatory responsibility from the FDIC, thought retaining considerable regulatory responsibility for the Fed.Both the FDIC and the Fed have strongly opposed this proposal.
Bank Reserves and the Fed
The Federal Reserve detemines the percentage of deposits that mast be held as reserves by member banks, nonmember banks, and other financial intermediaries offering checkable deposits, subject to persentage limits set by Congress.Such percentage is called a reserve requirement. To meet the requirement, reserves must be held in one of two ways.The first is vault cash-currency and coin held banks to apply to daily business needs.The second is in depository institution deposits at the Fed.These deposits account for the majority of bank reseves and require some explanation.
All member banks maintain deposit accounts at the Fed.These are noninterest-earning accounts that are similar to demand deposit accounts held by the public at commercial banks.Together, vault cash and depositary institution deposits are called legal reserves or total reserves.The portion of legal reserves necessary to meet the reserve requirement is known as required reserves, but banks may have legal reserves above the minimum.These are known as excess reservesLegal reserves are not included inany measure of the money supply since these money measures include only the amount of money incirculation.
Total (or legal) Required reserves reserves
Figure 3. Composition of bank Reserves
In addition to holding reserves in depository institytion accounts at the Fed and in vault cash, nonmember banks and other financial intermediaries may maintain their reserves on a pass-throught basis at Fed member banks (which in turn deposit these with the Fed), with the Federal Home Loan Bank System (to which most savings and loan associations belong), or a special bankers’ banks owned primarily by depository institutions to share the costs of various common financial services and do not do business with the general public.
Reserve requirement on transaction account in general exceed those on time deposits because these account turn over rapidly since they are used for transaction.Savings and time deposits are usually used for funds that are expected to be on deposit for some period of time.Technically, financial institutions can require notice to be given for withdrawal of funds from passbook savings account.In practice, however, passbook deposits are available for withdrawal at the time requested.The different function usually served by checking, savings, and time deposits have historically resulted in higher reserve requirements on checking accounts than on time and savings accounts.
3) The Federal Reserve and Monetary Policy
As the central bank in the United States, the Fed is responsible for fulfilling a number of functions,such as providing banking services to the Treasury and approving bank mergers.Another very important function and the one that attracts most attention is conducting monetary policy.This is the attempt by the Fed to unfluence the course of economic activity by affecting the reserves of the banking system.The reserve position of the banking system in turn affects the money supply, interest rates, and the economy.By making money and credit hard to obtain, or expensive, the Fed tries to reduce inflationary pressures in the economy.Alternative, by making money and credit plentiful and inexpensive,the Fed attempts to stimulate the economy.
Reserve Requirement Changes
When the Federal Reserve raises or lowers the reserve requirement, it changes the distribution between required and excess reserve in the banking system.An increase lowers the level of excess reserves, and a decrease increases excess reserves.Exess reserve availability influences the amount of bank lending in the economy.As most demand deposits come into existence throught bank lending, a change in reserve requirements may be translated into money supply changes.
Historically, the Fed has been reluctant to change reserve requirements because such action has a dramatic impact on the reserve positions of banks.Even relatively small changes absorb or release substantial amounts of excess reserve, which in turn may significantly affects the banking system’s ability to make loans. Between 1980 and 1987 the Fed was unable to use reserve requirement changes for policy purposes even if it had wanted to.The 1980 Depositary Institutions Deregulation and Monetary Control Act mandated a phase-in of new reserve requirements.Although the Fed once again has the ability to alter the requirements within rather broad limits set by Congress, it is unlikely that it will do so frequently.Nevertheless, in December 1990, as noted previosly,it did lower reserve requirements on some categories of deposits.
Discount Rate Changes
The discount rate is the rate charged banks and other depository financial intermediaries for borrowing at the Fed.Financial intermediary borrowing fulfills the Fed’s role as lender of last resort to the banking system.Since the borrowed funds go into the depository institutions’ accounts at the Fed, borrowing from the Fed leads to additional reserves in the banking system, whereas repayment of Fed loans reduced bank reserves.Presumably, borrowing would be discouraged by a rise in the discount rate and encouraged by a fall.In practice, however, the discount rate is almost always below open market rates.Therefore, financial institutions can profit by borrowing from the Fed and relending in the open market.As a results, the Fed exercises what it calls administative control over discount window borrowing to make sure that the financial institution borrowing privilege is not abused.Banks that borrow too frequently can be denied access to the discount window.From time to time the Fed has imposed a surcharge on the discount rate for too frequent borrowes.In practice, abuse of the borrowing privilege is infrequent since financial institutions are reluctant to endanger their access to the discount window.
Open Market Operations
These are the purchase and sale by the Fed of primarily U.S government securities in the money and capital markets.A purchase of securities injects reserves into the banking system, as proceeds of the purchase are deposited in bank account.Sales of securities drain reserves from the banking system as deposits at bans are used to for the securities.Thus, the banking system’s ability to lend is affected through these open marcet operations.
The FOMC, a major Federal Reserve committee, sets the General policy and issued instructions used to guide day-to-day conduct of open market operations.The Federal Reserve Bamk of Ney York,acting on FOMCinstructions,does the buying and selling of securities.In this way, the Fed is able to manage the reserve position of banks on a daily basis to meet its monetary policy objectives.
II. Depository Institutions:Commercial Banks and Banking Structure
Commercial Banking Structure
US commercial banks offer credit cards, travelers checks, travelers checks, brokerage services, and also underwrite and trade of treasury, municipal, and other permitted debt securities and can provide investment advice.
The credit philosophy adoped by American commercial banks is also somewhat different from those in other countries.Credit must be approved by a prescribed number of bank officers depending on the level of credit exposure,industry and borrewer.Accountability for decesion to extend credits are relatively easy.Credit exposure to any one one client is limited to five per cent of the total of bank capital.
Whether a bank is a national or a state bank , whether it is a Federal Reserve member or not , it must abide by the restrictions on branch banking operations imposed by the state in which it operates.In some states banks are restricted to only one office, while in other they may have several branches throughout the state.Some states fall between these extremes and permit limited branching.
Under the McFadden Act passed in 1927 , branching across state lines is prohibited to essentially all banks.The only exceptions are some very old organizations started in states before statehood and branches of foreign banks.The Bank of California , which has branches in Oregon and Washington , is the largest bank so "grandfather".However,the spread of bank holding companies , which permit banking organizations to own more than one bank or pursue banking-related business , has allowed some bank organizations to engage in branching of another kind.
Many banking services offered by banks in one state to customers in another are not strictly prohibited by the McFadden Act or are explicitly permitted by other legislation.As a results,numerous banking and bank-related services are offered nationally by a host of banks and nonbanks (financial institutions that do not technically meet the legal defiitions of banks).Although the McFadden Act has not been repealed,many analysts have concluded that its current impact is small , and United States has entered an era truly nationwide banking , therebly joing most other major industrial countries.
Internation Banking
Internation Banking refers to activities udertaken by banks outsides their home countries or directed at international business inside the bank s home country.It includes U.S. banks operating outside the United States and foreign banks operating in the U.S.Many of the large U.S. banks trace their foreign operations back more than 100 years.For example , Chase Manhattan and Citibank operated branches in Europe in the 19th century.Recent years have seen tremendous increases in american banking overseas.
Foreign Banks in the United States
The other side of international banking is foreign bank activities in the U.S.,which increased greatly in the 1970s.
The major organizational forms of foreign banks operating in the U.S. are as follows:
Subsidiary bank:A bank that has its own state or national charter and is separate from its foreign bank owner ;it operates as a full commercial bank , accepting deposits and making loans.
Branch:A fully functioning part pf its forein bank parent.
Agency:An organization that cannot accept deposits but can make loans and provide the financing for international transactions.
Representative office:The representative office cannot accept deposits or make loans but can make contacts for its parent bank.
For many years foreign banks in the United States enjoyed advantages over domestic banks.These advantages arose mainly from the lack of branching restrictions and Federal Reserve requirements.These issued, among other, were adressed by Congress in the International Banking Act passed in late 1978, which rectified some of the inequities but did not completely eliminate them.
International Banking Act of 1978
The International Banking Act specified that foreign banks must choose a home state and restrict their growth to that state alone. However , existing operations in other states at the time the act took effects could be maintained.The provision enabled, for an example, a foreign bank with offices in NewYork and Colifornia to choose New York as the home state;it could continue to operate in but not expand in Colifornia.The choose of the home state was flexible, and banks could choose a home state where they did not have sizable operations.A bank that was already well established in New York could choose California and build a substantial operation in that state,for example.
Despite the requirement under the act to cinfine domestic bankink expansion, foreign banks can continue to expand international banking operations in other state where they are not presently located by opening subsidiaries under the rules of the Edge Act.The Edge Act of 1919, originally designed to facilitate international banking activities of domestic bank, allows any bank to open an offices are restricted to foreign lending, but Edge Act subsidiaries cannot take local deposits.
The International Banking Act also extentended FDIC insurance to deposits at foreign banks.Before the act was passed, lack of FDIC insurance showed the acquisition of retail deposits by foreign banks.The imposition of reserve requirements increased the cost of funds for foreign banks and put them on a more equal footing in lending charges with large domestic banks.By the act,the Federal Reserve, the FDIC, and the Comptroller of the Currency were granted additional regulatory powers over foreign bank operations.The Fed is now permitted to make independent examinations of any and all foreign bank operatins in the United States.
In summary, the act placed foreign banks on a more competitive footing with American banks, but it did not totally remove the advantages they enjoed, particulary in branching.However, the advent of interstate banking through state legislation discussed previously will over time remove the advantage of foreign banking operations.Although the competitive advantage may be eliminated, foreign banks will remain an important participant in U.S. banking.
1) Banking System in Transition
Prior to 1988, Ukraine's banking system was typical of centrally-planned economies. A Republic branch of the Central Bank of the USSR acted as a central bank and commercial bank for the Ukrainian industry. In the context of market-oriented economic transition, the major challenge of the Ukrainian state is therefore to establish and develop market-based banking system and financial institutions.
The banking system was. reorganized between 1988-1990. In March 1991, the Law On the Banks and Banking was adopted. It established a two-tier banking system consisting of the National Bank of Ukraine (NBU) and the system of commercial banks. The NBU is an independent legal entity, accountable only to the Supreme Council of Ukraine. The NBU consists of the Headquarters and regional branches. Its everyday operations are market-based and a centralized approach is used to regulate and distribute credits to stabilize and strengthen the national currency. The NBU implements state policy as an issuing, clearing and foreign currency center and provides services to other banks.
The National Bank of Ukraine occupies a special place in the marketization of the banking system. As a central bank of the state, it organizes and implements its own restructuring and plays a decisive part in implementing banking reforms in general. Any radical changes necessary to reform commercial banks would fail if the NBU followed a path of a command-administrative interventions in the monetary policy. The NBU has to ensure stable currency and the following:
-active interest rate policy, followed by the NBU since 1994;
-compulsory reserves of resources from commercial banks to facilitate the liquidity of the comical banks and at the same time not to allow high degree of liquidity during high levels of inflation;
-offering credits to commercial banks, using such market mechanisms as credit auctions, issuing state security bonds;
-operations with state securities in the open market, this mode was used to cover the state budget deficit in 1995.
Development of the system of commercial banks is important for the banking system|"As of 1 January 1997, 188 commercial banks with 2284 branches operate in Ukraine. During 1992-1996, 32 commercial banks were dissolved. Problems encountered by the commercial banks in the process of development were pointed out in the report to the Supreme Council of Ukraine in February 1997 by V. Yushchenko, the Governor of the NBU and were the following..
A significant and steady decline in production weakened the financial potentials of bank clients and banks themselves.