Banking: its essence and basic principles

The current legislation does not provide a clear definition of the concept of "banking". However, it can be concluded that this is an activity carried out by banks and other credit institutions and covering the entire range of their operations.

The greatest development of banking activity was after the transition to a market economy, because during this period commercial banks began to be formed. Modern economic theory asserts that the bank can only be called the organization that performs three basic operations: issuing loans, attracting deposits and performing settlement operations for its customers. However, in addition to the main functions, the credit institution has the right to provide other services, for example, to conduct transactions in the securities market, advise the client and so on.

Banking activities involve the implementation of exchange transactions, the provision of guarantees to first-class customers, the opening and closing of various accounts, the provision of loans, loans and loans, as well as raising funds to deposit accounts with legal entities and individuals. In some cases, credit institutions offer services such as leasing or renting.

Organization of banking activities of each institution begins with the receipt of a license, which is issued by the central bank of the country. The National Bank monitors the company's activities at other levels of the banking system by setting norms and standards that are binding on all credit institutions. In order to obtain a license, the bank should file an application, after consideration of which a decision is made on the expediency of issuing a license. Like any economic entity, the bank must have an authorized capital, formed from the contributions of shareholders.

The banking activity of a credit institution operating on a commercial basis, as the main objective, allocates profit and its maximization. But the central bank directs all its forces to stabilize the economic situation, strengthen the national monetary unit, maintain its course at the required level. In addition, he is engaged in the issue of cash in circulation, and therefore controls the amount of money. The central bank is trying to achieve the goals indicated in the monetary and credit policy of the state.

The main principles of banking activities include compulsory licensing of each credit institution. If it carries out operations without having a proper permit, then this activity will be declared invalid. Without having a license, an economic entity has no right to continue working. Each bank operates on the basis of self-financing and self-sufficiency, and therefore, is an independent organization. Neither the government nor the central bank can intervene in the affairs of the credit institution except in situations stipulated by the current legislation. As mentioned above, the central bank only establishes certain standards in order to maintain the solvency of each economic entity.

A commercial bank has the right to decide on its own whether to issue a loan to a client or refuse to do so. No one should influence his decision or challenge him. Similarly, a consumer of banking products can choose at his own discretion a credit institution that best meets his needs. According to the principles of banking, bank employees do not have the right to disclose information that is a trade secret, as well as information about the client himself or the movement of his money.