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The structure of modern banking laws

Category: Concept of the Bank and the Banking System

Modern ideas about the nature of the bank, its nature and role in the economy largely determine the content and structure of the banking legislation. It is well known that ideas rule the world and this is reflected in the development banks.

No need to believe that ideas, including ideas about the nature and role of banks, there by themselves. On the contrary, they are a reflection of the historical process, the development of national economy. No coincidence with the growth of the banking sector took place separation of banking law, its formation as an independent unit of legal regulation.

Banking legislation in certain formations formed by evolution. A huge impact here have always had a business need. Activities of central banks demanded the creation of laws that define their objectives and legal status. The special role of currency demanded legislative consolidation of the central bank as the issuing institution, the main (and even under the laws of certain countries only) whose task is to ensure the stability of the monetary unit. Where required special efforts in economic development and there were no relevant financial institutions, legislators created them in the form of lending institutions that provide financing to the appropriate scope of business activity. The development of the real estate market, for example, led to the formation of mortgage banks, the establishment of an industry economy is determined by the idea of formation of various industrial, construction, agriculture, foreign trade bank. In some European countries are successfully operating postal banks, the banking system of France under the law in 1913 operated a credit institution «Sea mutual credit» in Germany rather successfully developed various cooperative banks, and in Russia at the beginning of XX century. — Establishment of small-scale credit, supporting the economy of small producers. Prominent place in the structure of the banking system a number of countries took the municipal (urban) banks, supporting the economy of urban utilities.

Banking legislation can be divided into three tiers. The first tier contains two units — the laws of the central (emission) bank and the laws governing the business activities of individual banks. In Germany, for example, along with the Law on the Bundesbank as the central bank of Germany has laws governing the activities of savings and mortgage banks. This unit may be called institutional laws, because it regulates the activity of individual credit institutions.

The second block covers the banking laws provisions governing the activities of business (commercial) banks. Such laws are usually multiple. This may be a separate law governing the credit, foreign exchange, circulation of bills, order in bankruptcy of banks, payments, etc. The history of individual countries knows examples of specific laws defining the nature of the banking profession.

The first and second blocks of the laws of this stage form the laws directly regulating the activities of banks as a whole, and holding their individual operations.

The second tier in the system of banking legislation advocate laws relating to the management of existing parallel institutions and affecting the banking business. Such laws, for example, may be of the Exchange Act, shares or securities, mortgages, trusts and trust operations, some of which directly apply to banks.

This group may include laws and laws governing the financial and industrial companies, investment funds, etc.

The third tier includes the universal laws of action. These include, for example, include the Constitution as the principal law of the country, the Civil Code, Commercial Law and other provisions of these laws are of fundamental importance for the bank, determine the ideology of its activities, the place of lending institutions in the economy. Laws regulating banking activities, are important primarily for the banks, because it defines the legal norms, «corridors» of their operation, the range of permitted and unlawful transactions, licensing, supervision and responsibility. Because banking laws do not work by themselves, and are a response to economic and political events, are based on the laws of a general nature, the activities of banks becomes orderly, taking into account the current system as a whole. Here, in particular, is important, as far as the law regulating the activities of the central (issuing) bank, corresponds with the laws regulating the activities of other banks, primarily commercial lending institutions. Commercial banks are interested in this case to the law on the central bank was the most complete and did not leave room for his subjective decisions.

No less important they are for bank customers. Banking laws define the rules of the game in the monetary sphere. Matter how perfect and complete, these laws depend, and economic performance of businesses and individuals. Here we must take into account a number of circumstances, primarily the fact that relations with clients are direct, there are no middlemen, and they relate very severe matter — money, credit, payments in cash and cashless forms, are highly specific due to the peculiarities of bank accounting, banking technology as a whole.

Nor can we forget that, besides the banking laws, the structure of the banking legislation contains various kinds of instructions, regulations, instructions and explanations of the central bank, which the client must also know and be guided by them. Customer must be sure that any requirement of the commercial bank is not his invention, and has a definite legal basis.

Very significant role of the banking legislation and the overall development of the national economy.

Banking laws are important not only for themselves. Banks are actively involved in the redistribution of resources in the economy, concentrated huge amounts of capital, provide significant funds for current operations and long-term investment, can accelerate or decelerate the pace of economic development, banks, despite their caution, however, can contribute to overproduction of goods, the formation of a crisis situation. Banks also fail, the possibility of bankruptcy proved as past historical experience and contemporary practice. Bankrupts are both small and large banks. If we consider that lending institutions are working mostly not on its own, but on other people’s money, including savings of individuals, it becomes clear that this can cause undesirable social consequences.

The state never wanted to bank failures, since failure is the diminishing financial aid, the slowdown in economic turnover, adversely affect the economic pace. In order to ensure economic stability, the state has always sought to regulate the activities of banks, tried to subdue their activity interests of the economy in general, initiated the establishment of associations of banks, new lending institutions that can fund the government programs the development of industries and regions. The state has always been interested in the concentration of capital in the revitalization of industry, trade, entrepreneurship, where the bank plays a key role. Laws, relates to the banking sector, contain legal rules which, on the one hand, contributed to the banking activity, on the other hand, constrained banks, where it interfered with the state in overall economic management.

State it always had to balance between how banks make obedient and self-reliant, active and liquid, how to do so, ensuring the regulation of banking activities, not impede normal competition between credit institutions. You can say that the state in many ways has always sought to «make friends» with the banks, but not averse to it and pull up those that are trying to be overly from his point of view, independent and autonomous. Unfortunately, the banking laws has always been enough to prevent it as well as others.

Bankers do not remain in debt. On the one hand, banks have tried to be law-abiding. Not in their interest to break the law, because it may result in not only significant financial penalties, extra taxation, but the cancellation of banking license. Not for nothing that banks often hire auditors who could show them the mistakes in order to avoid such violations in future. On the other hand, the banks, if the law in some way become an obstacle for them, looking for ways to work around it as a legal way. This game is still going on.

Of course, we do not consider here the direct, deliberate violations of banking laws, resulting in huge embezzlement of money and material resources.

Banking legislation contains certain consensus interests of different stakeholders — both banks and their customers and the state. Banking legislation, from the perspective of international experience, although it differs a certain stability, but under the influence of certain causes can and should change.

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