Macroeconomic Aspects of Investment Activity of Banks
Bank investments have a special economic content. In the microeconomic aspect, the investment activity of the bank can be viewed from the point of view of the bank taken as an economic subject (as an activity in which the bank acts as an investor by putting its resources into the creation or acquisi...
Saved in:
| Published in: | Управління економікою: теорія та практика |
|---|---|
| Date: | 2022 |
| Main Author: | |
| Format: | Article |
| Language: | English |
| Published: |
Інститут економіки промисловості НАН України
2022
|
| Online Access: | https://nasplib.isofts.kiev.ua/handle/123456789/192149 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Journal Title: | Digital Library of Periodicals of National Academy of Sciences of Ukraine |
| Cite this: | Macroeconomic Aspects of Investment Activity of Banks / E.Ch. Mammedov // Управління економікою: теорія та практика: Зб. наук. пр. — К: ІЕП НАНУ, 2022. — С. 189-197. — Бібліогр.: 5 назв. — англ. |
Institution
Digital Library of Periodicals of National Academy of Sciences of Ukraine| _version_ | 1859831811576692736 |
|---|---|
| author | Mammedov, E.Ch. |
| author_facet | Mammedov, E.Ch. |
| citation_txt | Macroeconomic Aspects of Investment Activity of Banks / E.Ch. Mammedov // Управління економікою: теорія та практика: Зб. наук. пр. — К: ІЕП НАНУ, 2022. — С. 189-197. — Бібліогр.: 5 назв. — англ. |
| collection | DSpace DC |
| container_title | Управління економікою: теорія та практика |
| description | Bank investments have a special economic content. In the microeconomic aspect, the investment activity of the bank can be viewed from the point of view of the bank taken as an economic subject (as an activity in which the bank acts as an investor by putting its resources into the creation or acquisition of real assets, and the purchase of financial assets with the aim of generating direct and indirect income). However, there is another aspect of banks' investment activities that is related to the implementation of their macroeconomic role. In this capacity, banks cause the realization of the investment demand of economic entities in the form of money and credit in the market economy, and the transformation of savings and savings into investment. Therefore, in the macroeconomic aspect, the investment activity of banks is understood as an activity aimed at meeting the investment needs of the economy.
Банківські вкладення мають особливий економічний зміст. У мікроекономічному аспекті інвестиційну діяльність банку можна розглядати з точки зору банку як економічного суб’єкта (як діяльність, у якій банк виступає інвестором, вкладаючи свої ресурси у створення чи придбання реальних активів, а також придбання фінансових активів з метою отримання прямого та непрямого доходу). Проте існує й інший аспект інвестиційної діяльності банків, пов'язаний із реалізацією ними макроекономічної ролі. У цій якості банки зумовлюють реалізацію інвестиційного попиту суб'єктів господарювання у формі грошей і кредиту в ринковій економіці, перетворення заощаджень і заощаджень на інвестиції. Тому в макроекономічному аспекті під інвестиційною діяльністю банків розуміють діяльність, спрямовану на задоволення інвестиційних потреб економіки.
|
| first_indexed | 2025-12-07T15:32:29Z |
| format | Article |
| fulltext |
189
DOI: https://doi.org/10.37405/2221-1187.2022.189-197
E.Ch. Mammadov
master's student,
Baku Business University,
Baku, Azerbaijan
MACROECONOMIC ASPECTS
OF INVESTMENT ACTIVITY OF BANKS
Raising cash by issuing securities or placing securities in their
primary market; of buyers and sellers of existing securities in the
secondary market coordination.
In the economic literature of the Soviet era, the investment activity
of banks was understood as the mobilization of long-term loan capital
and offered to borrowers. The explanation in this form was determined
by the existing characteristics of the organization of banking business,
the specifics of the objects and subjects of investment, because long-term
lending was the main form of investment activity of banks in the pre-
reform period. In the narrow sense of the word, investment activity,
which implies the activity of the securities market, could not exist for
obvious reasons.
As we move to market relations, as the stock market is formed, the
interpretation of bank investments as long-term investments in securities
is also reflected in the economic literature of our country. Thus,
VMUsoskin notes that the point of covering bank investments applies to
securities older than 1 year.
Investments are understood both as directions of placement of
commercial bank's reserves, and as operations on the term placement of
funds for the purpose of obtaining income. In the first case, investments
refer to the entire complex of active operations of a commercial bank,
while in the second case, its term component is related.
Thus, the investment activity of banks has a dual nature. From the
point of view of the economic subject (bank), the investment activity is
aimed at increasing the bank's income. In the macroeconomic aspect, the
effect of investment activity consists in achieving the growth of public
capital.
In terms of economic development, the investment activity of
banks includes not only investments at the bank level, but also
investments that lead to income generation at the level of society as
© E.Ch. Mammadov, 2022
190
a whole (in contrast to forms of investment activity related to the
redistribution of public income by ensuring the increase of the income of
a specific bank). Thus, from the point of view of macroeconomics, the
criterion for attribution to investment activity is the productive direction
of bank deposits.
Act as contributions to the creation and development of enterprises
and organizations through participation in the capital expenditures of
economic entities in the form of shares, shares, acquisition of other
securities of enterprises placed on the primary market, investment
lending, financing of investment projects (project financing). Both
aspects of investment activity of commercial banks are closely related to
each other. The basis of this interaction is the development of
privatization facilities and the securities market, the tools of which
directly or indirectly form the preconditions for the implementation of
the investment process. In the microeconomic aspect, in the course of
investment activity, commercial banks make investments in the
authorized capital in the form of acquisition of shares, shares of
privatized enterprises, other securities of enterprises placed on the
primary market, and carry out founding activities. Thus, specifically,
investment activity constitutes an important element of investment
processes in the economy does.
At the same time, the advantage of speculative investments in the
securities market is that credit forms for meeting investment demand in
the real conditions of the national economy, which is characterized by
instability and does not play a significant role in solving the problems of
investment in the economy, have long maintained their priority. will keep.
Therefore, when studying the participation of banks in the
investment process, it is necessary to take into account the dual nature of
the investment activity of banks.
One of the factors that has an important influence on the activity
of commercial banks, including their investment policy, is the issue of
legal regulation. Studies show that the normative-legal framework has
more superior effects in the banking sector than in other areas of the
economy. From this point of view, there is a flexible reaction in the
bank's activity to any changes in the system of legal regulation of banks'
activities. That is why it is necessary to give ample space to scientific
research, including marketing research, in the formation of the legal
regulation system of banks, its improvement, and the preparation of new
regulatory and legal acts is important.
The Central Bank (MB) acts as the main supervisory body in the
legal regulation of the activities of commercial banks. In addition to the
191
laws adopted by the Milli Majlis, the MB defines instructions, standards,
norms, rules, which are an integral part of the legal regulation of banking
activities. The activity of the Central Bank in this direction is regulated
by the Law "On the Central Bank" approved by the President of the
Republic of Azerbaijan on December 10, 2004. Therefore, the
aforementioned law can be considered as the basis of legal regulation of
banking activity. In paragraph 8 of Article 5 of the Law, it is mentioned
about MB: and regulates banking activities in accordance with the Law
of the Republic of Azerbaijan "On Banks", this law and the normative
acts adopted in accordance with them, and supervises banking activities
in accordance with the law.
The provisions on the aforementioned normative acts of the
Ministry of Finance are reflected in Article 8 of the law. It is noted here
that: "The Ministry of Finance independently adopts binding normative
acts for all banks, non-bank credit organizations, as well as other legal
entities on the issues assigned to its powers by law. These acts are
registered with the state in accordance with the law".
In accordance with the requirements of this law, the participation
limit of foreign capital in the country's banking system, the norms of
economic regulation for credit organizations are determined by the Board
of Directors of the Central Bank. In addition, in accordance with the
provisions of the law, the MB determines the following for commercial
banks:
– ın accordance with the Civil Code, the rules for non-cash
settlements and money transfers through credit organizations in the
country and conditions;
– types of bank accounts, their opening, maintenance and closing
in accordance with normative legal acts rules;
– and conducting settlements between credit organizations and etc.
Article 48 of the Law "On the Central Bank" is specifically
devoted to the issues of regulation and control of banking activities of
the Central Bank, and the following powers of the Central Bank to
regulate the activities of credit institutions are reflected in this article:
– adoption of regulatory acts on banking activity making;
– determination of the procedure for calculation and formation of
a special reserve fund created by banks, local branches of foreign banks
and non-bank credit organizations for compensation of probable losses
on loans and other assets;
– Mandatory instructions to credit institutions to assess the
financial condition of credit institutions based on reports and inspections
192
and make appropriate corrections in financial statements based on this
giving;
– determining corporate governance standards in banks and local
branches of foreign banks and monitoring its implementation make;
– carrying out inspections in credit organizations, as well as their
subsidiary companies, in the cases and in the manner determined by law;
– in order to prevent monopolistic activities in the market of
banking services, the issue before the competent state body removal;
– application of impact (corrective) measures and sanctions against
credit institutions and their administrators in the cases and in the manner
determined by legislation making;
– the results of control measures carried out in accordance with the
law to participate as an observer in the meetings of the management
bodies of credit institutions, to conduct consultations with the
administrators of credit institutions;
– in the cases provided by law, within the framework of measures
for the financial recovery of banks, determine the special conditions for
the fulfillment of their credit obligations to the Central Bank make;
– applying to the court to appoint a temporary administrator to
banks and local branches of foreign banks in the cases provided for by
law, to apply a moratorium on the bank's obligations if necessary make;
– legal measures against banks whose licenses have been revoked
and local branches of foreign banks to see;
– temporary restriction of individual operations carried out by
credit organizations in accordance with the legislation, including the
lower and upper limits of interest rates for their operations identification;
– exercise of other powers provided by law and etc.
Taking into account the development processes in the banking
sector, the increase in confidence in commercial banks, ensuring stability
in their activities and a number of other factors, the above-mentioned
regulatory activity of the Ministry of Finance can be highly appreciated. In
the mentioned direction, the normative acts of the Ministry of Justice,
arising from modern requirements, have an exceptional role was.
The legal basis of the process of regulation of banking activity is
based on the Law of the Republic of Azerbaijan "On Banks" approved
on January 16, 2004. Additions and changes were made to this document
on March 4, 2005 and March 6, 2007. The law establishes the principles,
rules and norms of the organization, internal management, regulation and
liquidation of banks in order to adapt the legal framework of the country's
banking system to international standards, increase the role of banking
services in the economy, strengthen the protection of bank deposits and
193
creditors, and ensure the stable and safe operation of the banking system
as a whole. determines.
Article 2.3 of the law describes the legal basis of banks as follows:
the activity of credit institutions is the Constitution of the Republic of
Azerbaijan, the Law "On Banks", the Civil Code, the Law "On the
National Bank", the relevant normative acts of the Ministry of Finance,
other laws of the Republic of Azerbaijan it is regulated by normative-
legal acts, as well as international agreements to which AR is a party.
Article 32 of the Law "On Banks" defines the types of activities of
banks in the Republic of Azerbaijan. According to this article, banks can
engage in the following types of activities:
– giving loans;
– mortgage lending;
– factoring, forfeiting, leasing services and other types of lending
with or without the right of recourse to hold;
– natural and legal persons, including correspondent accounts of
banks, and settlements conduct;
– transfer of cash, securities and payment funds services;
– means of payment, including credit and debit cards, traveler's
checks and bank drafts release;
– financial instruments (including checks, bills of exchange, debt
obligations and certificates of deposit), foreign currency, precious metals
and gems, currency and interest instruments, shares and other securities,
as well as forward contracts, swaps buying and selling of contracts,
futures, options and other derivatives relating to currencies, stocks,
bonds, precious metals or interest rates; and sale;
– attracting precious metals to the deposit and placement;
– providing guarantees for the performance of obligations,
including guarantees and letters of credit for own account or for the
account of customers opening;
– professional in the securities market action;
– financial advisor, financial agent or consultant services;
– to loans and credit ability checking about information giving
and services;
– documents and valuables, including cash (in special rooms or
safe boxes save);
– collection and sending of valuables, including banknotes and
coins.
Article 33 of the law prohibits banks from engaging in wholesale
and retail trade, manufacturing, transportation, agriculture, mining,
194
construction, and insurance activities. Banks can only participate in
insurance organizations as partners, associates, shareholders.
However, there is also an article in the law that, with the
permission of the Ministry of Finance and only during the period
specified in the permission, in order to meet the requirements for the
obligation, banks can carry out the above-mentioned types of activities
or participate as partners, shareholders, associates in legal entities that
carry out those types of activities they can.
Researches show that, based on the requirements of Article 33 of
this law, the vast majority of commercial banks have created insurance
companies in which they are shareholders, partners, or their subsidiaries,
and these companies have already taken a perfect position in the market.
Statistics show that insurance companies have been working profitably
in recent years. As a result, the investments made by commercial banks
in this direction bring income. In general, becoming a shareholder in
insurance companies can be considered as one of the important directions
of the investment policy of commercial banks.
Also provides for state support at the necessary moments to ensure
the financial health of banks and the stability of their activities. In this
regard, Article 57.1 of the law states that due to having a significant
weight in bank assets, providing services to a large number of savings
accounts, and having a significant share in interbank settlements,
disruption of financial stability will lead to a systemic crisis in interbank
payments, massive loss of depositors' funds and serious in trusting the
banking system financial recovery measures can be implemented by
attracting state funds for a bank that has lost its solvency or is in danger
of losing it, which may cause a danger.
In accordance with the requirements of the law, the financial
rehabilitation of banks is carried out by the Ministry of Finance. He
determines the amount of state funds necessary for the financial recovery
of the bank in agreement with the relevant executive power body
implementing the budget policy in the country.
The country's economy is undergoing a rapid development
process, which in turn causes both qualitative and quantitative changes
in various sectors of the national economy. Modern economic processes
are also reflected in the banking sector. On the other hand, the
development of the financial market and the further strengthening of the
interrelationship between the national economy and the financial market
require a more serious approach to banking activity and banks. So,
currently, banks have a leading role in ensuring financial stability in the
financial market. From this point of view, there is a need to adapt the
195
Law "On Banks" to modern requirements and direct it to the stable
development of banking and payment systems within modern economic
conditions. Changes to the law in different years were also born out of
this necessity. Also, this law is aimed at protecting the interests of
entrepreneurs engaged in banking activities is important.
As is known, commercial banks also carry out currency
operations. Therefore, the Law of the Republic of Azerbaijan "On
Currency Regulation" can be attributed to the legal framework we are
talking about. This law, adopted on October 21, 1994, defines the
principles of currency transactions in the Republic of Azerbaijan, the
powers and functions of currency regulation and currency control bodies,
the rights and duties of legal and natural persons in the field of owning,
using and disposing of currency assets, determined the responsibility for
the violation of currency legislation does.
Currency operations involving banks include the following:
– of property rights and other rights to currency assets, including
the use of foreign currency as a means of payment and payment
documents in foreign currency making;
– bringing and sending currency assets to the Republic of
Azerbaijan, as well as withdrawing them from the Republic and sending;
– international money transfers holding.
In addition, the law also uses the concept of "currency transactions
related to the movement of capital", which includes the following:
– direct investments, i.e. investment in the authorized capital of
the enterprise with the purpose of obtaining income and having the right
to participate in the management of the enterprise;
– acquisition of securities;
– transfers for payment of ownership rights over buildings,
facilities, including land and subsoil, as well as other property related to
immovable property under the legislation of the country where it is
located, as well as other rights over immovable property;
– attracting foreign currency funds to deposit for more than 180
(one hundred and eighty) days by authorized banks, etc. 5
Article 3.2 of the law states that the purchase and sale of foreign
currency in the Republic of Azerbaijan is carried out through authorized
banks in the manner determined by the Ministry of Finance. It is not
allowed to buy and sell foreign currency without the participation of
authorized banks.
With this law, the rules of foreign exchange transactions of
residents who are legal entities and natural persons in the Republic of
Azerbaijan were determined, which created fertile legal grounds for
196
foreign currency transactions of banks. In this regard, the 8th, 9th, 10th
and 11th articles of the law attract special attention.
Bank deposits are important as a source of income in the formation
of investment activity of commercial banks. However, since the well-
known banking crisis of the early 90s, the sharp decline in confidence in
banks as a result of the activity of financial pyramids has created a
fundamental problem for directing deposits to commercial banks until
almost a few years ago. It's only in the last few years a turnaround is
being observed in the field. In this area, the creation of the Deposit
Insurance Fund, the adoption of the Law of the AR "On Deposit
Insurance" had an exceptional role and stimulated the growth of deposits
of commercial banks.
The Law of the Republic of Azerbaijan "On Insurance of
Deposits", approved by the President of the Republic of Azerbaijan on
December 29, 2006, establishes the rules for the establishment and
operation of the system of collective compulsory insurance of deposits
of individuals in banks operating in the country, as well as the rules for
payment of compensation for deposits.
The creation of a deposit insurance system in Azerbaijan has been
a topic of discussion for a long time. In a number of CIS countries, this
system was formed earlier and in recent years it has practically produced
its positive results. The adoption of the mentioned law can be considered
as the foundation of this system in our country.
The purpose of creating the system mentioned in the law is to
prevent the risk of loss of money deposited from individuals when local
branches of national banks and foreign banks lose their ability to pay,
and to ensure the stability and development of the financial and banking
system.
In the report of the Ministry of Finance, it is noted that the
recommendations on the creation of an effective deposit insurance
system by the forum for the financial stability of the G7 countries created
in 1999 and the "On deposit guarantee schemes" of the European Union
dated May 30, 1994 the basic principles provided for the efficient
operation of the deposit insurance system in the directive are reflected in
the aforementioned law. With this law, a legal basis has been formed for
the protection of funds entrusted to banks by depositors, as well as for
the continuation of the activities of banks under conditions of healthy
competition.
As it can be seen, commercial banks are the main participants in
the formation of the insurance system and the formation of the income
of the Deposit Insurance Fund. Experience has shown that the adoption
197
of this law and the implementation of the measures provided for in it, the
joint activity of commercial banks in this direction has led to positive
results. Most importantly, this increased citizens' confidence in the
banking system, which in turn was reflected in the rapid growth of bank
deposits.
In our opinion, in the future, it would be necessary to create a
perfect banking code by summarizing the provisions of laws or
individual laws directly related to banking activity. Because the strategic
importance of banking activity in the national economy is increasing day
by day, and modern types of banking activity are emerging. From this
point of view, it is important and necessary to constantly improve the
banking legislation, to conduct in-depth scientific research during the
preparation of laws related to this field.
The laws we mentioned above are specific laws of this field,
directly related to banking activity. However, it should be noted that the
regulation of banking activity is not limited to these laws. Because
banking is also a type of entrepreneurial activity and the laws regulating
entrepreneurial activity are directly related to it. Therefore, the
provisions of such normative legal documents and their improvement are
of special importance for the development of the banking sector. In this
regard, it would be appropriate to look at the basics of those laws.
References
1. Azerbaijan 2030: National Priorities for socio-economic development. (2021,
February 2). By the Decree of the President of the Republic of Azerbaijan. Retrieved
from https://president.az/en/articles/view/50474.
2. Strategy of socio-economic development of the Republic of Azerbaijan in
2022-2026. (2022, July 22). By the Decree of the President of the Republic of Azerbaijan.
3. Strategic Roadmap for the development of financial services in the Republic
of Azerbaijan. (2016). Baku.
4. Law of the Republic of Azerbaijan on deposit insurance (with amendments and
additions adopted by the law dated May 8, 2009 and June 30, 2009).
5. Abdullayev, Sh., Asgarova, R.. (2010). Banking. Baku,
Надійшла до редакції 28.11.2022 р.
|
| id | nasplib_isofts_kiev_ua-123456789-192149 |
| institution | Digital Library of Periodicals of National Academy of Sciences of Ukraine |
| issn | 2221-1187 |
| language | English |
| last_indexed | 2025-12-07T15:32:29Z |
| publishDate | 2022 |
| publisher | Інститут економіки промисловості НАН України |
| record_format | dspace |
| spelling | Mammedov, E.Ch. 2023-07-11T16:56:47Z 2023-07-11T16:56:47Z 2022 Macroeconomic Aspects of Investment Activity of Banks / E.Ch. Mammedov // Управління економікою: теорія та практика: Зб. наук. пр. — К: ІЕП НАНУ, 2022. — С. 189-197. — Бібліогр.: 5 назв. — англ. 2221-1187 DOI: 10.37405/2221-1187.2022.189-197 https://nasplib.isofts.kiev.ua/handle/123456789/192149 Bank investments have a special economic content. In the microeconomic aspect, the investment activity of the bank can be viewed from the point of view of the bank taken as an economic subject (as an activity in which the bank acts as an investor by putting its resources into the creation or acquisition of real assets, and the purchase of financial assets with the aim of generating direct and indirect income). However, there is another aspect of banks' investment activities that is related to the implementation of their macroeconomic role. In this capacity, banks cause the realization of the investment demand of economic entities in the form of money and credit in the market economy, and the transformation of savings and savings into investment. Therefore, in the macroeconomic aspect, the investment activity of banks is understood as an activity aimed at meeting the investment needs of the economy. Банківські вкладення мають особливий економічний зміст. У мікроекономічному аспекті інвестиційну діяльність банку можна розглядати з точки зору банку як економічного суб’єкта (як діяльність, у якій банк виступає інвестором, вкладаючи свої ресурси у створення чи придбання реальних активів, а також придбання фінансових активів з метою отримання прямого та непрямого доходу). Проте існує й інший аспект інвестиційної діяльності банків, пов'язаний із реалізацією ними макроекономічної ролі. У цій якості банки зумовлюють реалізацію інвестиційного попиту суб'єктів господарювання у формі грошей і кредиту в ринковій економіці, перетворення заощаджень і заощаджень на інвестиції. Тому в макроекономічному аспекті під інвестиційною діяльністю банків розуміють діяльність, спрямовану на задоволення інвестиційних потреб економіки. en Інститут економіки промисловості НАН України Управління економікою: теорія та практика Macroeconomic Aspects of Investment Activity of Banks Макроекономічні аспекти інвестиційної діяльності банків Article published earlier |
| spellingShingle | Macroeconomic Aspects of Investment Activity of Banks Mammedov, E.Ch. |
| title | Macroeconomic Aspects of Investment Activity of Banks |
| title_alt | Макроекономічні аспекти інвестиційної діяльності банків |
| title_full | Macroeconomic Aspects of Investment Activity of Banks |
| title_fullStr | Macroeconomic Aspects of Investment Activity of Banks |
| title_full_unstemmed | Macroeconomic Aspects of Investment Activity of Banks |
| title_short | Macroeconomic Aspects of Investment Activity of Banks |
| title_sort | macroeconomic aspects of investment activity of banks |
| url | https://nasplib.isofts.kiev.ua/handle/123456789/192149 |
| work_keys_str_mv | AT mammedovech macroeconomicaspectsofinvestmentactivityofbanks AT mammedovech makroekonomíčníaspektiínvesticíinoídíâlʹnostíbankív |