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Money and credit - Ivanov VM

22.3. Specialized non-bank financial institutions

In recent years, the national markets of loan capital has increased the value of specialized non-bank financial institutions, which play an important role in the accumulation and mobilization of money capital. These institutions include: insurance companies, pension funds, savings and loan associations, building societies, investment and financial companies, charities, credit unions. These institutions essentially pushed banks in the accumulation of savings of the population and have become important providers of loan capital.

Strengthening the impact of specialized non-bank financial institutions contributed to three main reasons:

• income growth in the developed countries;

• active development of the securities market;

• Providing these institutions special services are unable to provide banks.

In addition, a number of specialized non-banking institutions (insurance companies, pension funds) unlike banks can accumulate cash savings for quite a long time and, therefore, to carry out long-term investments.

The main forms of these institutions in the market of loan capitals are reduced to the accumulation of household savings, lending through bond loans to corporations and the state, raising capital through all types of shares, granting mortgage and consumer loans, as well as mutual credit.

These institutions are fierce competition among themselves how to attract money savings, as well as in the field of credit operations.

Insurance companies compete to attract pension funds for retirement savings and investing them in shares. Savings and loan associations are fighting with insurance companies in the sphere of mortgage and real estate investments, as well as in investing in government securities. Financial companies compete with insurance companies in the area of ​​consumer credit. Investment and insurance companies, pension funds compete for investments in shares.

In addition, all kinds of institutions are competing with commercial and savings banks to attract savings of all sectors of the population. It should be noted that the competition between both specialized non-banking institutions, and between them and the banks have so-called non-price character. This is primarily due to the specifics of each type of passive operations of financial institutions. For example, in banking, the current interest rate on deposits (deposits) and loans granted in the insurance business - insurance rate, which determines the size of the insurance premium and the insurance indemnity; from investment companies - exchange differences produced and purchased shares them. Therefore, non-price competition is determined primarily by incompatibility of operations and their prices. Comparability is only possible when investing in similar financial in nature objects. In this case, we can talk about the comparability of investments in government securities and certain types of shares, as well as mortgage and consumer loans.

Creation and development of pension funds - a new phenomenon in the market of loan capital, securities, and generally in the credit system.

Savings and loan associations are credit unions, set up to finance housing construction.

Financial companies - a special type of financial institutions that operate in the field of consumer credit. Financial companies are an important tool for "pushing" of durable goods in the markets for large industrial corporations, especially in conditions of low demand and the deteriorating economic situation.

Credit unions are primarily intended to serve individuals, united by professional and religious grounds.

Development charities associated with a number of circumstances:

• charity become part of business;

• the desire of owners of large personal fortunes avoid heavy taxes on inheritance and gifts;

• the practice of large owners cover their capital from the income tax and inheritance tax.

Investment Company through the issuance of treasury shares attract funds, which are then invested in the securities industry and other corporations. Thus, they finance various sectors of the economy.

A feature of the accumulation of capital of insurance companies is the receipt of premiums from individuals and legal entities, the amount of which is calculated on the basis of insurance rates or interest rates, as well as income from investments.

The monopoly stage of capitalism has led to the emergence of new credit and financial institutions, which have developed rapidly since the crisis of 1929-1933. There was a better separation of functions between the various financial institutions in the credit system. Quickly grew and occupied the most important position in the market of loan capital insurance companies, pension funds, investment companies, savings and loan associations and other specialized agencies. They have become the main source of long-term capital in the money market, surpassing in this sphere of the commercial banks.

However, a decrease in the share of commercial banks does not mean reducing their role in the economy. They continue to perform the essential functions of the credit system: payment transactions, deposit and a check issue, short- and medium-term financing, as well as some of the long-term financing.

Specialized non-bank financial institutions perform their functions in the economy in three main areas:

• providing loan capital industry and government;

• accumulation of free cash capital and cash savings of the population;

• possession of fictitious capital.

A wide network of specialized financial institutions allowed to collect free money capital and savings and make them available to commercial and industrial corporations and the state. Thus, the development of the credit system was one of the most important prerequisites for ensuring a relatively high rate of capital accumulation, which contributed to the growth of production and sales of scientific and technological revolution.