Tutorial:Business Academy Topic: Financial Market and Banks Prepared by: Ing. Ingrid Ilčíková Projekt Anglicky v odborných předmětech, CZ.1.07/1.3.09/ je spolufinancován Evropským sociálním fondem a státním rozpočtem České republiky.

BANKS

 banks and their services - a part of the financial market  bank products – monetary and capital market  banks also offer some other activities and services  money as a trade subject  market economy cannot exist without a functioning market

 creation of financial market – a need of a specific subject (a bank)  a large part of financial resources in the economy is placed through banks  the capital utilization efficiency depends on the bank efficiency  bank - a specific type of business with specific legislation  bank is a business entity – it must operate on the principle of profit

BANK  financial intermediary in the movement of financial funds between individual economic entities  a business entity which accepts deposits from the public, makes loans, has a license by the CNB to as a bank, a legal entity, a joint-stock company  the minimum share capital is CZK 500,000,000  the applicant must document his/her professional training, qualification for managing, technological and security prerequisities to perform banking activities

BASIC FUNCTIONS OF BANKS  financial intermediation – to place the capital where it will earn a profit  issuing credit money – it is money in the form of credit entries in the accounts  issuing money – the CNB only  implementation of cashless payments – moving from one account to another

BANKING SYSTEM  it is a complex of banks in a given state and their interrelations  by 1990 – a single-stage system, the monopoly of the State Bank of Czechoslovakia, which was the Central Bank as well  in 1990 a two-stage system was created in the CR, new banking laws were accepted  a system based on the separation of a macroeconomic function, which is provided by the Central Bank, and a microeconomic function – commercial banks - business entities related to the clients on the profit principle

BANK RISKS  credit risk – the client fails to comply with the agreed conditions  interest rate risk – it depends on the changes in the market interest rates and the structure of the bank balance. There are items which are more sensitive to the changes in the interest rates; the more such items, the greater the impact  currency risk – it arises from the changes in the exchange rates  liquid risk - liquidity – the ability of banks to meet their payable liabilities at any time  capital risk – the amount of liabilities is bigger than the market value of all the assets

ACTIVITIES:  Make a graph of a current banking system in the CR.  What conditions must be met by the candidates in order to set up a specific business – a bank?

RESOURCES:  Klínský, P. Ekonomika 3. Praha: FORTUNA, ISBN  Synek, M. a kol. Podniková ekonomika. Praha: C.H.Beck,1999. ISBN