Money management is an important and necessary component of bank management system or the enterprise as a whole, ensuring the stability of their work in the current market conditions.Model of capital management represents a set of elements, including the principles and management practices aimed at creating optimal value and capital structure, its efficient use, and where the main criterion is the return on equity.
The principles on which to base any such model should include:
- level of involvement in the overall management;
- systemic nature of decision-making;
- flexibility, adaptability and dynamism of management;
- the multiplicity of management models;
- focus on the most important tasks of the institution or enterprise;
- legal protection;
- management optimization, in which the return on equity has become the main criterion for its effectiveness.
At the current stage of economic development the main objective of capital management is a return on equity of the bank and ensuring financial stability and security in the long term, taking into account the maximization of its market value.
Achieving this requires:
- withdrawal of the bank's operation mode, when the net return on equity and structure, achieved optimal parameters;
- distribution formed on the uses of capital;
- creating an environment for output to the optimum return on equity, to achieve the maximum yield with the expected level of risk;
- reduce the threats of financial risks at the planned level of its profitability;
- to ensure the financial equilibrium of the bank;
- the required level of control by the founders;
- to provide management flexibility;
- reduction of working capital indicators in line with those which formed the return on equity;
- timely reinvest capital of the enterprise.
management system includes the following subsystems:
- managing equity, generated both from internal and external sources;
- managing borrowed capital, attracted by using internal sources such as the contributions of participants, the issue of shares, etc .;
- an organization working with borrowed capital (banking, commercial loans, issue of bonds and other.);
- optimization of the structure.
Bank's capital management is based on the strategy and tactics of control.Strategy can be presented as the main direction of the bank's activities to achieve their goals.Capital management strategy should not contradict the overall development strategy of the bank, since it is a component.Defining management strategy should be implemented taking into account the peculiarities of its formation and use, environmental conditions and the objectives and activities of the bank.Hence, capital management strategy should be focused on the improvement of the main indicators characterizing the efficiency of formation and functioning of capital, promote financial stability.
Tactics management involves the use of specific methods and techniques to achieve the goal in a particular situation, at a particular time.
Capital management involves the use of two groups of instruments:
1. External tools represent a set of specific levers at the macro level that affect the processes of formation and use of capital at the micro level (state regulation of banks, asset market, currency regulation; availability of credit resources).
2. Internal management tools, which are aimed at increasing efficiency by optimizing the internal factors of the bank, identifying hidden opportunities and reserves (capital formation strategy and financial policy target, the method of choosing the optimal source of funding, a system of internal regulations oncertain aspects of the formation of capital, and others.).
Thus, money management involves finding and decision-making, given that guarantee the effectiveness of its use by the effect on the value, return on equity, structure and sources of capital.The mechanism provides for capital management: the definition of the goals and objectives of management, control over their execution;development of strategies and tactics for managing capital;the use of modern methods and models in the management process;timely analysis of efficiency and optimization of capital management.
