What is a bank asset? What are bank assets. Assets of Russian banks

Securities owned by the bank, investments and loans provided, tangible objects in the form of real estate, cash on hand, precious metals and other tangible assets.

Assets initially require the bank to invest funds. And the ultimate goal is to obtain further economic benefits. Assets require funds to exist. They, in particular, are the money of depositors and the capital of the bank itself. The main task is to increase the size of assets.

Types of assets

By purpose, the following categories of assets can be distinguished:

Cash registers. They are necessary for daily customer service and transfer of funds to them. These assets include money issued in person at ATMs, exchange offices, and savings banks. Owners of funds have the right to receive them as soon as required. And the bank must be ready to immediately fulfill this obligation.
Working. This group includes assets characterized by a short turnover period and regularly generating profit. Their percentage in the bank's balance sheet is large. The figure can reach 70%. Operating assets include deposits held in banking institutions and short-term loans.
Investment. The category includes long-term investments made by a financial institution. These assets are created by the bank with the aim of expanding its sphere of influence, as well as generating income later. Investments can be direct or in the form of promissory notes, the maturity of which is calculated over a period of more than a year.
Capitalized. These assets are used to enable the bank to function. In the overall structure they occupy up to 15%. Premises, equipment, transport - this and much more is necessary for a bank to organize its activities. Such assets are not in circulation. It is important that their amount does not exceed the bank’s own capital.
Others. The remaining assets include, for example, transit accounts and receivables. For normal bank activities, the share of assets of this kind should not exceed 10%. If the specified norm is exceeded, a negative trend appears.

Liquidity and risk level of assets

Characterizing assets from the perspective of liquidity, they can be divided into four levels:

Highly liquid. Such assets are quickly converted into funds needed to meet various obligations. This is, for example, cash money.
Medium liquid. These assets are owned by the bank. If necessary, with a short delay they can be turned into money. These are short-term loans and payments. Their completion time is up to a month.
Having long-term liquidity. If these are loans, then their repayment period extends beyond the year.
Low liquidity. We are talking about long-term investments and debts here.

In order for there to be stability in the bank’s activities, highly liquid assets must be at least 12%. The policy of any bank is aimed at maintaining high liquidity. However, a certain share of low-liquid assets is also necessary. It is with their help that reserves are formed that help out in critical situations. Assets of this kind - antiques, jewelry.

The concept of “working assets of a credit institution”

Assets in a broad sense are the future economic benefits that a credit institution may receive as a result of operations or transactions that occurred in the past to acquire property and possibly transfer it for temporary use to a third party.

Future economic benefit relates to the ability of assets to generate profits for their owners by returning claims, exchanging them for something of value to the owners, by using them in productive activities, or by using them to pay off liabilities.

Definition 1

The assets of a credit organization are data from the bank’s balance sheet items, which reflect the allocation of the resources they have. Banking assets are usually created as a result of active operations, i.e. operations related to the placement of own and borrowed funds to generate income, support liquidity and ensure the normal functioning of banks. By carrying out active operations, banks receive the bulk of their income.

Banks' balance sheets assume the following aggregate asset items:

Cash and accounts with the Central Bank of the Russian Federation.
Government debt obligations.
Funds from credit institutions.
Net investments in securities for resale.
Net loans and equivalent debt.
Interest accrued (including overdue).
Funds leased.
Fixed assets and intangible assets, tangible assets.
Net long-term investments in securities and shares.
Deferred expenses for other transactions.
Other assets.

The structure of assets should be understood as the ratio of balance sheet asset items of different quality to its total currency. Bank assets can be divided according to the following classification criteria:

their purpose,
degree of liquidity,
level of risk,
the timing of their placement,
subjects.

We are interested in the first group of assets - their purpose for the bank. According to their purpose, assets are divided into five groups. These include:

cash, the so-called cash assets, which provide liquidity to banks;
current assets or, in other words, working assets that generate current income for the bank;
investment assets for which income generation is envisaged in the long term and other strategic goals are achieved;
non-current assets that support the economic activities of banks;
other assets.

We will look at performing assets in more detail. They can be seen most clearly in the figure below.

Classification of operating assets and their brief characteristics

Working (profitable or current or risky) assets, sometimes called allocated assets, constitute on average about 60–70% of all assets of credit institutions.

Definition 2

The main criteria for classifying assets into this classification group are the generation of the bulk of income and their relatively fast turnover. This group should include short-term (up to a year) medium-term (up to three years) loans and investments in securities intended for sale and measured at fair value. The classification of interbank loans and deposits that are placed with the Central Bank of the Russian Federation or credit institutions is a type of working assets.

In modern conditions, the structure of working assets is represented to the greatest extent by loans from various sectors of the economy and loans from the population.

Detailing the composition of operating assets, they can be divided into the following items:

loan debt and debt equivalent to loan debt:

deposits and other funds raised in the Bank of Russia;
interbank loans (IBC) and deposits placed with credit institutions;
loans provided to clients other than credit institutions;
factoring and leasing operations;
bank guarantees paid, but not collected from clients.

short-term and medium-term funds invested in securities, including discounted bills.

Having considered the main classification criteria, it should be noted that operating assets must satisfy the basic requirements and characteristics of assets. They are shown in the figure below.

According to the classic definition in accounting, total assets are all the property of an organization, and total liabilities are the sources of its formation. Consequently, the bank’s assets are all the property it has, formed from the funds shown in the liabilities side of the balance sheet.

Bank asset structure

The property of a banking institution can be structured in different ways, depending on which classification criterion is taken as a basis. For example, all banking assets can be divided according to the timing of their placement into short-term, medium-term and long-term, however, in fact, this will not give any information about their composition. In this regard, the most popular classification of assets according to their purpose.

Cash assets are those funds that are constantly in cash registers, ATMs, current accounts, and exchange offices, and ensure the current activities of the bank.
Working assets on the balance sheet are called current and generate income - these are loans and deposits in other banks, bills, etc.
Investment assets - they also generate income, but they represent investments for a longer period, and the investments themselves can be either direct or portfolio; the purpose of these investments can be both income and expansion of the bank’s sphere of influence;
Non-current assets - as the name suggests, they do not undergo any turnover. Their goal is to provide the current activities of the bank with everything necessary, this includes fixed assets, intangible assets, and capital investments.
Other assets – receivables, deferred expenses.

Separately, it is worth noting the bank’s information assets - these are all personal information, details, personal data, trade secrets, publicly available information, etc. These assets, according to information security requirements, must be classified according to the degree of information secrecy.

In addition, banking institutions sometimes have improper assets. Their presence is undesirable and often borders on illegal, but occurs nonetheless. In fact, this is “inflated” capital - that is, the bank’s own funds returned to it, only through third parties. This happens when meaningless transactions are concluded or transactions with interested parties, there is no real activity, loan defaults, etc.

Income assets

With respect to any commercial bank, at first glance it is not easy to identify all the objects that bring it real income.

Obviously, income comes from issued loans, securities and objects transferred for financial lease (leasing). However, the assets of the balance sheet also display objects that at first glance seem to be non-performing, but still generate income. A striking example is currency and precious metals. It would seem that the bank does not conduct any transactions with them, they are simply in its possession, and they also do not bring interest income. But due to changes in their market price and exchange rate fluctuations, these investments still bring income to the bank.

Another example of implicit profitability is cash assets. At first glance, this is simply money that the bank needs for its current activities - it simply lies in the cash register, ATM or account and does not generate income. However, the bank also receives a commission from these funds (for cash settlement services, issuing money at an ATM to clients of other banks, for money transfers, etc.) Another thing is that in the fight for clients, banks usually lower such commissions or make them minimal.

Sale and analysis of bank assets

The analysis in this case is usually carried out from a liquidity perspective. The degree of liquidity is how quickly an investment can be converted into cash if such an opportunity arises.

Money itself is the most liquid asset. Investments in currencies and precious metals are considered a little less liquid - there will be no problems with cashing out funds, but still this is not done instantly. Next, in descending order, there are urgent investments, for example, deposits in other commercial banks or issued loans, which will turn into money only after a certain period. The least liquid assets are considered to be fixed assets, long-term investments, overdue and bad debts.

For example, a bank can sell a house or office for commercial real estate, but it will take several weeks to complete the transaction, not to mention the fact that a buyer still needs to be found - and there may not be any demand at all. The story is similar with long-term investments - for example, a stake in another company can be sold, but this cannot be done overnight.

Yes, in practice there are extremely rare situations when a bank needs money so much that it has to sell off its investments and fixed assets. However, the liquidity ratio plays a critical role in the balance sheet analysis.

Cash assets, the most liquid, should be 15-20% of the total, working (current) - 55-70%, investment 3-10%, non-current - 10-15%, and the rest should be other property.

When compiling a rating of financial institutions, analysts take into account not only profit margins and operational efficiency, but also the presence of a variety of assets at the company. This indicator helps to draw conclusions about the reliability of a financial institution and its stability in the market. In this article we will look in detail athow they are calculated and what exactly they show.

Introduction

Assets are property that is owned by a company and that has some value. This is not necessarily something physical: this term includes any material value that can be calculated in monetary terms. Assets include real estate and land, money and shares, receivables and loans, loans and investments, equipment and vehicles, intellectual property and securities.

Attention:The goal of any bank, as a commercial organization, is to make a profit. Therefore, the more competent and professional an institution operates, the more assets it has.

Distribution of banking assets in Russia

You need to understand that building up assets can not only be positive, that is, accumulating existing property. The bank can make investments, give out loans, arrange an overdraft and carry out other borrowing operations, distributing its finances, but at the same time the level of assets still increases, since in the end the institution will be in the black.

Asset types

Economics considers two main types of assets:

Revenues that bring profit to the company (funds received for conducting banking operations).
Non-profitable ones that do not generate income for the company.

It is noteworthy that this division is quite arbitrary. For example, an asset may not generate income, but at the same time increase the recognition of the organization or increase the value of the brand. And a loan issued to a client at interest and implying a profit may ultimately turn into problem bank assets : the client either will not return it at all, or will have to submit documents to the court and return it through executors, which in the end will not bring the expected profit and, due to inflation, will turn out to be an unprofitable business.

Nevertheless, it is loans and advances to legal entities and individuals that bring banks the main income. They issue consumer, commercial and interbank loans, loans for the development and purchase of real estate, etc. At the same time, a small financial structure often uses the services of a large one, for example, placing deposits of its investors in it and receiving certain services in return. The senior partner bank can support its satellites by purchasing securities from it, accepting a variety of checks, conducting transactions on foreign currency assets, etc.

If a financial institution can no longer make payments on its debts, it declares bankruptcy according to the accepted procedure. The existing assets are transferred to a management company, and a special manager is appointed to the bank, who checks the accounting department for fictitious bankruptcy or illegal withdrawal of funds.

Nuances of banking assets

Above, we looked at general terms and looked at what assets financial institutions have. But this is just a simplified concept. Speaking from an accounting point of view, then bank assets are property that belongs to a company and has a specific financial valuation. The following tools take part in their creation:

Money that is raised from the population in the form of deposits.
Loans and interbank credits issued by the company.
Capital of a financial institution.
Issue of bonds.

The bank's assets must bring it profit

Assets grow due to the work of the points listed above. The bank carries out various operations and receives corresponding profits. They include:

Loans and credits issued by a financial institution.
Cash that is present in the cash register.
Investments made by the company.
Real estate owned by the company (including collateral).
Various securities.

Data on assets must be entered on the balance sheet and taken into account when filing reports. They also serve to evaluate the effectiveness of the institution. Understanding the dynamics of change, management draws conclusions about the effectiveness of work and makes appropriate changes to the development strategy.

Attention:2008 and 2015-2016 were the reason for the sharp increase in toxic assets or “toxic assets”. This term refers to overdue loans and credits that are not repaid by debtors.

Toxic assets are problem loans. They arise in crisis years, when household incomes fall, people remain unemployed, and enterprises and companies close, unable to withstand the fallen purchasing power and increasing tax burden. According to statistics, Toxic assets account for approximately 4% of loans in normal times. During times of crisis, this figure rises to 10–14%, and then an avalanche of defaults and reborrowing occurs, as a result of which many banks find themselves on the verge of bankruptcy, unable to cope with their debts. As a result, as of the beginning of 2019, Russians owe banks almost 13 trillion rubles (these are toxic assets), while legal entities owe about 23 trillion in debt. All this affects the stability of the banking sector and the ruble exchange rate: banks, having the opportunity, refinance their clients, and those who cannot continue working turn to the Central Bank of the Russian Federation to obtain refinance.

How is the movement done?

So now you know that commercial bank assets are his property, expressed in tangible and intangible objects that can be somehow assessed. Next, let's look at exactly how assets are moved. In the event of an issue, financial institutions are the first to receive funds. Therefore, they rarely go completely bankrupt. In fact, the central bank supports them in various ways, as does the government.

Banks are often supported by the government and the central bank

If difficulties arise in the bank's work, they provide assistance in the form of long-term refinancing, reduce rates, and introduce temporary administration to help get rid of debts and become profitable. But, despite such benefits, not all establishments survive the crisis years. The Central Bank revokes the licenses of some and they cease to operate due to the fact that they cannot make payments to clients. Sometimes situations happen that the state “nationalizes” an institution by paying its debts, and this procedure is carried out both with foreign and national banks. But if you look at the statistics, it becomes clear that the number of bankrupt and closed banks over the past 10 years is minimal: almost all of them were, one way or another, pulled out of the hole by the government. Also, when studying closure statistics it becomes clear that in 95% of cases, bank reserves melted due to problem loans.

Today we will talk about banking assets, and also consider their key features. This information will be very useful to all novice investors.

The term “bank assets” usually means all the property owned by a particular credit institution. Bank assets include both cash on hand and funds held in accounts.

It should also be noted that the term “cash” refers not only to banknotes that are located directly at the cash desks of a credit institution, but also to non-cash funds.

Banking assets. Peculiarities

The group of banking assets also includes all loans that were issued to specific credit institutions, as well as property rights associated with them. Property rights acquired in the process of issuing loans are taken into account in the balance sheet of the credit institution, since they can be used in the event of non-repayment of the loan. All issued loans are considered a risky asset of the lending institution.

It should be noted that the group of banking assets usually includes real estate, vehicles and office furniture that belongs to the credit institution in question.

Bank investments in various types of securities, as well as shares in various enterprises are also among the assets of a credit institution.

Current legislative norms impose restrictions on the share of capital of a credit institution that can be invested in various types of business. This restriction was introduced because credit institutions are not always able to correctly select an enterprise for investment. Thus, if the selected enterprise goes bankrupt, the bank may suffer serious losses and will not be able to service customer deposits.

If only 50 years ago credit institutions acted as a kind of centers providing financing for the national economy, today, due to too high interest rates on loans, they practically do not perform this function.

In addition to assets, there are bank liabilities, which we will also consider in detail.

Bank liabilities

If in the eyes of our fellow citizens bank deposits are an asset, then for a credit institution they are one of the main liabilities. This is due to the fact that the credit institution is obliged to pay interest on all existing deposits.

Also, operations with bank liabilities include the issue of securities, which makes it possible to form the capital of a credit institution. Another type of operation with bank liabilities is the process of using profits for a certain period to increase the volume of equity capital, as well as to form a variety of funds.

In most cases, all profit, which represents the difference between the liabilities and assets of a credit institution, is used to increase the bank's working capital. At the same time, a certain part of these funds is used to pay interest to investors.

Typically, credit institutions do not award any dividends to holders of securities issued by them. Holders of securities of credit institutions receive their income due to the increase in their value.

It should be remembered that it is not always possible to observe an increase in the value of securities issued by credit institutions. For this reason, investing in bank securities is just as risky as investing in any other stock.

Bank deposits are safer because they are protected by government guarantees. Their key drawback is that interest on deposits does not allow one to count on high profits. Their size is only enough to compensate for the negative impact of inflation on your capital.

If you decide to use bank deposits as an investment instrument, then you should consider the amount of compensation that will be paid in the event of bankruptcy of a credit institution.

If the amount of savings you have exceeds the amount of government guarantees, then you should divide your capital into several parts and open deposits in various credit institutions.

Conclusion

Having information about what bank assets and liabilities are, it will be much easier for you to assess the reliability of the chosen credit institution using information from open sources. If you are interested in investing in credit institutions, then it is better to use your existing savings to open one, since shares of credit institutions are as risky as ordinary ones, but they do not pay any dividends.

What is a bank asset? What are bank assets. Assets of Russian banks