Promissory notes are far from the last place on the securities market. Their circulation is developing both globally and on the territory of the Russian Federation. But how successful? What difficulties are there in the way of this development? What are the features of bill circulation in Russia? What prospects do analysts determine for him? The article will be devoted to the answers to these questions.
Definition of a concept
A bill of exchange is one of the most frequent categories of securities in Russian stock market practice. But what is it? The answer is contained in the Law of the Russian Federation "On the Securities Market" (1996):
- An equity security - any securities (including a non-documentary group) that simultaneously secures a list of property and non-property rights that are subject to certification, possible assignment and unconditional exercise (subject to the provisions of the aforementioned Federal Law), are placed in issues, and also have equal volumes and the terms for exercising powers within one such issue - excluding the time of purchase of a security.
- Security - a specific monetary document certifying the property rights or the relationship of the loan of the owner of the paper in relation to the person issuing it.
A bill of exchange is an unconditional debt monetary written obligation drawn up in accordance with a form approved by law. According to it, one party (drawer) is obliged to unconditionally pay the amount of money indicated in this paper. The holder of the bill of exchange (holder of the bill of exchange) receives it upon the due date for payment to him or his own request.
Thus, the bill gives the right to its owner to demand from the credited (or the acceptor - a third party who has undertaken the obligation to pay the bill) the payment of the amount of money indicated in the document upon the occurrence of a certain condition.
A feature of bill circulation is that this document is a complex settlement and credit instrument. It can simultaneously serve as a security, means of payment and credit money. In addition, the role of a security in itself is the subject of various transactions.
Promissory notes and bill circulation in the Russian Federation are regulated by the following:
- Fundamentals of civil law.
- Federal Law "On a Promissory Note and a Bill of Exchange" (1997).
Key Features
To understand the rules of bill circulation, you need to decide on the main features of this security:
- The nature of the obligation, as expressed by the bill of exchange, is abstract. The text of this document does not contain a reference to the transaction, which is the basis for its issuance.
- If the bill is genuine, then the nature of the obligation is undeniable.
- The nature of the obligation on this security is unconditional. The bill contains a simple and unconditional offer to provide a certain amount of money. Hence, any attempts to stipulate payment are not legally binding.
- The bill always acts as a monetary obligation. It will never be an obligation where the payment of a debt implies the provision of a product or the provision of a service.
- A bill of exchange is a strictly written document. The issuance of such obligations orally is not possible.
- A bill of exchange is a document having strictly established requisites required for indicating.
We will analyze the latter in more detail.
Mandatory details
In the article we analyze the basics of bill circulation, types of bills, details of a bill. As for the latter, according to the International Convention, there are 8 mandatory details for this security:
- Bill label. That is, the document must necessarily indicate "Promissory note". Not only in the title, but also in its textual content.
- Currency in which the debt will be paid.
- Amount of payment. In the bill of exchange it is indicated at least twice - in numbers and in words.
- Information about the payer for this document.
- Information about the person in whose favor the payment will be made.
- The place where the debt will be paid.
- The term after which the payer is obliged to pay off his debt.
- Time and place of issuing a bill.
- The document is certified by the handwritten signature of the person who issued the bill.
I must say that the parties obligated under the bill bear joint responsibility. And in case of default by the debtor (drawer), the payee can apply for recovery to any of the previous holders. Those, in their turn, upon repayment of a bill acquire the right to claim bill amounts from persons who find themselves in the bill chain.
Varieties of bills
The bill circulation in Western Europe of the New Age developed so productively that it became necessary to introduce several classifications of these securities because of their difference. Consider the most common:
- Plain (or solo-bills) and transferable (draft). They differ from each other in the number of participants in the transaction.
- Commercial (commodity), treasury and financial. They differ from each other in the nature of the transaction, which underlies the bill.
- Bronze, oncoming and friendly. Separation by degree of security of a bill. A simpler classification is the division into secured and unsecured.
- Order (with the transfer of the transfer) and bearer. Accordingly, they differ in the transmission method.
Let's consider some categories in more detail.
Commodity group
The liabilities of this bill circulation are based on a commercial loan, commodity transactions. In this case, the loan is provided by the seller to the buyer in case of product sales.
With such promissory note circulation, a commercial loan can, on the one hand, act as an instrument of this security. On the other hand, to perform the tasks of the settlement means. Indeed, in the future he repeatedly passes from hand to hand, serves as a monetary substitute for multiple acts of sale of products.
Finance and Treasury Groups
The monetary obligation on a financial bill necessarily is based on some kind of monetary transaction, which cannot be associated with the sale and purchase of goods.
It is important to note that the types of such bills are “commercial papers” - negotiable promissory notes in the name of the issuer. Their characteristics:
- They do not have collateral.
- They are discounted.
- Bringing to the face value a certain percentage.
- Issued for a period of 1 to 270 days.
- The form of the security is bearer.
As for treasury bills, they are essentially short-term securities. Their issuer is the state.
Friendly group
Bill circulation in the Republic of Kazakhstan, the Russian Federation, and the Republic of Belarus is somewhat similar, which is not surprising - these are the “descendants” of one state, which is why the prerequisites for the development of their stock markets are related.
Both in these countries and around the world so-called friendly bills are common. What is it? Securities for which there are no actually concluded transactions, nor real financial obligations. Only persons acting as participants in a bill are real.
According to common practice, two persons who are already in trust between each other usually exchange bills of exchange. To record bills by the bank, in order to pledge this security, in order to receive real money for it. Friendly bills are sometimes used to make payments.
Bronze band
Analyzing the varieties of these securities, we see the economic problems solved in bill circulation.
Behind the category “bronze bill” is neither a real deal, nor a real financial liability. And an important point: at least one person who participates in such a transaction is a fictitious one.
The objectives of the bronze bill are as follows:
- Obtaining collateral in this paper at banks.
- Using this essentially fake documentation to pay off debts.
- Use to work with your financial obligations, to participate in real transactions.
Simple group
Bill circulation in Belarus and the Russian Federation cannot be presented without the category of promissory notes. Two parties participate in them. The payer, accordingly, is the drawer. He, writing this paper, is obliged to pay his creditor (bill holder in this vein) a specific amount at a specific time and place.
Translation group
If we turn to the features of accounting for bill circulation in banks, then the transfer category is the most difficult. After all, at least three persons participate here. The drawer here is a drawer. And he is not a bill payer. The payer is a third party who assumes responsibility to fulfill obligations on the bill on time.
Thus, a bill of exchange acts as a written offer of drawers - an appeal to a third party (payer, drawee) to pay the agreed amount to the drawer (lender in this case).
A classic bill of exchange is the participation of three persons. But in this category there are also bills with two or even one single participant. When issuing such a paper, the drawer may designate himself as the recipient of the cash amount. Or another person as you wish.
Feature of bills of exchange: the obligation of the drawer here is conditional. He undertakes to pay the creditor the bill amount only if the drawer has not provided it. In this situation, the drawer is equal to the person who wrote a promissory note.
A bill of exchange is not considered a liability of the drawer. It is an obligation of the drawee (payer) and only after a unilateral act of expression of will, called acceptance.
From here comes the concept of "accepted bill of exchange" - with the consent of the payer to pay it. From the moment of acceptance, the drawee becomes the direct debtor of the bill. If he accepts a security, but does not pay on it, then a default protest will legally arise against him.
Fundamentals of international circulation
The features of accounting for bill circulation in banks, respectively, are regulated by laws and legal acts of the states of the world. But all of them rely on international bill law (we are talking about the International Geneva Convention on Bills, which took place on 7/06/1930).
It must be said that it allows an extremely liberal procedure for the issue of such securities. For this, neither state registration of a bill of exchange, nor protection by a special certificate, nor the preconditions for its appearance (certificate), nor collateral or mortgage, are required. The parties to the transaction are required only to have legal and legal capacity.
But the simplicity of the statement is compensated by the strict adherence to the rules of the bill circulation of the parties to the transaction. It is necessary to comply with a number of requirements, to undergo certain procedures. Hence, work with bills requires experience, professionalism.
Russian trends
The basis of bill circulation has two distinct features, if we talk specifically about the Russian Federation:
- The desire of Russian banks and companies to increase the share of their own bills in circulation.
- Search for new sectors of capital application.
This is vividly represented by the situation in the country that unfolded in 1996. Then, according to the Central Bank of Russia, promissory notes worth 20.2 trillion rubles were issued. As a rule, in the Russian Federation they were written out mainly for settlements with creditors, without taking into account the receivables of enterprises. But the tough deflationary state policy of 1994-1996. coupled with such trends led to an acute shortage of real money in the economy. Many companies and manufacturing enterprises then lost the last source of replenishment of their working capital - inflation.
On the other hand, high levels of lending rates for end borrowers have led to the fact that promissory notes (like other surrogates) have become both the only possible methods of settlement in business and sources of working capital replenishment.
Features of domestic circulation
Therefore, the problems and features of bill circulation in Russia are primarily associated with the fact that these papers in our country work according to a scheme different from the world classical one. In most cases, they act as means of settlement with creditors. In this case, the mandatory function of money supply is ignored.
The reason for this is simple: as soon as the bill is "transformed" into money supply, products from the shipped list are transferred to the list sold. Consequently, it becomes necessary to pay income tax. That is why the bill is sent from one counterparty to another. Its role is to cover accounts receivable. Therefore, if he returns to the drawers, then only to pay the debt.
From here, bill market operators focus on operations with bank bills, since against this background they are more reliable and liquid. And the holder of bank bills can receive "live" money on them. While for commercial bills, the best thing is to provide goods.
We will explain the interest of Russian banks in bills. The decline in profitability in markets such as GKO / OFZ and OGSZ forced banking organizations to turn their attention to highly liquid securities. Banks also take into account the interests of their own customers, who use bills of exchange for mutual settlements. Also, receiving income from the distribution of bills, banks are expanding the range of services provided to customers.
But here there is a negative moment when banks use bills of exchange. Namely - their excessive release. As an illustrative example from the past, Tveruniversalbank can be cited. He, in fact, was a pioneer of the bill market in the Russian Federation. But he led an extremely risky policy in this area, which later put him in a very difficult financial situation.
The current state of affairs in the Russian Federation
Now we turn directly to the problems of the development of bill circulation in Russia in the present. In recent summers, rapid development of this sector of the stock market has been observed. Hypertrophied forms of bill circulation take place. And this is due to the following factors:
- The crisis of the state budget. It forces the authorities at all levels (from federal to local) to use money surrogates to cover the budget deficit. If we turn to the example of 1995-1996, we can recall how the Ministry of Finance used treasury bonds for settlements with state enterprises. The large-scale issue of these securities then caused sharp criticism from the International Monetary Fund. The practice ceased, but in 1996 the Ministry of Finance began to apply guarantee schemes for commercial banks on bill loans for recipients of budget money. Money was replaced by bills of commercial banks. Many of them could not resist the temptation to over-issue these securities.
- Fake bills. In the history of modern Russia, and they took place. Moreover, the Ministry of Finance also acted as a drawer or avalist. A striking example is bills issued on behalf of the federal treasuries of Dagestan and North Ossetia totaling 7 trillion rubles. Other subjects of the federation also contributed to the issue of various substitutes for money, including promissory notes.
- Restriction of credit opportunities of banks. Many of them reduced the volume of lending to trading capital. Amid a shortage of "live money" companies were forced to replace them with the active introduction of commercial bills.
Currently, the Central Bank of Russia does not allow credit organizations to work in book-entry form with bills. AUVER was created under the auspices of the Central Bank, designed to create the necessary legal basis for the bill market, as well as create its information transparency. Today, there is a transition of the Russian circulation of bills from laissez-faire state to active state regulation.
Prospects for the development of technology of bill circulation in the Russian Federation and the world are assessed ambiguously. Someone sees the right path in further following the Geneva Agreements, someone in the development of a fundamentally new regulatory act. As for the Russian Federation, the state of the bill market requires a major legislative reform in this area.