Trust operations of banks: their nature and principles of conduct

Recently, in the market of credit services, trust operations, that is, carrying out operations on behalf of the client, based on the trust of the parties, have developed increasingly. Russian specialists determine the trust operations of commercial banks as a separate form of managing the client's property, which gives the credit institution the right to distribute profits or otherwise dispose of the property of a legal or physical person.

In other words, trust operations involve absolute confidence in the bank on the part of the client and full confidence that the bank, in carrying out this or that action, is doing everything to improve the welfare of the client. Often, the management of the bank decides on the formation of a separate unit engaged in confidential transactions. If such operations are carried out in large volumes, then this unit may exist separately and represent a small trust company.

Trust operations can differ by many criteria. The most popular are financial, that is, services for accumulating and distributing the funds of an enterprise's premium fund or a pension fund, which is formed by companies to encourage employees with a long record of service. In some cases, the bank is entrusted to conduct public trusts, that is, funds whose funds are accumulated on a grant basis and distributed to needy individuals. One can also note the kind of discretionary trust operations aimed at managing the shareholder's share and finding ways to maximize its profit.

A credit institution offers the possibility of conducting confidential operations with the possibility of full disposition of property, and without it. By the method of disposition, trust operations of banks are divided into two groups: active and passive. The first group grants the right to sell, lease or pledge property as collateral, but no additional authorization of the client is required. And passive operations allow only to manage property without the possibility of its independent implementation.

Trust management services are provided by credit institutions both for legal entities and individuals. Individual citizens usually apply for a case of inheritance, as well as assistance in the purchase of securities on the stock exchange, in the disposal of property provided on the basis of registration of guardianship, and so on. But the most popular services are the maintenance of settlement and foreign currency accounts of the client, the preparation of tax returns, and the maintenance of the revenue side.

As legal registration of trust services, a contract of parties is used, which specifies the terms, the amount of payment, but, most importantly, the rights and obligations between the creditor and the client are clearly restricted. A contract with a legal entity may provide for the right to manage all or part of its assets, conduct collection operations, engage in investment activities at the expense of a certain part of the income. And, of course, the provision of loans and loans to customers in the presence of a temporary shortage of free cash resources.

Why should banks conduct trust operations? Like any service, this is also considered an additional income. The amount of commission is indicated in the agreement for conducting confidential transactions. And the bank together with the client defines the concrete form of payments. For example, a one-time transfer at the end of the contract in the form of a total for the entire period, or an annual transfer of a portion of the client's income.

In our country, trust operations are at the development stage, therefore some types of services are not yet provided by banks. These include the management of the enterprise's pension fund or the management of individual investments, operations on the stock exchange.