Recently, trust operations have become more and more developed in the credit services market, that is, conducting operations on behalf of the client, based on the trust of the parties. Russian experts define 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 natural person.
In other words, trust operations imply absolute confidence in the bank on the part of the client and full confidence that the bank, performing one or another action, does everything to improve the welfare of the client. Often, the bank's management decides to form a separate unit engaged in trust operations. If such operations are carried out in large volumes, then this unit may exist separately and constitute a small trust company.
Trust operations can vary in many ways. The most popular are financial, that is, services for the accumulation and distribution of funds of the premium fund of the enterprise or pension, which is formed by companies with the aim of encouraging employees with long work experience. In some cases, the bank is instructed to conduct public trusts, that is, funds whose funds are accumulated free of charge and distributed among those in need. One can also note such a form as discretionary trust operations aimed at managing a share of a shareholder’s funds and finding ways to maximize his profit.
A credit institution offers trust operations with the possibility of complete disposal of property, and without it. According to the method of disposal, trust operations of banks are divided into two groups: active and passive. The first group provides the right to sell, lease or mortgage property as a guarantee, with no additional permission of the client required. And passive operations allow only managing the property without the possibility of its independent implementation.
Trust management services are provided by credit institutions for both legal entities and individuals. Individual citizens usually ask for the conduct of the inheritance case, as well as assistance in purchasing securities on the stock exchange, at the disposal of property provided on the basis of guardianship and so on. But the most popular services are maintaining the client’s settlement and currency accounts , drawing up tax returns, maintaining the revenue side.
The legal registration of trust services is the agreement of the parties, which indicates the terms, amount of payment, but, most importantly, the rights and obligations between the lender and the client are clearly limited. An agreement with a legal entity may provide for the right to manage all or part of its assets, conduct collection operations, and engage in investment activities at the expense of a certain part of the income. And, of course, the provision of loans to customers in the presence of a temporary lack of free cash resources.
Why do banks need to conduct trust operations? Like any service, this is also considered an additional income. The amount of the commission is indicated in the contract for trust operations. Moreover, the bank together with the client determines the specific form of payments. For example, a one-time transfer at the end of the contract in the form of a total amount for the entire period, or an annual transfer of a part of the client’s income.
In our country, trust operations are under development, so some types of services are not yet provided by banks. These include maintaining the pension fund of an enterprise or managing investments of individuals, operations on the stock exchange.