Banking System

The banking system is an aggregate of banks, non-banking institutions, and banking infrastructure, which are in close interaction with each other and ensure its sustainable development.

The classification of banking systems may be based on various criteria.

Thus, depending on the type of banking relations in society, it is customary to distinguish between banking systems of a distributive, transitional and market type. A market-type system is characterized by competition and regulation. Distributive type is characterized by the complete absence of market elements, strict regulation and centralization of management from a single economic center. Transitional type includes features of both market (competition and regulation) and distributive economic system – strict administration in some positions.

At the same time, taking into account what type the banking system refers to – distributive or market – levels of the banking system are formed and function. In practice there are one-, two- and three-tier systems.

Classifying banking systems by models, we can distinguish a competitive, oligopolistic and monopolistic model of construction. By class – national, supranational and global banking systems.

According to the level of specialization, we distinguish universal and specialized banking systems. In a specialized model, it is forbidden to combine credit and investment activities. The universal model of the banking system, on the contrary, allows a combination of lending and investment activities.

Depending on the degree of development of the banking system in practice are found:

• Extensive model. It is characterized by a limited number of banking services, aggressive policy in the market of assets and liabilities, low degree of diversification, high concentration of risks, low level of development of competition and market discipline;
• intensive model. It is characterized by a high level of competition, a high degree of transparency and market discipline, the presence of an extensive modern infrastructure, a high degree of capitalization of banks, the balanced conduct and sustainability of business, the reliability of information published and presented to the control and supervisory authorities.