32. Types of banks and their role in the international financial market. Типы банков и их роль на международном финансовом рынке.

A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank is the connection between customers that have capital deficits and customers with capital surpluses.

A bank can generate revenue in a variety of different ways including interest, transaction fees and financial advice. The main method is via charging interest on the capital it lends out to customers. The bank profits from the difference (spread) between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities.

Banking system has 2-tier structure: national (specialized, universal) and international banks.

Specialized, in turn, are divided into retail and investment banks. The combination of both forms universal banks. International banks are formed with intension to support poor economies as well as promote development and growth of vital branches of economy. Currently there are 13’265 banks in the world. 50% of those are located in the USA.

Types of retail banks: Commercial bank: a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses. Savings bank: objective is to provide easily accessible savings products to all strata of the population. Apart from this retail focus, they also differ from commercial banks by their broadly decentralized distribution network, providing local and regional outreach. Credit unions: not-for-profit cooperatives owned by the depositors and often offering rates more favorable than for-profit banks. Private banks: banks that manage the assets of high net worth individuals. Offshore banks: banks located in jurisdictions with low taxation and regulation.

Types of investment banks: Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, provide investment management, and advise corporations on capital market activities such as mergers and acquisitions.

Both combined: Universal banks, more commonly known as financial services companies, engage in several of these activities.

International Banks are divided into global (World Bank Group (IBRD, IDA, IFC, MIGA), EBRD, Bank for Int. Settlements) and regional (AsDB, AfDB). Their main goal is to promote economic development, cooperation and social progress of the (region if regional) countries, reduce indebtedness and poverty level, and support private businesses.

Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis. Islamic banks adhere to the concepts of Islamic law.

Role: 1) ameliorate the information problems between investors and borrowers by monitoring the latter and ensuring a proper use of the depositors’ funds. 1) provide intertemporal smoothing of risk that cannot be diversified at a given point in time as well as insurance to depositors against unexpected consumption shocks. Because of the maturity mismatch between their assets and liabilities, however, banks are subject to the possibility of runs and systemic risk. 3) banks contribute to the growth of the economy..

Due to their influence within a financial system and an economy, banks are generally highly regulated in most countries. Most banks operate under a system known as fractional reserve banking where they hold only a small reserve of the funds deposited and lend out the rest for profit. They are generally subject to minimum capital requirements which are based on an international set of capital standards, known as the Basel Accords.