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Who's profiting from the high rates on loans?

Who's profiting from the high rates on loans? At this writing, I spodviglo perception throughout misconception about how, like bedbugs, banks suck sap from the citizens and do not give to develop small-scale entrepreneurs. And in the role of accuser stands the Central Bank! This is especially strange looks, since he is the one most important bug-vampire.

When a businessman comes to the bank statement for the loan, then apply direct to the employee of the credit department. The clerk wrote the conclusion based on the calculation of your financial statements (or tax), and assesses the existence and condition of the loan - usually a bond or surety.

A credit committee decides whether to grant a loan, and at the time the accounting entries to transfer funds from the loan account to create a mandatory reserve for possible loan losses.

This is not new, and practice, binding and approved by the circulars of the Central Bank almost 15 years ago. Over time it evolved, but the essence remains the same. All loans must be weighed by the risk (now from 1 to 5 groups), in accordance with certain criteria, as percentage of the loan amount. This is done here with a purpose: if the loan will be released in late, he is certain (though not all) cases is, therefore, net, in the form of a possible redemption for the provision established at the time of the loan. That is, the money wasted lying in the accounts, but, nevertheless, ensure that the bank will not be ruined by delays, and its financial stability is not shaken.

So, the bank pays money for the "maybe", creating a sort of "stash" - but the amount of allowance for loan may be different. What does it depend?

In order to determine the size of the estimated reserve in accordance with the factors of credit risk loans are classified according to five categories of quality as follows:

    * I (a) the category of quality (standard loan) - lack of credit risk (the probability that the loan is not settled and will be released at the delay, zero);
    * II category of quality (non-standard loans) - moderate credit risk (there is a slight chance of financial loss as a result of accrued a reserve of 20%);
    * III category of quality (doubtful debts) - significant exposure to credit risk (ie the borrower unreliable for several reasons, for example, had a delay of interest, so the charge will be from 21 to 50%);
    * IV category of quality (problem loans) - high credit risk (from 51 to 100%, the causes of unreliability is not less than two);
    * V (lowest) category of quality (bad loans) - there is no likelihood of repayment even in the period, the borrower has little or insolvent (accrual reserve 100%).

Not surprisingly, the classification of loans may change over the entire loan period in connection with the following: the detention of interest payments or repayment of the next, the changes that have occurred with the mortgage, the borrower's financial condition, and so on. In these cases, the bank is obliged to transfer credit to another group at risk and incur additional expenses in the reserve.

This, incidentally, is another misconception: for some reason it is considered that reserves deducted from profits. In fact, this cost item. The profit of the bank is considered the first stage as revenue less operating expenses (interest on deposits, commissions ...). Turns operating profit. Then out of it made the cost of dismissal provisions. The result-tax profit, is it stated in the report, which is on each bank at the site of the Central Bank. It is from this profit is calculated on profit tax.

It is easy to understand that the more the costs borne by the bank on the loan, the higher it will crank you bet on it, trying to compensate for the negative. Now you can say: who he is to blame? Suppose that, looking at the honest eyes of a young entrepreneur, believes that money to turn around and come back, that will be used for these purposes, etc. Even so, and the bank trusts you, evaluate your loan as a safe will not allow him to the Central Bank carries out regular checks on the ground Académie. Credit to small businesses obviously risky, and as soon as percentage of the reserve will be small, after checking the Central Bank, he will grow from 50 to 100% of the loan amount.

In addition to the reserve, your interest rate on the loan must still pay off interest rate on the payment of interest on deposits. The longer the term of the loan, the more "long money" needed to achieve it, it is necessary to attract long-term deposits - it provides a binding norm of the Central Bank. A long-term investments should be well paid - who else would put money in the long term a small percentage?

But that's not all! Banks shall transfer to the Central Bank to funds required reserves - as a percentage of loose money and money on call accounts, ostensibly to ensure repayment of these deposits to customers. And banks are cast up money as a credit resources (ie, funds for lending), respectively, can not be used.

So that is not enough! The system of deposit insurance when banks involved in fundraising physical persons, deduct the money to the Central Bank in case of its bankruptcy as the provision of payment of deposit (this is done on a quarterly basis) also contribute to higher prices of resources. Thus, when the Central Bank said that banks provided cheap resources - it is not just being clever, he's lying.

Of course, commercial banks do not operate at a loss. Of course, they are not troubled and have a good income from interest on loans. But to say that the high rates on loans to the same small businesses - it is the fault only commercial banks, at least silly. The more that governments can make such loans is quite robust: to create a fund to support small businesses and under its guarantee of commercial banks without any problems can be issued requiring the provision of low-interest loans.