Interbank loan - a loan provided by one bank to another. The main lender in the market is the Central Bank . Commercial banks act as borrowers and lenders to other commercial banks. Typically, borrowing is carried out on the basis of one-time loan agreements or by placing deposits with other banks.
Most interbank loans are designed for up to one week or less, most - for the night. Such loans are issued at the interbank rate (also called overnight rate , if the loan term is overnight).
Banks borrow and lend money in the interbank lending market to manage liquidity and meet regulatory requirements such as reserve requirements. The interest rate depends on the availability of money in the market, on prevailing rates and on specific conditions of the contract, such as the duration of the term. There is a wide range of published interbank rates, including the rate of federal funds (USA), LIBOR (UK) and Euribor (Eurozone).
Lending activities of commercial banks are inseparable from operations in the interbank loan market. Obtaining loans from other banks makes it possible to replenish bank credit resources. With an excess of resources, the bank places them on the interbank market; with a lack of resources, the bank buys them on the market. The interbank loan market is an important component of the credit market.
Content
Views
In practice, the following main types of interbank credit are used:
- overdraft on correspondent accounts on the corresponding account takes into account the amount of debit (credit) balances on correspondent accounts of banks at the end of the trading day;
- Overnight loans granted (received) to other banks: they are provided to other banks for a period of not more than one operational day. This type of interbank loan is used to complete the calculations of the current day;
- REPO operations - are related to the purchase of securities from them for a certain period with the condition of their repurchase at a predetermined price or with the condition of an irrevocable guarantee of repayment in case the repo transaction period coincides with the maturity of securities.
Commercial banks as economically independent credit institutions independently set the level of interest rates on interbank loans, depending on supply and demand in the interbank market and the level of the discount rate.
Mechanism
The credit market was actually divided into two parts: intra-bank and inter-bank. In this situation, large banks with a significant number of branches began to create their own intra-bank markets in order to optimally use their existing credit resources.
In order to obtain an interbank loan, the debtor bank submits to the creditor bank, as a rule, the following documents: application; memorandum of association; notarized copy of the articles of association; a copy of a banking license, notarized; a card with specimen signatures and a stamp of the official seal, also notarized; balance sheet for the current reporting date; calculation of economic standards for the current reporting date; performance indicators of a commercial bank; form of collateral and urgent obligations. The main source of information for determining the borrower's creditworthiness about interbank loans is the bank balance.
An interbank loan agreement should include the following main provisions: 1) the subject of the agreement is the provision of a loan in a certain amount with a certain repayment period 2) the rights and obligations of the creditor bank and the borrowing bank; 3) the responsibility of the parties; 4) dispute resolution procedure; 5) conditions for amending the contract; 6) special conditions; 7) the duration of the contract.
Bank bills and certificates of deposit can also be used on the interbank loan market. A certificate of deposit is a written certificate of a bank on depositing funds that certifies the right of a depositor to receive a deposit.
Due to the active use of such a tool as interbank credit, within the framework of the interbank credit market, it is possible to solve a number of important problems [1] :
- liquidity support for financial institutions;
- obtaining additional profit if the bank acts as a borrower;
- access to speculative operations;
- formation of a positive image of the bank among other similar organizations;
- establishing links between banks and access to information about their status.
The adoption of the optimal decision by the bank on the sale and purchase of resources on the interbank market is possible only under the condition of accurate knowledge of the situation on the market of credit resources and scientific forecasting of the dynamics of its change.
Russian practice
The provision and receipt of loans by commercial banks in the interbank market is regulated by the Law on Banks and Banking Activities, the Civil Code, charters of commercial banks and credit agreements. Credit relations between commercial banks are determined on a contractual basis by concluding credit agreements, which should provide for the rights and obligations of the parties, with proper registration of cases on interbank loans. The provision of interbank loans should be accompanied by the opening of accounts in accordance with the Chart of Accounts for the Accounting of Commercial Banks.