the impact of banks and non bank financial institutions on economic growth

1 The impact of banks and non bank financial institutions on economic growth PREAMBLE 1 CONTENT 1 PART 1 THEORETICAL BASIS OF BANKING AND FINANCIAL INSTITUTIONS FOR BANKING 1 1 1 Bank 1 1 2 Non bank f. 1. The impact of banks and nonbank financial institutions on economic growth PREAMBLE 1 CONTENT 1 PART 1: THEORETICAL BASIS OF BANKING AND FINANCIAL INSTITUTIONS FOR BANKING 1 1.1 Bank 1 1.2 Nonbank financial institutions 5 PART 2: THE EFFECTS OF BANKING ON ECONOMIC GROWTH 6 PART 3: THE IMPACT OF FINANCIAL INSTITUTIONS BANKING ON ECONOMIC GROWTH 7 REFERENCE 9 CONCLUDE 9 PREAMBLE Banks and nonbank financial institutions are an indispensable part of economic growth and development. Banks and nonbank financial institutions come together to support and help each other. each other helps to develop finance and credit. To develop the country and improve peoples lives, it is indispensable to support banks and nonbank financial institutions. deep integration with the world. The establishment and development of the Bank has fundamentally changed the payment operations, making an ideal business and business market framework on an overall scale. The bank gives different types of payment utilities: check, authorized collection payment, electronic payment, clearing, ... permitting clients to choose the most effective and safest form of payment. CONTENT PART 1: THEORETICAL BASIS OF BANKING AND FINANCIAL INSTITUTIONS FOR BANKING 1.1 Bank A bank is a financial institution and financial intermediary that accepts deposits and channels them into lending activities directly or indirectly through capital markets. A bank is the connection between customers with capital deficits and customers with surpluses. First, a commercial bank is a kind of intermediary bank. Each country has its own meaning of a business bank. Example: In the US: a business bank is a business organization that represents considerable authority in offering monetary types of assistance and works in the monetary interpretation industry. In France: commercial banks are enterprises or establishments that regularly receive money from the public in the form of deposits or other forms of money that they use for themselves in a discount, credit or service operation. financial services. In India: commercial banks are the basis of receiving deposits for loans or financing and investment. In Turkey: Commercial bank is a limited liability association established for the purpose of receiving deposits and performing transactions, public exchange operations, discounting and other forms of borrowing ...Banks act as payment agents by managing checking or checking accounts for customers, paying checks drawn by the customer at the bank, and collecting checks deposited in their current accounts. customer. Banks also allow customers to make payments via other payment methods such as clearing (ACH), domestic or international transfer, EFTPOS and automatic teller machines (ATM). Banks borrow money by taking deposits deposited on current accounts, receiving term deposits, and issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, making installment loans, investing in marketable debt securities and other forms of lending. The tibanking tisystem tiis tigradually tiformed tiand tideveloped tiaccording tito tithe tidevelopment tiof timonetary tiand ticommodity tirelations. tiThrough tia tilong tiprocess tiof tiups tiand tidowns, tithe timodern titype tiof tibanking tireally tiappeared tiin tithe tiseventeenth ticentury, tialthough tibanks tihave tibecome tia tisystem tibut tistill tioperate tiindependently tiwith tithe tiright tito tiissue tiseparate tibank tinotes. tiFrom tithe tinineteenth ticentury, tithe tiscale tiand tiscope tiof tigoods ticirculation tideveloped tistrongly, tito tieliminate tithe tisituation tiof timany tibanks tiissuing timoney, tiobstructing tithe tiprocess tiof ticirculation tiand tieconomic tidevelopment, tito tiunify tithe ticirculation tiregime. ticurrency, ticountries tihave tirestructured tithe tibanking tisystem tiinto titwo tilevels: tithe tiCentral tiBank ti(some ticountries ticall tithe tiState tiBank, tithe tiFederal tiReserve tiFund ti...) tiand tithe tiBank. ticentral tigoods tiare tiassigned tiby tithe tistate tithe tiissuance tiof timoney tiinto ticirculation tiand tiperform tithe tifunction tiof tistate timanagement tiof timoney. Banks tioffer tia tivariety tiof tipayment tiservices, tiand tia tibank tiaccount tiis ticonsidered tiindispensable tifor timost tibusinesses tiand tiindividuals. tiNonbank tiinstitutions tiproviding tipayment tiservices tisuch tias timoney titransfer ticompanies tiare tinot tiusually ticonsidered tia tisuitable tireplacement tifor tia tibank tiaccount. The tifunction tiof tithe tistock tiCredit tiintermediary tifunction: tiAs tia tibridge tibetween tithe tisurplus tiand tithe tilack tiof ticapital, tithe tibank timobilizes titemporarily tifree timoney tifrom tieconomic tientities tito tiform tiloans tiand tiuse. tiThis ticapital tisource tiis tito timeet tithe tiborrowing tineeds tiof tientities tilacking ticapital ti(need tito tisupplement ticapital, tideposit tiinto tia ticompulsory tireserve tiaccount tior ticurrent tiaccount tiat ticentral tibanks, ticommercial tibanks, ti...). tishortterm tiloans tiare tiweak. tiWith tithis tifunction, ticommercial tibanks tiare tiboth tiborrowing tiand tilending. tiThe ticredit tiintermediary tifunction tistems tifrom tithe tineed tito tiovercome tifinancial timarket tidefects ti(the tisupply tiand tidemand tiof ticapital timismatches tiin titime tiand tiquantity tihave tia tigreat tiinfluence tion tithe ticontinuous ticirculation tiof tithe tiprocess tiof tirecycle. timanufacturing). tiThe ticredit tiintermediary tifunction timost ticlearly tireflects tithe tinature tiof tithe tibank tiin tithe timonetary tibusiness tisector. Payment intermediary function: the bank acts as a payment intermediary between customers, helping them not to pay directly to each other. The payment intermediary function is the result of the credit intermediary function. When performing the function of credit intermediary, many customers come to open accounts at the system, the bank will be able to perform the intermediary function when withdrawing money from the buyers account. purchase) to pay for goods or services or enter the sellers account or make other charges at the customers order.

1 The impact of banks and non-bank financial institutions on economic growth PREAMBLE CONTENT .1 PART 1: THEORETICAL BASIS OF BANKING AND FINANCIAL INSTITUTIONS FOR BANKING .1 1.1 Bank .1 1.2 Non-bank financial institutions PART 2: THE EFFECTS OF BANKING ON ECONOMIC GROWTH PART 3: THE IMPACT OF FINANCIAL INSTITUTIONS BANKING ON ECONOMIC GROWTH REFERENCE CONCLUDE PREAMBLE Banks and non-bank financial institutions are an indispensable part of economic growth and development Banks and non-bank financial institutions come together to support and help each other each other helps to develop finance and credit To develop the country and improve people's lives, it is indispensable to support banks and non-bank financial institutions deep integration with the world The establishment and development of the Bank has fundamentally changed the payment operations, making an ideal business and business market framework on an overall scale The bank gives different types of payment utilities: check, authorized collection - payment, electronic payment, clearing, permitting clients to choose the most effective and safest form of payment CONTENT PART 1: THEORETICAL BASIS OF BANKING AND FINANCIAL INSTITUTIONS FOR BANKING 1.1 Bank A bank is a financial institution and financial intermediary that accepts deposits and channels them into lending activities directly or indirectly through capital markets A bank is the connection between customers with capital deficits and customers with surpluses First, a commercial bank is a kind of intermediary bank Each country has its own meaning of a business bank Example: In the US: a business bank is a business organization that represents considerable authority in offering monetary types of assistance and works in the monetary interpretation industry In France: commercial banks are enterprises or establishments that regularly receive money from the public in the form of deposits or other forms of money that they use for themselves in a discount, credit or service operation financial services In India: commercial banks are the basis of receiving deposits for loans or financing and investment In Turkey: Commercial bank is a limited liability association established for the purpose of receiving deposits and performing transactions, public exchange operations, discounting and other forms of borrowing Banks act as payment agents by managing checking or checking accounts for customers, paying checks drawn by the customer at the bank, and collecting checks deposited in their current accounts customer Banks also allow customers to make payments via other payment methods such as clearing (ACH), domestic or international transfer, EFTPOS and automatic teller machines (ATM) Banks borrow money by taking deposits deposited on current accounts, receiving term deposits, and issuing debt securities such as banknotes and bonds Banks lend money by making advances to customers on current accounts, making installment loans, investing in marketable debt securities and other forms of lending The banking system is gradually formed and developed according to the ti ti ti ti ti ti ti ti ti ti development of monetary and commodity relations Through a long process of ups ti ti ti ti ti ti ti ti ti ti ti ti and downs, the modern type of banking really appeared in the seventeenth century, ti ti ti ti ti ti ti ti ti ti ti ti ti although banks have become a system but still operate independently with the right ti ti ti ti ti ti ti ti ti ti ti ti ti to issue separate bank notes From the nineteenth century, the scale and scope of ti ti ti ti ti ti ti ti ti ti ti ti ti ti goods circulation developed strongly, to eliminate the situation of many banks ti ti ti ti ti ti ti ti ti ti ti issuing money, obstructing the process of circulation and economic development, ti ti ti ti ti ti ti ti ti ti to unify the circulation regime currency, countries have restructured the banking ti ti ti ti ti ti ti ti ti ti ti system into two levels: the Central Bank (some countries call the State Bank, the ti ti ti ti ti ti ti ti ti ti ti ti ti ti Federal Reserve Fund ) and the Bank central goods are assigned by the state the ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti issuance of money into circulation and perform the function of state management ti ti ti ti ti ti ti ti ti ti ti ti of money ti ti Banks offer a variety of payment services, and a bank account is considered ti ti ti ti ti ti ti ti ti ti ti ti indispensable for most businesses and individuals Non-bank institutions providing ti ti ti ti ti ti ti ti ti payment services such as money transfer companies are not usually considered a ti ti ti ti ti ti ti ti ti ti ti ti suitable replacement for a bank account ti ti ti ti ti ti The function of the stock ti ti ti ti - Credit intermediary function: As a "bridge" between the surplus and the ti ti ti ti ti ti ti ti ti ti ti lack of capital, the bank mobilizes temporarily free money from economic entities ti ti ti ti ti ti ti ti ti ti ti ti to form loans and use This capital source is to meet the borrowing needs of entities ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti lacking capital (need to supplement capital, deposit into a compulsory reserve ti ti ti ti ti ti ti ti ti ti ti account or current account at central banks, commercial banks, ) short-term ti ti ti ti ti ti ti ti ti ti ti loans are weak With this function, commercial banks are both borrowing and ti ti ti ti ti ti ti ti ti ti ti ti lending The credit intermediary function stems from the need to overcome ti ti ti ti ti ti ti ti ti ti ti financial market defects (the supply and demand of capital mismatches in time and ti ti ti ti ti ti ti ti ti ti ti ti ti quantity have a great influence on the continuous circulation of the process of ti ti ti ti ti ti ti ti ti ti ti ti ti recycle manufacturing) The credit intermediary function most clearly reflects the ti ti ti ti ti ti ti ti ti ti nature of the bank in the monetary business sector ti ti ti ti ti ti ti ti ti - Payment intermediary function: the bank acts as a payment intermediary between customers, helping them not to pay directly to each other The payment intermediary function is the result of the credit intermediary function When performing the function of credit intermediary, many customers come to open accounts at the system, the bank will be able to perform the intermediary function when withdrawing money from the buyer's account purchase) to pay for goods or services or enter the seller's account or make other charges at the customer's order The birth and development of the bank has fundamentally changed the ti ti ti ti ti ti ti ti ti ti payment operations, creating a pretty perfect banking system on a worldwide scale ti ti ti ti ti ti ti ti ti ti ti ti Commercial banks provide convenient forms of payment: check, authorized ti ti ti ti ti ti ti ti ti collection / payment, electronic payment, clearing, etc., allowing customers to ti ti ti ti ti ti ti ti ti ti choose the most effective and safest form of payment ti ti ti ti ti ti ti ti ti - Money creation function The bank's money creation process is essentially a ti ti ti ti ti ti ti ti ti ti ti process that closely combines credit operations and non-cash payments (between ti ti ti ti ti ti ti ti ti ti the function of intermediary payment and intermediary payment), making the ti ti ti ti ti ti ti ti ti ti banking system has the ability to create a bookkeeping (currency pen) on a ti ti ti ti ti ti ti ti ti ti ti ti ti customer's current account at the bank When the bank uses the deposit to make a ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti loan, the customer uses the loan (balance on the intermediary payment account) to ti ti ti ti ti ti ti ti ti ti ti ti ti pay for goods and services… that is, the bank has created money The bank's ti ti ti ti ti ti ti ti ti ti ti ti ti ti money creation function only occurs when these operations are performed by ti ti ti ti ti ti ti ti ti ti ti transfer, Debit to this account, and Credit to the relevant account ti ti ti ti ti ti ti ti ti ti ti Banks business mainly in operations: - Capital mobilization: The Bank mobilizes idle capital in society in the forms such as: receiving savings deposits (term and demand deposits), demand deposits ; issuing valuable papers (bonds, promissory notes, treasury bills, certificates of deposit) or borrowing from banks, banks and other credit institutions Raising capital is a basic operation that helps the Bank perform the money creation function - tUsing tcapital: tMainly tproviding tcredit t(medium t/ tlong t/ tshort-term tloans, t finance tleasing, tguarantee t ) tThe tbank tuses tthe traised tcapital tto tlend, tthereby t collecting tprofits ton tthe tbasis tof tthe tdifference tin tinput tfees tand toutput tcharges t This tis ta tbusiness tthat tis tmainly tprofitable tfor tthe tBank tbut talso tcontains tvery t high trisks tCapital tuse talso tincludes ttreasury toperations t(reserve, tguarantee tof t payment tsecurity) tand tinvestment tand tinvestment toperations t(joint tventures, t securities ttrading) - tPayment tintermediary: tThe tbank tmakes tpayments tat tthe trequest tof t customers tby tproviding tconvenient tpayment ttools tsuch tas tchecks, tcollection tand t payment torders, tpayment tcards, telectronic tpayment t tTogether twith tthe t development tof tthe tmarket teconomy, tthe tBank's toperations thave talso tdeveloped t abundantly, tdiversified tand thave tclose trelationships twith teach tother tAsset t operation tDebt tdetermines tthe tscale tand tscope tof toperations tof tthe tCredit t operation tEach tbusiness tis ta tpremise tand tcondition tto tmaintain tand tdevelop tother t professions tHowever, tthe tmost timportant tcredit toperation tis tthe tone tthat tis tmainly t profitable, twhich tdetermines tthe tbusiness tresults tof tthe tBank 1.2 Non-bank financial institutions Non-bank financial institution is a kind of credit organization that is permitted to some banking activities as regular business contents but cannot receive demand deposits, nor provide payment services first] Non-bank credit institutions include finance companies, finance leasing companies and other nonbank credit institutions are credit institutions permitted to carry out one or several banking activities, except deposit-taking activities of individuals and providing payment services through customers' accounts Non-bank financial institutions have different characteristics from banks in ti ti ti ti ti ti ti ti that: Non-bank financial institutions that not accept demand deposits, can only ti ti ti ti ti ti ti ti ti ti ti ti accept certain term deposits, are not allowed to so payment services like banks ti ti ti ti ti ti ti ti ti ti ti ti ti ti Therefore, non-bank financial institutions not participate in the deposit creation ti ti ti ti ti ti ti ti ti ti ti process and are not strictly regulated by the Central Bank like commercial banks ti ti ti ti ti ti ti ti ti ti ti ti ti With their characteristics, non-bank financial institutions have brought small ti ti ti ti ti ti ti ti ti savings into production and life according to their strong activities such as ti ti ti ti ti ti ti ti ti ti ti ti securities, consumer loans, mortgage and services such as brokerage, agent ti ti ti ti ti ti ti ti ti ti ti With their characteristics, non-bank financial institutions play an important ti ti ti ti ti ti ti ti role in the socio-economic life Non-bank financial institutions contribute to ti ti ti ti ti ti ti ti ti ti diversifying financial services and services economy, bringing practical benefits: ti ti ti ti ti ti ti ti ti creating profitable opportunities for small sources of savings to promote ti ti ti ti ti ti ti ti ti ti competition and financial progress ti ti ti ti ti The activities of non-bank financial institutions bring insurance contracts, ti ti ti ti ti ti ti ti information services to customers, helping them to be financially protected and ti ti ti ti ti ti ti ti ti ti ti ti risk dispersed This is a unique aspect of what these organizations offer ti ti ti ti ti ti ti ti ti ti ti ti PART 2: THE EFFECTS OF BANKING ON ECONOMIC GROWTH In the context of global international economic integration, foreign borrowing becomes an objective demand for all countries in the world, it is even more urgent for developing countries like Vietnam Thereby promoting economic growth of developing countries and improving people's material living standards A bank was born associated with the movement in the production and circulation of goods The rapid development of commodity production has pushed the goods and currency into more and more deep, complex and covers all socioeconomic activities On the other hand, the production and circulation of goods was born and the commune expanded, leading to capital mobilization and was the foundation to create the first monetary trading organizations with the characteristics of a bank Therefore, for non-bank financial institutions, we find that if there still exists ti ti ti ti ti ti ti ti ti ti ti a monetary and commodity relationship, credit activities cannot be lost, but on the ti ti ti ti ti ti ti ti ti ti ti ti ti contrary, it is growing strongly Because in the economy, at a certain time, there ti ti ti ti ti ti ti ti ti ti ti ti ti ti will be two types of needs: those who have excess loans to earn interest and those ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti who lack capital to borrow to conduct production and business These two types of ti ti ti ti ti ti ti ti ti ti ti ti ti ti demand are opposite but also have the same object that is money, mutual in terms ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti of temporary nature and both sides satisfy needs and both benefit The Bank was ti ti ti ti ti ti ti ti ti ti ti ti ti ti born as a place to best understand the balance between the supply and demand of ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti capital in the market, and with credit operations, the bank has solved the ti ti ti ti ti ti ti ti ti ti ti ti ti phenomenon of excess capital and lack of capital This is by mobilizing all idle ti ti ti ti ti ti ti ti ti ti ti ti ti ti money to redistribute capital on the principle of having timely repayment for the ti ti ti ti ti ti ti ti ti ti ti ti ti needs of production and business ti ti ti ti ti ti PART 3: THE IMPACT OF FINANCIAL INSTITUTIONS BANKING ON ECONOMIC GROWTH Non-bank financial institutions are an important and indispensable ti ti ti ti ti ti ti component in the system of financial institutions in general, and the financial and ti ti ti ti ti ti ti ti ti ti ti ti ti credit system in particular Non-bank financial institutions have contributed to ti ti ti ti ti ti ti ti ti ti diversifying types and financial services for customers, especially providing credit ti ti ti ti ti ti ti ti ti ti to customers who have difficulty in accessing capital from banks commercial ti ti ti ti ti ti ti ti ti ti ti goods, minimizing the burden of capital supply for the economy of commercial ti ti ti ti ti ti ti ti ti ti ti ti banks ti Non-bank financial institutions are not allowed to mobilize deposits, nor ti ti ti ti ti ti ti ti ti have a payment function, often targeting those with no credit history, inability to ti ti ti ti ti ti ti ti ti ti ti ti ti contact banks, income low, unstable income, so the risks are also greater than ti ti ti ti ti ti ti ti ti those of individuals and businesses with good credit history ti ti ti ti ti ti ti ti ti ti ti ti ti Non-bank financial institutions are a part of Vietnam's current credit institutions system, accounting for about 1.4% of total assets and 3.6% of equity of the entire system credit institutions Although small in size, in more than 20 years since the first non-bank financial institutions appeared, non-bank financial institutions have made certain contributions to development development of the system of Vietnamese credit institutions, participating in the provision of credit to the economy, especially providing credit to groups of individual and corporate customers who cannot access credits to each commercial bank trade Since then, the group of non-bank financial institutions has affirmed an important role in the credit institution system, contributing to the diversified development of the financial services market, meeting the needs of the economy In fact, the scope of operations of Vietnamese non-bank financial institutions ti ti ti ti ti ti ti ti ti ti is quite limited The financial leasing, factoring and consumer credit markets still ti ti ti ti ti ti ti ti ti ti ti ti have plenty of room for growth The demand of individuals and businesses for the ti ti ti ti ti ti ti ti ti ti ti ti ti ti services of non-bank financial institutions is still very great, thanks to the ti ti ti ti ti ti ti ti ti ti ti ti increasing income of Vietnamese households, leading to an increase in demand for ti ti ti ti ti ti ti ti ti ti ti ti spending and many businesses Businesses as well as individuals are still facing ti ti ti ti ti ti ti ti ti ti ti ti difficulties in accessing credit Therefore, the development of non-bank financial ti ti ti ti ti ti ti ti ti ti institutions in Vietnam is essential In order to support the growth of these groups ti ti ti ti ti ti ti ti ti ti ti ti ti ti of organizations while minimizing the potential for systemic risk effects of non- ti ti ti ti ti ti ti ti ti ti ti ti bank financial institutions, proper management of these institutions is an issue ti ti should be addressed ti ti ti ti ti ti ti ti ti ti ti ti REFERENCE The impact of banks and non-bank financial institutions on economic growth, Hsin-Yu Liang &Alan K Reichert, 2009 The Impact of Bank and Non-Bank Financial Institutions on Local Economic Growth in China, Xiaoqiang Cheng Katholieke Universiteit Leuven Stock Markets, Banks, and Economic Growth,American Economic Association, 1998 CONCLUDE The commercial bank's role in economic development is primarily a financial intermediary In this role, commercial banks help to operate investment capital flows in the market The mechanism of capital allocation in the economy through the lending process will help commercial banks assess financial risks Non-bank financial institutions and banks play a very important role in the market economy, being a bridge between actors in the economy, making them stick, depend on each other, increase cohesion and dynamics of the whole system Today, commercial banks have become an indispensable financial institution to operate the economy, but the state-owned commercial banking system is also considered a "powerful arm" of the Government in the implementation of monetary policy The current target is to stabilize the macro-economy, curb inflation and ensure the social security of the country ... REFERENCE The impact of banks and non- bank financial institutions on economic growth, Hsin-Yu Liang &Alan K Reichert, 2009 The Impact of Bank and Non- Bank Financial Institutions on Local Economic Growth. ..PREAMBLE Banks and non- bank financial institutions are an indispensable part of economic growth and development Banks and non- bank financial institutions come together to support and help each other... for the ti ti ti ti ti ti ti ti ti ti ti ti ti needs of production and business ti ti ti ti ti ti PART 3: THE IMPACT OF FINANCIAL INSTITUTIONS BANKING ON ECONOMIC GROWTH Non- bank financial institutions