The current legislation does not give a clear definition of the concept of “banking”. However, we can conclude that this is an activity carried out by banks and other credit institutions and covering the whole range of operations conducted by them.
Banking got the most development after the transition to a market economy, because during this period commercial banks began to form. Modern economic theory claims that a bank can only be called an organization that performs three basic operations: issuing loans, attracting deposits and performing settlement transactions of its customers. However, in addition to the main functions, a credit institution has the right to provide other services, for example, to conduct operations on the securities market, advise a client, etc.
Banking involves exchange transactions, providing guarantees to first-class customers, opening and closing various accounts, granting loans, loans and credits, as well as raising funds for deposit accounts with legal entities and individuals. In some cases, credit organizations offer services such as leasing or rental.
The organization of banking activities of each institution begins with a license, which is issued by the central bank of the country. The National Bank controls the activities of the company at other levels of the banking system by establishing norms and standards that are binding on all credit institutions. To obtain a license, the bank should submit an application, after consideration of which a decision is made on the advisability of issuing a license. As with any economic entity, the bank must have an authorized capital formed from the contributions of shareholders.
Banking activities of a credit institution operating on a commercial basis, as the main goal highlights the profit and its maximization. But the central bank directs all its forces to stabilizing the economic situation, strengthening the national monetary unit, maintaining its exchange rate at the required level. In addition, he is engaged in the release of cash into circulation, which means that he controls the volume of money supply. The Central Bank is trying to achieve the goals outlined in the monetary policy of the state.
The main principles of banking include mandatory licensing of each credit institution. If it carries out operations without proper authorization, then this activity will be invalidated. Without a license, an economic entity does not have the right to continue working. Each bank operates on the basis of self-financing and self-sufficiency, which means that it is an independent organization. Neither the government nor the central bank can intervene in the affairs of a credit institution except for situations stipulated by applicable law. As mentioned above, the central bank only sets certain standards in order to maintain the solvency of each economic entity.
A commercial bank has the right to independently decide whether to grant a loan to a client or to refuse it. No one should influence his decision or challenge it. In the same way, a consumer of banking products may, at his own discretion, choose a credit institution that best meets his needs. According to the principles of banking, bank employees do not have the right to disclose information that is a commercial secret, as well as information about the client or his cash flow.