Commercial Banks

Any commercial bank has a capital which, in essence, is expressed in its fixed and circulating capital. Fixed assets have the lowest level of liquidity, and often exist in the form of various buildings of the bank, land allotments and machinery, office furniture, computer equipment, working capital of the bank - it's most liquid part of its capital, expressed in securities (bills, stocks, free cash flow). Thus, liquidity funds of the bank (ie the possibility of their rapid conversion to free funds) involves four basic types of them: the most highly liquid bank funds - are funds that do not require conversion into cash, because it is already, as well as funds that can almost instantly become the cash (funds on correspondent accounts with other banks, checks and other payment instruments). These assets are the most highly, but they do not bring income, so they share relatively high. The most highly liquid funds of the bank is its primary reserves, as a guarantee of solvency, highly liquid funds Bank - a fund that can quickly be converted into cash of the bank (eg, short-term promissory notes received, short-term loans receivable, as well as demand deposits, etc.).

These assets highly liquid, and bring a little interest income. Highly liquid funds of the bank is a potential means for increasing the mass of the primary reserves, so often referred to as a secondary reserve (or insurance funds of liquidity); mean liquidity of bank funds - in effect for the treatment of these assets to the free money supply requires a certain period of time (which depends on the conditions of the loan agreement). These assets the most profitable and most of them form the profits of the banking institution. This group of funds, can also be attributed to a very interesting structural component - the gallant operations. The proportion of such transactions strongly increases, it is quite profitable, but require a certain reserve balances under warranty.

Such operations do not require banks to no cost, provided of course that the object is to guarantee reliable, low liquidity of bank funds - this group of assets is difficult to be converted into the free money supply. This building and land, and vehicles of the bank, seized collateral, etc. Often often they generate revenue only conditionally, provided of course that is not located in the temporary use of other on terms of repayment and interest payment. Speaking of the funds of banking institutions, incl and commercial, it should be noted that the greatest proportion of their bank funds average liquidity. Their structure is primarily a recording and loan funds, and securities, and transactions with these funds can be regarded as basic. Today, the structure active banking has changed significantly due to the intensification of the use of securities in the mobilization of bank resources. Today, the priority becomes the operation of converting credit obligations of the borrower in a special type of securities - bills and bonds. The latter, often expressed in the issuance of bonds under the obligations under the mortgage. The popularity of such operations due to the possibility of resale secondary market for commercial lending - certainly in this case, the selling party loses some level of profitability over the active operation.