One of the most important indicators of the bank's liquidity is its resources.A high level of this indicator means that the financial institution is able to pay its liabilities, both current and future periods.When the liquidity and solvency and hence, the bank falls, you should refinance.This means that the central bank of the state should allocate additional funds in conjunction with interested investors.
Fundamentals of Financial System Stability
objective of any central bank - this time to note the gap in time in the bank's liquidity, analyze it and, if necessary, to find the means to eliminate it.Refinancing - this is a process that allows:
- ensure continuity of payments in the national economy by guaranteeing the liquidity of each bank.
- To control the situation on the monetary market by setting interest rates.
Nevertheless, it is important to understand that the refinancing - it's not a permanent source of additional funds for financial institutions.The central bank is not interested to support troubled financial institution on a regular basis.Therefore, any bank must seek to raise additional funds of new clients and shareholders.
basic principles of good refinancing
to ensure the stability of the monetary system of the state central bank in the provision of additional funds to other financial institutions should be guided by the following provisions:
- pre-established limits and lending.
- Refinancing banks must comply with the approved objectives of monetary policy.
- need financial institution should not have debts to the Central Bank and to be able in the future to repay the loan.
- Availability reliable supply of additional funds.
- correct size of the loan corresponding to the value of the collateral.
- refinancing rate can not be lower than the discount.
Types of credits
Refinancing - this is the last chance for most banks.The Bank of appeal when all other ways to attract free funds have been exhausted, and due to customers still remains.There are two basic types of loans: regulatory and specific.The first are permanent financial instruments and are used to monitor the situation on the money market.Specific credits are used to stabilize the situation with the lack of liquidity in certain banks.For the regulation of the Central Bank may also use repos and swaps.
mechanism functioning
Refinancing - a process which is as follows:
- The bank problems with solvency.
- CB analyzes the situation and makes a decision to grant a loan, for example, $ 10 million for one year.
- Commercial bank gives the money in debt to its customers under a higher percentage than the refinancing rate.
- Upon expiration it returns to the 10 million mark-CB.
- obtained as a result of this transaction the money redistributed and increase the solvency of the bank.
CB does not work directly with the population, as in this case would have to monitor the millions of small borrowers.Therefore, commercial banks act as intermediaries between them and ordinary people.
refinancing rate
According to the Federal Law "On Central Bank", the Central Bank may provide additional means for a certain period on a return basis to credit institutions to solve their liquidity problems.The refinancing rate - is the instrument through which the monitoring of the interest on deposits and loans.Its decrease is beneficial to borrowers, while investors lose part of their income.Refinancing is carried out by the Central Bank established or selected on the basis of the rate of market mechanisms.
Rationing percent
Until 2010, the maximum amount that is recognized as an expense was equal to the following values: the refinancing rate * 1.1.Now, the second factor was increased to 1.8 for ruble loans.If one of the indicators during the term of the loan agreement should be made a double payment.With regard to contracts with a foreign currency, the refinancing rate is not used.The maximum level that can be considered flow rate - 15%.
Applications and influence
refinance banks at a certain rate in Russia has an impact not only on themselves the financial and credit institutions, but also on the ordinary citizen.In particular, the following cases:
- taxation of interest income on deposits (the Tax Code of the Russian Federation at the rate of 35% set in excess of the amount which is calculated on the basis of the refinancing rate).
- Calculation of payments for the delay of money owed to the employee (including vacation).
- Calculation of interest on taxes or charges (it is one three percent of the established rate of refinancing).
process of crediting the Central Bank of commercial banks is an important regulator of the financial system of the state.It largely depends on the development of the economy, as people tend to trust their resources to banks only if they are stable.
