Money and the banking system Lecture 6 Money and the banking system Money and their functions Types of money Monetary aggregates Banking system Creation of money by commercial banks Deposit and credit multipliers Money multiplier Demand for money Money market equilibrium $$ ¥ ¢ ££ RUR

Money and Its Functions Money is something that is usually accepted as a means of payment for goods and services or used to pay debts. functions Money performs the following 4 functions: means of circulation (exchange) means of circulation (exchange), which allows you to buy goods and services, and this is the main function of money; unit of account unit of account, i.e. value meter, which provides a single meter for prices, costs, revenue, and income; a store of value a store of value that allows you to defer spending current income and thus save it to make purchases in the future; measure of deferred payments measure of deferred payments, i.e. an intertemporal unit of account that can be used to pay off debts and therefore allows you to give and take loans. ¥$$

Types of money Commodity money Commodity money is ordinary goods that serve as a medium of circulation. Therefore, they have intrinsic (true) value, their value as money and as commodities is the same. Token money legal tender by law fiat money Token money is a means of payment whose value as money exceeds the value of its production or its value in non-money use. They must be legal tender and are accepted as legal tender. Cash made from paper or from cheap metals is used as money only because it is considered money by government order, i.e. are fiat money. Credit money (IOUmoney) debt Credit money (IOU - I owe you - money) ("I owe you" money) is a means of payment based on the debt of a private agent (firm or individual). Plastic cards are not considered money in macroeconomics, because they represent a short-term bank loan to its owner and are already included in the money supply as funds on deposits in commercial banks that issued these cards.

Monetary aggregates In the US, these are: M1 M1 = cash outside the banking system (coins and paper money) + checking (or current) accounts + traveler's checks. M2 M2 = M1 + savings accounts + small term accounts (less than $100,000) + money market mutual funds + Eurodollar accounts. M3 M3 = M2 + large term accounts + EURUSD term accounts. L L = M3 + Treasury bills (government short-term bonds) + other less liquid assets. M1 M2 M3 L Liquidity Liquidity is the property of an asset to quickly turn into money with minimal loss of face value or into any other asset. The most liquid asset is cash. LIQUIDITY YIELD

Monetary aggregates in Russia M0 = M0 = cash in circulation (outside banks) M2 (money supply) = M2 (money supply) = M0 + non-cash funds (balances in national currency on the accounts of non-financial organizations and individuals who are residents of the Russian Federation) + bonds of the Bank of Russia from credit institutions

The banking system of the credit system The banking system is part of the credit system. In addition to banks, the credit system also includes other (non-banking) financial institutions that can raise money and issue loans. These include: pension funds; investment funds; Insurance companies; credit unions; savings and loan associations; pawnshops, etc. The modern banking system has two levels. Central bank Commercial banks

The central bank and its functions The Federal Reserve Bank of England The Bank of Russia Conducting monetary policy (the most important function) Supervising and regulating the activities of commercial banks and other financial institutions Providing loans to commercial banks and other financial institutions (lender of last resort) Providing banking services to the government (government banker) Issuing paper money and coins (issuing money) Providing financial services to commercial banks and other financial institutions

Central Bank balance sheet Assets Liabilities Credits to commercial banks Banknotes (cash) Credits to the government Commercial bank deposits Government bonds Government deposits Government short-term securities Gold and foreign currency The two sides of the balance sheet of any bank must always be equal: Assets = Liabilities balance sheet identity This is the basic balance sheet identity, which means that if there is a change in one side, the other side must necessarily change.

Liabilities (liabilities) Deposits (demand, savings, term); Reserves that can be borrowed from the Central Bank; Equity capital of a bank Balance sheet of a commercial bank accumulation of public money issuance of loans The main operations of commercial banks are the accumulation of public money (passive operations) and the issuance of loans (active operations). Assets Liabilities Reserves Loans Loans Deposits Simplified commercial bank balance sheet Assets Cash; Required reserves; Excess reserves that can be issued on credit; Loans; Shares and bonds of private firms; Government securities

Types of banking systems Full (100%) reserve system Assets Liabilities Reserves = 1000 Credits = 0 Deposits =1000 Reserve rate (rr) The entire volume of deposits is kept as reserves and is not issued on credit. Fractional Reserve System Assets Liabilities Reserves = 100 Credits = 900 Deposits = 1000 Only part of the deposits is held as reserves, and the rest is lent. Reservation rate (rr)

Reserves of commercial banks The ability of the banking system to create transactional (or checking, or demand, or current) deposits is controlled by the central bank through the establishment of the required reserve ratio for these accounts. Required Reserve Ratio The required reserve ratio (rr obligated) is the percentage of deposits that each commercial bank must hold as reserves and is not allowed to lend. Required reserves (R liability) = = Deposits × Required reserve ratio = = Deposits × Required reserve ratio = = D × rr liability = D × rr liability

Reserves of commercial banks The difference between the amount of deposits and required reserves is called excess reserves or credit potential, because. these funds can be issued on credit: Excess reserves (R surplus) = Excess reserves (R surplus) = = Deposits - Required reserves = = Deposits - Required reserves = = D - D × rr liability = D × (1- rr liability) = D - D × rr liability = D × (1- rr liability) s of a commercial bank will be: Actual reserves (R fact) = = Required reserves + Excess reserves = = Required reserves + Excess reserves = = R liability + R surplus = = R liability + R surplus = = Deposits - Credits = D - K = Deposits - Credits = D - K

How banks create money Deposits =1000Reserves = 100 Loans = 900 Liabilities Assets Bank 1 Bank 2 Deposits =900Reserves = 90 Loans =810 Liabilities Assets Bank 3 Deposits =810Reserves = 81 Loans =729 Liabilities Assets Reserve Rate = 10%

Deposit Multiplier A necessary condition for the creation of money by commercial banks is the existence of a fractional reserve system. Conditions for the maximum increase in the money supply: М = D = D I + D П + D Ш + D IV + … = = D 1 + D 1 × (1 – rr) + × (1 – rr) + = D 1 + D 1 × (1 – rr) + × (1 – rr) + + × (1 –rr) + × (1 – rr) + … = + × (1 –rr) + × (1 – rr) + … = = D 1 × (1/rr) = D 1 × (1/rr) Deposit multiplier = The deposit multiplier shows the amount of supply created by 1 deposit currency. In our case: M = …= D 1 × (1/0.1) = 1000 × 10 = M = …= D 1 × (1/0.1) = 1000 × 10 = banks do not keep excess reserves people do not keep cash on hand

Deposit expansion process Bank I D 1 = 1000 K 1 R 1 K 1 = D 1 × (1 – rr) K 1 R 1 K 1 = D 1 × (1 – rr) Bank II D 2 = K 2 R 2 K 2 = × (1 – rr) K 2 R 2 K 2 = × (1 – rr) Bank Ш D 3 = K 3 R 3 K 3 = × (1 – rr) K 3 R 3 K 3 = × (1 – rr) Bank IV D 4 = K 4 R 4 K 4 = × (1 – rr) K 4 R 4 K 4 = × (1 – rr) Bank V D 5 = K 5 R 5 K 5 = × (1 – rr) K 5 R 5 K 5 = × (1 – rr)

Credit multiplier M = D P + D W + D IV + D V + ... M = D P + D W + D IV + D V + ... = D 1 × (1 - rr) + × (1 - rr) + = D 1 - rr) + ... = ΔM = K = K 1 + K 2 + K 3 + K = i.e. In our example M = ... = M = ... = = 900 × 1/0.1 = 900 × 10 = 9000 = 900 × 1/0.1 = 900 × 10 = 9000

Credit multiplier The credit multiplier is equal to the deposit multiplier minus 1. Credit multiplier The credit multiplier shows the change in the money supply as a result of a change in loans by 1 monetary unit. M = D × (1/rr – 1) = 1000 × 9 = 9000 In our example, M = D × (1/rr – 1) = 1000 × 9 = 9000 Thus, the change in the money supply can be calculated either by applying the deposit multiplier to loans M = K 1 × (1/rr) M = K 1 × (1/rr) or by applying the credit multiplier to deposits M = D 1 × [( 1/rr) - 1] M = D 1 × [(1/rr) - 1]

There are two circumstances that can limit the process of deposit expansion. the desire of commercial banks to keep excess reserves the desire of commercial banks to hold excess reserves the desire of the public to keep more money on hand in the form of cash, the desire of the population to keep more money on hand in the form of cash, and not in a bank account in the form of a deposit.

The determinants of the supply of money in macroeconomics in the macroeconomics of money (m) are understood as the Money unit M 1, which consists of cash outside the banking system (CU) plus deposits of demand (or current accounts) (D): M = Cu + D Money offer (money supply) depends on the behavior: the central bank that establishes the norm = R Obliyaz + R Hind) of the population, which stores a certain amount of cash (CU).

Monetary base The only way a central bank can influence the money supply is through changes in the monetary base (B), also called high power money or central bank money. The monetary base includes cash outside the banking system (CU) and commercial bank reserves (R): B = CU + R The ratio of the money supply to the monetary base is called the money multiplier: Money multiplier = M/B

Money multiplier The value of the money multiplier depends on: the proportion in which the population divides money between deposits and cash - deposit rates (cr = CU/D) on the reserve ratio of commercial banks (rr = R/D): The value of the money multiplier increases if: The Central Bank lowers the required reserve ratio The desire of banks to keep excess reserves decreases People prefer to keep less money in cash, increasing deposits in banks

The money supply is controlled by the central bank (CB), it does not depend on the interest rate and is graphically represented by a vertical line. Shifts in the money supply curve are caused by changes in the money supply by the Central Bank. If the central bank increases the money supply, the money supply curve shifts to the right. If the central bank reduces the money supply, the money supply curve shifts to the left. Money supply curve and its shifts i MSMS M M i MS1MS1 M 1 M MS2MS2 M 2 i MS2MS2 M2M2 M MS1MS1 M1M1 25

Types of Financial Assets Number of Transactions Rate of Interest The ratio of money to bonds that a person wants to have in his financial portfolio depends on the number of transactions that he wants to make and on the interest rate that is paid on bonds. In practice, there are various financial assets. To simplify the analysis in macroeconomics, two main types of financial assets are considered: money and bonds. Money cashDemand deposits Money can be used to make transactions, but does not generate income. There are two types of monetary financial assets: cash and demand deposits. Bonds Bonds earn interest i, but cannot be used in transactions. 26

Demand for money Motives for the demand for money are based on two basic functions of money: a medium of circulation and a store of value. motive There are three motives for holding money: transactional motivetransactional motive - money is needed for transactions, i.e. purchases of goods and services; precautionary motive (prudent) precautionary motive (prudent) - money is needed for unplanned (unforeseen) purchases, i.e. driven by uncertainty; speculative motivespeculative motive - money is a financial asset, but there are other types of financial assets (stocks and bonds) that serve as a better store of value, because they not only store value, but increase it over time (earn interest income). 27

Determinants of demand for money Price level (P) At higher prices, people need more money to buy more expensive goods and services Nominal interest rate (i) At a higher interest rate, i.e. At higher opportunity costs of holding money (instead of, for example, income-producing bonds), less money will be demanded. Level of real GDP (Y) Higher output means more goods and services produced in the economy more money buyers need to make more transactions Transaction motive Speculative motive

Movement along For example, an increase in the interest rate from i 1 to i 2 (i.e. an increase in the opportunity cost of holding money) reduces the amount of demand for money in the economy (from M 1 to M 2) and corresponds to movement along the curve M D (from point A to point B). Demand curve for money downward slope of the interest rate The demand curve for money has a negative slope, which reflects the reciprocal effect of a change in the interest rate on the amount of money demanded. real output the price level shifts If there is an increase in real output (Y) or an increase in the price level (P), the curve M D shifts to the right. This means that the amount demanded for money increases at each level of the interest rate. i MD MD M A B i1i1 i2i2 M 2 M 1 i MD(Y1)MD(Y1) M or (P 1) MD(Y2)MD(Y2) or (P 2) 29

Equilibrium in the money market M S = M D Money market equilibrium condition: the demand for money is equal to the money supply: M S = M D. Changes in the equilibrium of the money market occur due to changes in the demand for money or money supply. Equilibrium in the money market is restored by changing the interest rate. An increase in the demand for money results in an increase in the rate of interest, and an increase in the supply of money leads to a fall in the rate of interest, which equalizes the amount of money supplied in the economy with the amount of money demanded. i MDMD M MS1MS1 MS2MS2 i2i2 i1i1 M 1 M 2 A B i2i2 MD(Y1)MD(Y1) M M D (Y 2) MSMS i i1i1 A B M

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Economics lesson

• Lesson topic:

• How banks create money

• LESSON PLAN:
• 1. The Central Bank and its functions;
• 2. Commercial banks and their functions;
• 3. Spend today - pay tomorrow;
• 4. How banks create money.

Relevance

• It's no secret that life in a market economy requires people to master elementary economic concepts and acquire market behavior skills.
• Therefore, the choice of this topic is not accidental, because knowledge of the structure of the banking system, the features of its functioning and understanding how banks create money are simply necessary to increase the level of economic literacy of any person.

The purpose of the lesson

• - to determine the main functions of the Central Bank;
• - to find out the functions of commercial banks;
• - talk about ways to attract money to banks;
• - explain what a bank deposit is;
• - show the features of bank lending;
• - to consider what bank reserves are, why
• they are needed, how they affect the ability of banks
• create money.

• Lesson objectives:

• form ideas about the activities of banks, explain the features of their functioning and how banks create money.

Sources

• http://festival.1september.ru/articles/612238/
• https://prezentacii.org/prezentacii/prezentacii-po-ekonomike/4476-den-gi-kredit-banki.html
• http://www.referatbank.ru/referat/preview/40704/referat-banki-zarabatyvayut-dengi.html

Basic concepts

• MONEY is a special kind of commodity for which any good or service can be exchanged.
• MONEY SUPPLY - a set of cash in circulation and balances of non-cash funds on accounts owned by individuals, legal entities and the state.
• CENTRAL BANK - an organization established by the authorities of the country, which is responsible for controlling the circulation of money and credit conditions, control over the financial system, which is a bank of banks, accepting deposits from commercial banks, as well as a state banker.

• “Since the beginning of time, mankind has made three great discoveries:
• fire, the wheel and the central banking system.
• Will Rogers (1879-1935)

The banking system is compared to the circulatory system of the human body. It is so important for the economy of the state. Indeed, in the modern economy, banks play a key role.

• The banking system is compared to the circulatory system of the human body. It is so important for the economy of the state. Indeed, in the modern economy, banks play a key role.

• Banks are financial intermediaries, because, on the one hand, they accept deposits (deposits), attracting money from depositors, and on the other hand, they provide them at a certain percentage to various economic agents (firms, households, etc.), i.e. issue loans.

Commercial banks are private organizations that have the legal right to raise free cash and make loans for profit. Operations performed by banks are divided into active And passive.

• Commercial banks are private organizations that have the legal right to raise free cash and make loans for profit. Operations performed by banks are divided into active And passive.

• Active- these are operations for the profitable placement of funds (the bank gives loans, buys securities, etc.).

• Passive- these are operations to attract customer funds to their accounts (opens deposits, accepts deposits, etc.). Everything that the bank has for its activities is assets, and the sources of bank funds (loans) are liabilities.

• Currently in Russia
• two-tier system

• Central

• Bank "B"

• Bank "B"

• Bank "G"

• 1st level

• 2nd level

• Jar"

• COMMERCIAL BANKS

• emission center of the country;
• government banker;
• bank of banks;
• interbank settlement center;
• custodian of gold reserves
• countries;
• defines and implements
• monetary (monetary)
• politics.

• Functions of the central bank:

Economic interests Savings owner Entrepreneur

• It has:
• value for money project
• Needs: money capital
• Ready:
• share the income for the right to use the money to implement your project

• It has:
• saving
• Needs to:
• savings income
• Ready:
• refrain from consuming their savings and allow them to be used for a fee

• Commercial banks

• Specialized

• Universal

• 1. By goals:
• - investment;
• - innovative;
• - mortgage.
• 2. By industry:
• - construction;
• - agricultural;
• - foreign economic.
• 3. By customers:
• - only firms;
• - population only.

• reception and storage of any kind
• financial assets;
• implementation of credit operations;
• money creation;
• organization of payments;
• buying and selling
• valuable papers.

• Functions of a commercial bank:

• Operations
• banks

• Active

• Operations on placement by banks of available in their
• resource management

• Passive

• Operations through which banks form their resources for lending and other operations

• deposit

• credit

• settlement

• currency

• cash

• and etc.

• attraction
• and keeping funds in accounts

• accepting deposits

• receiving
• bank loans

• income generation
• from accommodation
• valuable papers

• and etc.

Contributions

• A deposit in a bank is an amount of money that is deposited with a bank in order to receive income in the form of interest on the deposit. The bank uses this money for its own purposes, in return paying the depositor a reward - interest.

Depositors give money to the bank for use not forever, but for a while. Therefore, the bank has the right to dispose of each ruble of its deposits only for a certain number of months or years. Deposits- these are all types of funds transferred by their owners for temporary storage to the bank with the right to use this money for lending.

• Depositors give money to the bank for use not forever, but for a while. Therefore, the bank has the right to dispose of each ruble of its deposits only for a certain number of months or years. Deposits- these are all types of funds transferred by their owners for temporary storage to the bank with the right to use this money for lending.

• Deposits

• demand deposits- these are current accounts from which the depositor can withdraw money at any time

• term deposits- these are urgent accounts from which the depositor undertakes not to take money before the expiration of a certain period

• Accordingly, the bank can also invest the money it has received at its disposal for a certain period of time - no longer than the depositor has allowed it to use this money.

• REMINDER TO THE INVESTOR:
• 1. Before you entrust your savings to the bank,
• inquire about it. Try to choose
• reliable bank. An old bank is better
• protected from bankruptcy than new.
• 2. Term deposits are best made for the shortest
• terms.
• 3. It is risky to put large sums of money in one
• bank.
• 4. If the bank has reduced the interest rate on the deposit,
• that is, unilaterally changed the conditions
• agreement with the depositor, the bank violated the rights
• client.

• Lending -

• (from lat. Creditum - loan, debt)

• provision of money for a temporary
• use and for a fee

• Types of loans

• short

• medium term

• long-term

• up to 1 year

• From 1 year to 5 years

• over 5 years

Loans

• Lending - granting to a person in need of money the right to carry out his expenses at the expense of the bank, subject to guaranteed reimbursement to the bank of the amounts spent and payment of fees for the use of bank funds.

• The principle of lending is simple: a loan is granted for use on specified period and must be returned on time. But for the bank itself, compliance with this principle requires very painstaking work to assess creditworthiness of borrowers.

Banks lend mostly other people's money entrusted to them by depositors. In order to protect this money from losses, banks, along with an analysis of the borrower's creditworthiness, have long begun to use another method of insurance: to require the borrower to secure a loan (collateral) or even provide them with direct collateral (mortgage).

• Banks lend mostly other people's money entrusted to them by depositors. In order to protect this money from losses, banks, along with an analysis of the borrower's creditworthiness, have long begun to use another method of insurance: to require the borrower to secure a loan (collateral) or even provide them with direct collateral (mortgage).

• Creditworthiness- this is the ability of the borrower to fulfill its obligations under the loan agreement on time.

• Loan security (collateral) is the property of the borrower, which can be seized from him by the bank and sold to cover his debts, which he is unable to repay.

• INVESTORS

• ENTREPRENEURS

• CREATION
• NEW
• MONEY

• % SW % SW
• LOANS TO DEPOSITS

• = MARGIN

• Margin (from the English "margin" border) - bank income

• "Money Makes Money"

• "Money to Money"

How banks create money

• Banks were able to achieve a key role in the economy due to the fact that they learned ... create money! No, we are not talking about printing paper money and minting metal coins. There is just nothing complicated about this. Banks manage legally, without printing money, to increase the money supply and, on this basis, regulate the entire economic life.

• Banks have the ability to create money, that is, to increase the money supply. Banks' ability to create money is based on their excess reserves and the principle of the deposit multiplier.

The required bank reserve ratio is the percentage of total deposits that commercial banks are not allowed to lend, and which they keep in the Central Bank in the form of interest-free deposits. If the amount of required reserves is subtracted from the total amount of deposits, then we get the amount of credit opportunities or excess reserves (in excess of the required ones).

• The required bank reserve ratio is the percentage of total deposits that commercial banks are not allowed to lend, and which they keep in the Central Bank in the form of interest-free deposits. If the amount of required reserves is subtracted from the total amount of deposits, then we get the amount of credit opportunities or excess reserves (in excess of the required ones).
• It is from these funds that the bank provides loans. If a bank lends out all of its excess reserves, this means that it has used its full credit facilities. In this case, K \u003d R est.

• Bankers around the world have long understood that, according to the theory of probability, the number of customers who want to withdraw money from an account is equal to the number of customers who deposit money.

• = D*rr,

• - the amount of required reserves,

• - amount of deposits,

• - the rate of reserve requirements.

• K=R

• = D - R

• =D - D * rr =D*(1 - rr)

• K - bank's credit capabilities,

• - excess (above mandatory) reserves.

The process of creating money is called credit expansion or credit multiplication. It begins if money enters the banking sector and deposits of a commercial bank increase, i.e. if cash turns into non-cash. If the amount of deposits decreases, i.e. the client withdraws money from his account, then the opposite process will occur - credit compression.

• The process of creating money is called credit expansion or credit multiplication. It begins if money enters the banking sector and deposits of a commercial bank increase, i.e. if cash turns into non-cash. If the amount of deposits decreases, i.e. the client withdraws money from his account, then the opposite process will occur - credit compression.
• If a bank has received a deposit, then after deducting the required reserves, the bank has funds (its credit capabilities) and they can be put into circulation so that they earn money for both the bank and depositors. So the banker does, and at this moment there is a monetary “trick”. Money begins to multiply, that is, credit emission begins.

The essence of credit emission is that banks borrow money from the future. In essence, the bank takes the risk and gives the client the right to pay with money that has not yet been “earned by the country”, i.e. behind them there are no real commodities whose value they must turn back upon themselves, valuables in the form of precious metals or commodities. goods. The purchasing power of credit money is guaranteed only by the reputation of the country's banking system.

• The essence of credit emission is that banks borrow money from the future. In essence, the bank takes the risk and gives the client the right to pay with money that has not yet been “earned by the country”, i.e. behind them there are no real commodities whose value they must turn back upon themselves, valuables in the form of precious metals or commodities. goods. The purchasing power of credit money is guaranteed only by the reputation of the country's banking system.

• Credit issue- this is an increase by the bank of the country's money supply by creating new accounts for those customers who received loans from it.

Banks always issue loans for a reason, but for certain needs and projects. As a result, it turns out that money gives rise to goods, and then new money. Thus, with the help of banks, “money makes money”, thus increasing the wealth of the people and the country.

• Banks always issue loans for a reason, but for certain needs and projects. As a result, it turns out that money gives rise to goods, and then new money. Thus, with the help of banks, “money makes money”, thus increasing the wealth of the people and the country.

The results of the study of the topic:

• So, in this presentation, we got acquainted with the concepts of a central bank, a commercial bank. Considered their functions, interrelation and importance for the economy.
• We dealt with the operations that commercial banks perform, paid special attention to deposit operations and lending operations.
• We found out what the required bank reserves are and were able to understand how banks create money.

• Thank you for your attention!

How the bank works

Economics - Grade 6

MOU secondary school №7 Dryamina T.V.

• A bank is a financial institution that carries out transactions with individuals and enterprises.
• Bank - in Italian "banco" - a bench
• The main task of the bank is to attract deposits and provide loans, i.e. keeping and lending money

Bank work

Issues, sells, buys securities

Conducts foreign exchange transactions

Makes mutual settlements

with clients

Issuing checks and bills

Holds money and lends it out

How the bank makes money

Stepan put a deposit in the bank - 500 rubles. under 20% per annum. So he will receive 600 rubles in a year. (500+500* 20:100)

Grigory took a loan from a bank - 500 rubles at 30% per annum (the loan interest is always greater than the percentage of the deposit). So in a year he will return 650 rubles to the bank. (500+500* 30:100)

A year later, Stepan received 600 rubles, i.e. for 100 rubles more

Grigory returned 650 rubles to the bank, i.e. for 150 rubles. more than the amount taken

• When granting a loan, the bank requires to indicate the property that the client can offer the bank in case of impossibility to repay the loan.
• Real estate, cars, jewelry, i. property that can be sold to make up for losses
• By investing money in a bank, the depositor also risks, what if the bank goes bankrupt?

• Before investing money in a bank, the depositor needs to familiarize himself with the information about banks and choose the most reliable one.
• This information can be found in national and local newspapers.

• The entrepreneur put his money 1000 rubles. to the bank. A year later, he took 1,050 rubles from the bank. What is the bank interest rate set by the bank?

Check the task

1000 + 1000 * X: 100 = 1050

1000+ 10X = 1050

• The Ivanov family decided their free money in the amount of 5,000 rubles. save in the bank. The annual interest rate is 30% What income will the family receive in a year?

Check the task

5000+ 5000 * 30: 100 = 6,500 rubles

6500 - 5000 \u003d 1,500 rubles.

• What is a bank?
• Why is the loan interest always greater than the interest on the deposit?
• Why do banks most often provide loans secured by property?
• Where can I find information about banks?

Lesson 2 What are the banks

• The most important bank in our country is the Central Bank of Russia

It controls the activities of all banks in the country and issues (issues money)

All other banks are subordinate to the Central Bank

• A savings bank is a bank that consumers deal with. We can store money there, borrow money, perform settlement operations (pay taxes, services).
• The founder is the Central Bank, therefore the Savings Bank is the most stable and reliable

• Commercial banks perform the same financial transactions, but each bank has its own prices for the provision of services, prices for buying and selling currency.

• The most solid is the World Bank, or the International Bank for Reconstruction and Development in Washington, USA (1946)
• This bank was created in order to help restore the economy of those countries that suffered as a result of the war. Loans are given to the government of the needy country

There are large banks in every region. In Ekaterinburg:

• Ural Bank for Reconstruction and Development
• - Uralpromstroybank
• - Uralsibsotsbank
• - Bank "Northern Treasury"

These banks have branches in many cities of the Sverdlovsk region and in our city

• What is an emission?
• What types of banks do you know?
• What banks or their branches are there in our city?

Homework

Prepare for the test work on the questions:

• What is a bank?
• Bank work
• What is the name of the main bank of Russia?
• What is an emission?
• What types of banks do you know?

slide 2

LESSON TASKS DEFINE THE FUNCTIONS OF A CENTRAL BANK DEFINE THE FUNCTIONS OF A COMMERCIAL BANK GET TO KNOW THE TYPES OF DEPOSITS GET TO KNOW THE TYPES OF BANK RESERVES CONSIDER THE DEPOSIT EXPANSION MULTIPLIER AS A BAN CI MAKE MONEY

slide 3

MONEY is a special kind of commodity for which any good or service can be exchanged. MONEY SUPPLY is the amount of symbolic and bank money that is in the hands of the population. BANK MONEY is a medium of exchange in the form of checks, invoices issued by banks. MONETARY BASE is the sum of bank reserves and cash in the hands of the population. SYMBOLIC MONEY is a means of payment whose value or purchasing power is many times greater than the cost of production. CENTRAL BANK - an organization established by the authorities of the country, which is responsible for controlling the circulation of money and credit conditions, control over the financial system, which is a bank of banks, accepting deposits from commercial banks, as well as a state banker.

slide 4

slide 5

LESSON PLAN: 1. Money heart of the market; 2. Central Bank and its functions; 3. Commercial banks and its functions; 4. Spend today - pay tomorrow; 5. How banks create money.

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"Since the beginning of time, mankind has made three great discoveries: fire, the wheel, and the central banking system." Will Rogers (1879-1935)

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Economic interestsSavers ownerEntrepreneur

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BANKING SYSTEM Prior to 1989 three-tier system State Bank of the USSR Promstroybank Agrobank Zhilsotsbank Sberbank Vnesheconombank SPECIALIZED BANKS BRANCHES OF SPECIALIZED BANKS (ABOUT 6,000)

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Currently two-tier system Central bank Commercial banks

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Functions of the Central Bank is the issuing center of the country; government banker; bank of banks; interbank settlement center; the custodian of the country's gold and foreign exchange reserves; determines and implements monetary (monetary) policy.

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Commercial banks universal specialized 1. Purposes: - investment; - innovative; - mortgage. 2. By industry: - construction; - agricultural; - foreign economic. 3. For clients: - only firms; - population only.

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Functions of a commercial bank: acceptance and storage of any types of financial assets; implementation of credit operations; money creation; organization of payments; buying and selling securities.

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Operations of banks active Operations on placement by banks of the resources at their disposal passive Operations through which banks form their resources for credit and other operations deposit credit settlement currency cash, etc. Attracting and keeping funds on accounts accepting deposits receiving bank loans receiving income from the placement of securities, etc.

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BANK DEPOSITORS ENTREPRENEURS CREATION OF NEW FORMS OF MONEY % ON % ON LOANS TO DEPOSITS = MARGIN

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Lending - (from Latin Creditum - loan, debt) provision of money for temporary use and for a fee Types of loans short-term medium-term long-term up to 1 year From 1 to 5 years over 5 years

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REMINDER TO THE DEVELOPER: 1. Before entrusting your savings to the bank, make inquiries about it. Try to choose a reliable bank. An established bank is better protected from bankruptcy than a new one. 2. Term deposits are best made for the shortest possible time. 3. It is risky to place large sums of money in one bank. 4. If the bank reduced the interest rate on the deposit, that is, unilaterally changed the terms of the agreement with the depositor, then the bank violated the rights of the client.

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"Money Makes Money" "Money Makes Money"

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R \u003d D x rr, vol. R vol. - the amount of required reserves, D - the amount of deposits, rr - the rate of reserve requirements. K=R ex. = D - R vol. =D – D x rr =D(1 – rr) K-credit opportunities of the bank, Rex. - excess (above mandatory) reserves.

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1,000 rubles Bank 1,800 rubles 200 rubles Bank 2,640 rubles 160 rubles Bank 3,512 rubles 118 rubles Bank 4,409.6 rubles 102.4 rubles Bank 5 81.92 rubles 327.68 rubles …

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The process of deposit expansion M = D1+ D2 + D3 + D4 + D5 + D6 + … =1000 + 800 + 640 + 512 + 409.6 + 327.68 + … that is, the sum of an infinitely decreasing geometric progression with base (1 – rr) M=D x 1 (1-(1-rr)) =D x 1 rr In our case: M=1000 x 1 0.2 \u003d 1000 x 5 \u003d 5000

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The results of the study of the topic:

Banks carry out business operations and earn profits. They provide depositors with the safety of their money, checking services for their deposits. Banks provide loans and guarantee the stability of the payment system. They minimize the cost of finding loans, take on the risk of cash transactions and offer clients highly liquid funds for investment; Commercial banks are required to hold reserves as part of their deposits in case of significant withdrawals. Commercial banks use balance sheets to control their operations, which provide information on the movement of assets, liabilities and equity of the bank;

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The most important link in the banking system is the Central Bank. It is the bank of the government. The main function of the Central Bank is to ensure three main macroeconomic objectives: sustainable economic growth, high employment and, especially, a stable price level. The Central Bank establishes the required reserve ratio, controls the activities of commercial banks and other financial intermediaries, and issues fiat money; The central bank, as a rule, has a significant degree of independence. The facts show that the higher the independence of the Central Bank, the lower the rate of inflation in a given country; Acting jointly, commercial banks carry out lending operations using excess reserves. Credit expansion of banks depends on the value of the deposit expansion multiplier. The value of the multiplier is influenced by the reserve ratio, the conversion of a part of the check turnover into cash and the desire of many banks to keep the volume of reserves above the required norm.

OUTLINE: Introduction. 1. Money The origin of money. 1.2.Functions of money. 2. Banks. The emergence of banks. Bank operations. 3. Settlement part. Conclusion. List of used literature.

INTRODUCTION Nowadays, money has become the meaning of life for many people. A lot of people spend all their time making money, sacrificing their family, relatives, personal life. "Money bewitches people. They suffer for it, they work for it. They think of the most skillful ways to spend it. Money is the only commodity that cannot be used except to get rid of it. It will not feed you, clothe you, shelter you, or entertain you until you spend it or invest it. People will do almost everything for money, and money will do almost everything for people. Money is a captivating, repetitive, changing mask for nasty" (Honoré de Balzac).

Having a surplus of money, people invest it in real estate, developing their business, etc. But in a market economy, this can be risky and does not always lead to an increase in income. Money, like any commodity, can be bought and sold on the market. And just as business cannot exist without the exchange of money and goods, so the circulation of money is unthinkable without the participation of intermediaries - banks. Due to the fact that at present the activities of banking institutions are very diverse, their true nature is uncertain. Today, banks are engaged in various types of operations. In addition to organizing money circulation and credit relations, insurance operations, the purchase and sale of securities, intermediary transactions and property management, and financing of the national economy are carried out through them.

Each person is already or can be a potential client of banks. That is why the topic of this study is relevant in our time. Objectives of the research work: 1) determination of the place and role of money and banks in modern society; 2) to show on concrete examples the essence of banking operations, as well as their profitability for both the bank client and the bank itself.

1. MONEY The origin of money. Many thousands of years ago, people invented something that after a short time began to be valued more than anything else. What made a real revolution in the sphere of the movement of material goods, and the economic life itself pushed several stages forward. The historical periods of the development of money circulation are quite consistent with the types of monetary units, so it would be best to consider the following milestones in the development of money: 1) Quasi-money - this includes all means of exchange that do not fit into the modern idea of ​​\u200b\u200ba person about money. 2) Metal money. They are understood as money made from various metals, whether it be gold, silver or copper. 3) Paper money. 4) Electronic signs of modern network payment systems. The main criterion in this classification is not the source material with which money is made, but the method of their circulation, circulation in commodity circulation.

The first money invented by mankind least of all resembled a banknote, and few people would turn their tongues to call them money in the traditional sense of the word. Nevertheless, they could perform the main monetary function - the function of the general commodity equivalent, therefore, accordingly, they were money. Strictly speaking, initially the role of money was played by commodities exchanged for each other in certain quantitative and qualitative ratios. So, for example, products were exchanged for valuable goods with a long shelf life: furs, grain, rare stones, sea and river shells, and so on. Cattle became a commodity by which all other commodities were valued, and which was also readily accepted everywhere in exchange for them. In a word, cattle acquired the function of money and served as money already at this stage. With such necessity and rapidity, the need for a special commodity, money, developed already at the very beginning of commodity exchange. With the division of social production into two large main branches, agriculture and handicrafts, commodity production arises, and with it, trade. From now on, noble metals (they are not amenable to chemical attack, and even relatively rare in nature) begin to become the predominant and universal commodity money, but at this time they are not yet minted, but only exchanged simply by weight.

Coins began to be made at the beginning of the 6th century BC in the territory of Lydia. Several forms of production (issue) of metal money are known: Monometallism. Occurs when coins are made from a single metal. For example, from copper (Ancient Rome), gold (Western European countries) or silver (Russia). Bimetallism. With him, a mixture of metals (not necessarily precious) took place. This form is inherent in all countries at a late stage in the development of capitalist relations. Base metals, such as copper, very often initially served as money, and then were already supplanted by noble metals. Copper, and after the introduction of the gold currency, silver, ceased to be measures of value, although copper and silver coins continue to function as a medium of exchange in petty trade. They began to correspond now to certain weight parts of gold. The value they represent varied according to the real value of gold and was not in the least affected by fluctuations in the value of silver and copper.

The first paper money originated in medieval China. The first mention of paper money dates back to the 11th century. Paper money can only replace gold money as a medium of exchange, but not as a measure of value. They can replace them only insofar as they represent certain quantities of gold. Paper money can never be more valuable than metal money, or represent more gold than can be absorbed by the circulation of commodities.

1.2. FUNCTIONS OF MONEY. Economists identify five main functions of money. 1. Measure of value: money measures the value of goods through prices, thereby comparing goods with qualitatively different consumer properties. In other words, money serves as a kind of "ruler" for measuring prices. This function is so important that money is most often defined precisely as a universal equivalent. In fulfilling the role of a measure of value, money is necessary as mentally represented money. For example, to assert that a kilogram of pears is twice as expensive as a kilogram of apples, it is enough to have prices; money itself in any material form is not needed at all for this comparison.

2. Medium of circulation: money plays the role of intermediaries in the exchange of goods. Instead of directly exchanging one commodity for another, which is called barter, commodity producers receive money for the commodity they sell, with which they purchase other goods they need. This function is described by the formula commodity-money-commodity. When money plays the role of an intermediary, the acts of buying and selling do not coincide in time and space. A commodity producer gets the opportunity, for example, to sell one commodity today, and buy another only in a day, a week, a month, and so on. Further, he can sell his goods in one place, and buy the goods he needs in a completely different place. Thus, money as a means of circulation overcomes the temporal and spatial limitations of exchange relations.

3. Store of value: Money creates a store of wealth. We are talking about the ordinary accumulation of funds before buying any expensive goods (or accumulation for other purposes). For example, to buy a car, you need to save money for a number of years until the required amount is accumulated. There is a break in the chain: instead of commodity-money-commodity, first commodity-money occurs, and only then, after a considerable period of time, money-commodity. Money is temporarily withdrawn from circulation and is "in the hands" of commodity producers, the sale of one product is not accompanied by an immediate purchase of another. For the effective performance of this function (as well as for the function of a measure of value), it is very important that money retains its value, that is, does not depreciate. 4. Means of payment: the movement of money "breaks away" from the movement of goods, lags behind it. This happens when credit develops. So, the buyer can buy a car on installments, as a result of which he immediately becomes its owner, but still makes installments for it for a long time. 5. World money: manifested in the free circulation of certain types of money outside their national borders. Today, this role is played by the most reliable national currencies. This is, first of all, the dollar and the euro.

2. BANKS. The emergence of banks. Bank operations. Already in ancient times, usury was widespread - the issuance of money at interest. The difference between the amount that was returned to the usurer and that which was originally taken from him was called interest. So, in Ancient Babylon it was already 20% or more! This meant that an artisan who took 1,000 monetary units from a usurer for a period of one year returned to him after a year at least 1,200 of the same units. It is known that in the XIV - XV centuries. banks were widespread in Western Europe.

Banks at that time were called institutions that lent money to princes, merchants, artisans, financed long-distance travels, campaigns of conquest, etc. Of course, banks did not give money disinterestedly: they took a fee for the use of the money provided, just like usurers in antiquity. This fee was usually expressed as a percentage of the amount of money lent.

Those who borrow money from a bank are called borrowers, and a loan, i.e. The amount of money borrowed from a bank is called a loan. The main part of the money that banks issue to borrowers is the money of depositors, which they deposit in the bank for safekeeping. Part of the profit that the bank receives, it transfers to depositors in the form of a fee for using their money. This fee is also usually expressed as a percentage of the value of the contribution. Thus, the funds deposited in the bank, after a certain period of time, bring some income equal to the amount of interest accrued over this period.

So, on the one hand, banks accept deposits and pay interest on these deposits to depositors, and on the other hand, they give loans to borrowers and receive interest from them for using this money. The difference between the amount that the bank receives from borrowers for granted loans, and the amount that it pays on deposits, is the bank's profit. Thus, the bank is a financial intermediary between depositors and borrowers.

One of the most common ways to attract savings from citizens, firms, etc. to the bank. is the opening of a savings account by a depositor: the depositor can deposit additional amounts of money into his account, can withdraw a certain amount from the account, can close the account, completely withdrawing the money stored on it. At the same time, the depositor receives a fee from the bank in the form of interest for using the money to issue loans to entrepreneurs, firms, the state, other banks, etc.

3. CALCULATION PART. Let's consider schemes for calculating a bank with depositors. Depending on the method of accrual, interest is divided into simple and compound. Simple interest: the increase in the So deposit under the simple interest scheme is characterized by the fact that the interest amounts during the entire storage period are determined based only on the initial amount of the So deposit, regardless of the storage period and the amount of interest accrued.

Let the depositor open a savings account and deposit S o rubles into it. Let the bank undertake to pay the depositor at the end of each year p% of the initial amount S o. Then, after one year, the amount of accrued interest is S o p / 100 rubles and the amount of the contribution will be equal to S \u003d S o (1 + p / 100); here p% is called the annual interest rate. If, after one year, the depositor withdraws the accrued interest S o p / 100 from the account, and leaves the amount So, the bank will again accrue So p / 100 rubles, and in two years 2 S o p / 100 rubles. After n years, the contribution according to the simple percentage formula will be: S n= S o (1 + (pn): 100) (2)

Consider another way of calculating the bank with the depositor. It consists in the following: if the depositor does not withdraw the amount of accrued interest from the account, then this amount is added to the main deposit, and at the end of the next year the bank will accrue p% already on a new, increased amount. This means that the bank will now charge interest not only on the principal deposit, S o , but also on the interest that is relied upon. This method of calculating "interest on interest" is called compound interest. S n= S o (1 + p:100), (2) where n is the term of the deposit = 1, 2, 3, …

Example 1. The bank pays depositors every year 8% of the deposited amount. The client made a contribution in the amount of rubles. What amount will be in his account in 5 years, in 10 years? To solve this problem, we use formula (1): 1) S= (1+85:100)= ,4= (rubles) – in 5 years; 2) S= (1+810:100)= ,8= (rubles) – in 10 years.

Example 2. A depositor opened a bank account, depositing 2,000 rubles on a deposit with an annual income of 12%, and decided not to take interest charges for 6 years. How much will he have in his account after 6 years? Because the depositor does not take interest accruals, then the amount of the deposit with interest will be calculated according to the formula (2), i.e.: S=2000(1+12/100), where n=6; S=20001, ~3947.65 (rub.)

Example 3. At what interest rate will a deposit of 500 rubles increase to 650 rubles in 6 months? Let the interest rate be x%. Then we will express it from the formula for calculating simple interest (1), substituting the already known data: 500(1+6x:100)=650; 5(100+6x)=650; X=650; X=5 (%).

Example 4. The bank gave the client a loan in rubles. at 20% per annum for 3 months. What amount will the client have to return to the bank after the deadline? Let's define the monthly interest: Р months =20/12=1, And since the client took a loan for 3 months, then: Р=1, =5. Let's find the refund amount using the formula (1): S=100000(1+5:100)= (rub.)

Example 5. According to the previous problem, determine the real interest rate of the bank if it services 3 more customers one after the other on the same terms, while issuing a loan in the amount of the returned amount with interest. 1) S 1 (example 4) = rubles. 2) S 2 = .05= (rubles) 3) S 3 = .05=115762.5 (rubles) 4) S 4 =115762.51.05=121550.63 (rubles) 13: ~52.56%.

Example 6. A bank issued a loan to a client on the following terms: initial amount - rubles, interest rate - 170% per annum, loan term - 2 years. Determine how many times the amount of debt at the end of the loan period will exceed the original amount of debt. According to formula (1), we determine the amount of the return: S=200000(1+2170:100)= (rubles). The amount of debt by the end of the loan term will exceed the initial amount of debt by: :200000=4.4 (times)

Example 7. The bank issued a loan in the amount of rubles for 3 years at 50% interest per annum on the terms of simple interest with the requirement of a uniform monthly repayment of the debt during this period. How much does the client have to return each month? Using formula (1), we find the amount of debt with interest for 3 years: S=24000(1+350:100)=60000 Therefore, every month the client will have to repay: 60000:3:12=1666.67 (rubles)

Example 8. The client put rubles in the bank. During the first year and a half, the interest rate on the deposit was 20% per annum, then the rate was raised to 40% - this rate was six months, after which it rose to 50%. How much after four years will the bank have to return to the client? S 1 \u003d 20000 (1 + 1.520: 100) \u003d 26000 (rubles); S 2 \u003d 26000 (1 + 0.540: 100) \u003d 31200 (rubles); S 3 \u003d 31200 (1 + 250: 100) \u003d 62400 (rubles).

TO REVEAL THE ESSENCE OF A CREDIT, LET'S CONSIDER THE FOLLOWING EXAMPLE. Example 9. A credit institution provided an individual with a special-purpose loan in the amount of rubles for a period of 3 years at 25% per annum. It is necessary to calculate monthly payments of the client to the bank.

Solution. Loan term = 3 years = 36 months. Calculate the monthly repayment of the principal amount: RUB. : 36 months = 2,777.78 rubles. Those. the client must pay 2,777.78 rubles monthly. But this is an incomplete amount, because This does not include interest on loans. Let's calculate their sum for 1 month: .25: 12 = 2083.33 (rubles). Thus, the client must pay the bank in the first month: 2777.33 = 4861.11 (rubles)

To calculate payments for the 2nd month, it is necessary to subtract the monthly principal installment from the amount of the loan received, and then calculate interest on the amount received, i.e.: - 2777.78 = 97222.22 (rubles) 97222.22 0.25: 12 = 2025.46 (rubles) Thus, the total amount of payments in the 2nd month will be: 2777.46 = 4803.24 (rubles)

To calculate payments for using the loan in the 3rd month, it is necessary to subtract the amount of the monthly installment from the amount of the principal debt received when calculating the installment in the 2nd month, and then calculate the interest: 97222.22 - 2777.78 = 94444.44 (rub.) 2777.59 \u003d 4745.37 (rubles) Payments for the remaining months are calculated in a similar way. We will draw up a payment schedule for the client.

Month InstallmentInterestAmountBalance 1678,244456,781620,374398,781562,494340,781504,624282,781446,754224,781388,884166,781331,014108,781273,144050,781215,273993 .58

Thus, the client pays the bank for using the loan the amount of 38541.5 rubles. The total amount paid is: .5 = .5 (rubles)

CONCLUSION. The existence of mankind without money in a market economy is impossible, since they play a very important role, manifested in their main functions: means of circulation, means of payment, means of accumulation. The circulation of money is unthinkable without the participation of intermediaries - banks. They are at the center of economic life, serve the interests of producers, linking industry and trade, agriculture and the population with cash flow. All over the world, banks have significant power and influence, they manage the huge money capital flowing to them from enterprises and firms, from merchants and farmers, from the state and private individuals.

Banks have firmly entered our lives. Although the role of banks has been so often ignored in Russia, their economic purpose has been reduced to such an extent that even now, when our country has begun to live according to different economic laws, many people do not give the activities of banks the attention that they deserve. The question of what a bank is is not as simple as it seems at first glance. In everyday life, banks are stores of money. At the same time, this and similar worldly interpretation of the bank not only does not reveal its essence, but also hides its true purpose in the national economy. Based on the examples given in the research work, it can be concluded that for bank customers, keeping money in a bank is not only reliable, but also profitable.

The banks themselves, being a mechanism for making a profit for their customers, also make a profit when making operations to place funds attracted to deposits. Therefore, the cooperation of banks with their depositors is mutually beneficial, which is shown when solving problems in this research work.

LIST OF USED LITERATURE 1.Money. Credit. Banks. Ed. Prof. E.F. Zhukov. - M.: UNITI, Money, credit, banks: Textbook / ed. O.I. Lavrushin. M.: Finance and statistics, 2007; 3. Zaichenko N.A. A primer for the Rockefellers. Tutorial. - St. Petersburg: SMIO Press, Studenetskaya V.N., Sagatelova L.S. Mathematics: a collection of elective courses. - Volgograd: Teacher, 2007.