The modern credit system is:

A set of forms and methods of lending (functional aspect).

A set of financial institutions providing lending (institutional).

Links of the credit system:

The top link is the Central Bank, which regulates the activities of all credit institutions in the country.

Banking sector – commercial, mortgage, savings, investment.

Insurance sector – insurance companies and private pension funds (are providers of long-term capital).

Specialized non-banking financial institutions (investment funds and companies, financial companies, charitable foundations, savings and loan associations, credit unions, pawnshops).

Links of the credit system in Russia:

Central bank.

Banking sector – commercial universal and specialized: mortgage, savings, investment banks.

Specialized non-banking financial institutions (including insurance organizations).

Functions of the credit system:

accumulation and mobilization of monetary capital;

redistribution of monetary capital by providing credit to various categories of borrowers;

monetary and economic function - making settlements and payments and creating or issuing credit funds of circulation;

consulting and information function.

According to the Federal Law “On Banks and Banking Activities,” a credit organization is a legal entity that, in order to make a profit as the main goal of its activities, on the basis of a special permit (license) of the Central Bank of the Russian Federation (Bank of Russia), has the right to carry out banking operations.

Banking operations are:

attracting free funds from individuals and legal entities into deposits;

placing raised funds on your own behalf and at your own expense;

opening and maintaining bank accounts for individuals and legal entities;

collection of funds, bills, payment and settlement documents, cash services for individuals and legal entities;

purchase and sale of foreign currency;

attracting contributions and placement of other sources;

issuance of bank guarantees.

Bank is a credit organization that has the exclusive right to carry out the following banking operations in total:

attracting funds from individuals and legal entities into deposits;

placement of these funds on your own behalf and at your own expense on the terms of repayment, payment, urgency;

opening and maintaining bank accounts for individuals and legal entities.

Non-bank credit organization is a credit organization that has the right to carry out certain banking operations. Acceptable combinations of banking operations for non-bank credit institutions are established by the Bank of Russia.

11.5 Central bank, functions and operations

According to the form of organization and form of ownership of capital, Central banks can be:

Joint stock company(in USA);

State, the capital of which belongs to the state (Germany, France, Canada, Russia);

Mixed, those. in the form of a joint stock company, part of the capital of which belongs to the state, and part to shareholders (Japan, Belgium).

Regardless of the ownership of the capital, the Central Bank is legally independent and its property is separate from the property of the state.

The purpose of the Central Bank of the Russian Federation is:

Ensuring purchasing power and a stable exchange rate of the national currency;

Ensuring stability and liquidity of the banking system;

Ensuring the efficiency and reliability of the payment system.

The Bank of Russia in its activities is guided by the Federal Law of July 10, 2002 No. 86-FZ “On the Central Bank of the Russian Federation (Bank of Russia)” (with subsequent amendments). The activities of the Bank of Russia are also regulated by the Civil Code, the Law “On Currency Regulation and Currency Control,” etc.

Functions of the Central Bank:

Monopoly issue of banknotes.

The function of monetary regulation of the economy, control and supervision of the banking system.

Serves as a bank for other banks.

Function of the government's bank.

Foreign economic function.

1. Monopoly issue of banknotes– legally assigned to the Central Bank. Banknote issue is required:

For payments in retail trade.

To ensure liquidity of the banking system.

The emission monopoly turned the Central Bank into the issuing and cash center of the banking system.

2. Monetary regulation of the economy– is an essential element of the government’s economic policy and represents regulation of the economy by influencing the state of credit and money circulation:

– Changes in interest rates, for which the Central Bank provides loans to commercial banks. The main rate in the Russian Federation is the refinancing rate.

There are two options for interest policy. Credit restriction policy: The Central Bank increases the refinancing rate – Commercial banks are also increasing interest rates on loans (credit) – The number of loans issued by commercial banks to enterprises will decrease ↓ – Leads to a decrease in the money supply ↓ - Leads to a decrease in inflation ↓ – Leads to an increase in the exchange rate of the national currency. The reverse action of the central bank is called credit expansion policy.

– Changes in required reserve norms. If the Central Bank lowers the required reserve requirements ↓ - Credit resources of commercial banks will increase - interest rates of commercial banks will decrease ↓ - The volume of loans will increase - The money supply will increase - Inflation will increase - The national currency exchange rate will decrease ↓. Required reserves serve to regulate the liquidity of commercial banks and reduce the money supply.

– Open market operations– purchase or sale by the Central Bank of securities to commercial banks. If the Central Bank buys securities from commercial banks, then they have additional credit resources. If the Central Bank sells securities to commercial banks, then the monetary resources of commercial banks decrease - therefore, the money supply decreases - the exchange rate of the national currency rises. These operations are carried out to regulate bank liquidity.

– Exchange rate policy (exchange rate policy).

Exchange rate regulation is carried out in two general ways:

A) Regulation through foreign exchange intervention (purchase and sale by the central bank of foreign currency for national currency).

B) Changes in the interest rate by the central bank for commercial banks.

There are also selective (selective) methods. They are aimed at specific forms of regulation. For example, to regulate the credit market:

A) Establishment of credit ceilings (direct limitation of credit);

B) Regulation of the conditions for issuing individual loans.

Credit system can be characterized according to three aspects: essential, institutional And functional.

IN essential aspect, the credit system is a system of credit and financial relations arising in connection with the provision, use and repayment of loans on the terms of repayment, payment and urgency.

WITH institutional point of view - this is a system of credit and financial institutions servicing credit relations (banks, financial companies, stock and currency exchanges, insurance companies, etc.).

WITH functional positions, the credit system is a set of species And loan forms(Fig. 66).

§ Credit system- this is a set of forms and types of lending (functional aspect)

§ Credit system- this is a set of credit and financial institutions (institutional aspect)

§ Credit system- is a set of credit and financial relations (essential aspect)

Structure of the credit system

Credit system in the institutional aspect - a set of credit and financial institutions serving the entire sphere of credit relations. All credit institutions are interconnected and form a certain hierarchical structure (Fig. 69).

The core of the entire credit system is banking system. Single-level The banking system involves the use of mainly horizontal connections between banks, the universalization of their operations and the performance of similar functions.

Rice. . Structure of the credit and banking system

The two-tier banking system is based on connections between banks in two planes: horizontally and vertically. Vertically, relations arise of subordination to the central bank as the governing and regulatory body of the lower levels of the system.

Banking system of Russia- one of the most important elements of its financial system. Like the entire Russian economy, the banking system is currently undergoing fundamental changes, affecting both its structural and functional parts. The changes are fixed by banking legislation, the development of which is carried out on the basis of foreign experience, the experience of the first years of economic reforms in Russia, and modern ideas about the essence and purpose of banking institutions.

The banking system includes three groups of credit and financial institutions:

§ Central bank

§ Commercial banks

§ Specialized financial institutions

At the head of the credit system is the central bank. It, as a rule, belongs to the state and performs the main functions of regulating the economy.

central bank monopolistically issues (issues) credit money in cash (banknotes), carries out lending to commercial banks, stores cash reserves of other credit institutions, carries out settlement operations and exercises control over the activities of other credit institutions.

Commercial banks- these are credit institutions of a universal nature that carry out credit, stock, intermediary operations, organize payment turnover on the scale of the national economy.

Specialized financial institutions engage in lending to certain areas and sectors of economic activity. They usually dominate narrow sectors of the capital market.

Introduction

The development of the credit system is a necessary condition for the formation of a healthy economic environment, the development of Russian entrepreneurship and the economy as a whole, since credit is necessary for expanded reproduction, ensuring the circulation of production assets and circulation funds.

The need for loans arises not only from firms, farmers and entrepreneurs who are directly involved in production. Ordinary consumers also need loans for large purchases - a car, a house, an apartment. Government agencies, both federal and local, are also large borrowers.

In order to provide the economy with credit funds, special attention must be paid to the development of commercial banks and increasing the efficiency of their activities. To achieve this, it is important to accelerate the transition of Russian commercial banks to international standards for organizing the credit process.

The essence and structure of the credit system of the Russian Federation

The modern credit system is a collection of various credit and financial institutions operating in the loan capital market and carrying out the accumulation and mobilization of monetary capital.

The essence and functions of credit are realized through the credit system. Credit is the movement of loan capital, which is lent out on the terms of repayment for a certain percentage.

The loan performs the following functions:

accumulation and mobilization of monetary capital;

redistribution of monetary capital;

cost savings;

acceleration of concentration and centralization of capital;

regulation of the economy.

There are two main forms of credit sold on the market: commercial and banking; they differ from each other in the composition of participants, the object of loans, dynamics, interest rates and scope of operation.

A commercial loan is provided by one operating enterprise to another in the form of the sale of goods with deferred payment. The instrument of such a loan is a bill of exchange paid through a commercial bank. As a rule, the object of commercial credit is commodity capital, which serves the circulation of industrial capital, the movement of goods from the sphere of production to the sphere of consumption. The peculiarity of commercial credit is that loan capital here merges with industrial capital. The main purpose of such a loan is to speed up the process of selling goods and the profit contained in them. The interest on a commercial loan, which is included in the price of the goods and the amount of the bill, is usually lower than on a bank loan. The size of a commercial loan is limited by the amount of reserve capital available to industrial and trading companies.

Bank credit is provided by banks and other financial institutions to legal entities (industrial, transport, trading companies), the population, the state, and foreign clients in the form of cash loans.

A bank loan exceeds the boundaries of a commercial loan in direction, terms, and size. It has a wider scope of application. A significant replacement of a commercial bill with a bank bill makes this loan more elastic, expands its scope, and increases security. The dynamics of bank and commercial loans are also different. Thus, the volume of commercial credit depends on the growth and decline of production and trade turnover. The demand for bank credit is mainly determined by the state of debt in various sectors of the economy. However, it is also subject to cyclical economic fluctuations. A bank loan is dual in nature: it can act as a capital loan for operating enterprises, companies, or in the form of a money loan, i.e. as a means of payment when paying debts.

As the credit system develops and expands, the growth rate of bank credit increases.

Currently, there are several forms of bank loans.

Consumer loans, as a rule, are provided by trading companies, banks and specialized financial institutions for the purchase of goods and services by the population in installments. Typically, durable goods (cars, refrigerators, furniture, household appliances) are sold with the help of such a loan. The loan term is 3 years, the interest is from 10 to 25. The population in industrialized countries spends from 10 to 20% of their annual income to cover consumer loans. In case of non-payment, the property is seized by the creditor.

A mortgage loan is issued for the purchase or construction of housing or the purchase of land. It is provided by banks (except investment banks) and specialized financial institutions. The loan is also issued in installments. The highest level of mortgage loans is in the USA, Canada, and England. The interest rate on the loan varies depending on the economic situation - from 15 to 30 or more.

State credit should be divided into state credit itself and state debt. In the first case, state credit institutions (banks and other financial institutions) lend to various sectors of the economy. In the second case, the state borrows funds from banks and other financial institutions in the capital market to finance the budget deficit and public debt. At the same time, in addition to credit institutions, government bonds are bought by the population, legal entities, i.e. various enterprises and companies.

International credit is both private and public in nature, reflecting the movement of loan capital in the sphere of international economic and monetary relations.

Usurious credit persists as an anachronism in a number of developing countries where the credit system is poorly developed. Typically, such loans are issued by individuals, money changers, and some banks. The peculiarity of this loan is extremely high interest rates (from 30 to 200 and above).

The modern credit system includes two basic concepts: a set of credit, settlement and payment relations that are based on certain, specific forms and methods of lending; a set of functioning financial institutions (banks, insurance companies, etc.). The first concept is usually associated with the movement of loan capital in the form of various forms of credit. The second means that the credit system, through its numerous institutions, accumulates free funds and directs them to enterprises, the population, and the government.

The modern credit system of capitalist countries has undergone serious structural changes in the post-war years; The role of banks has decreased and the influence of other credit and financial institutions (insurance companies, pension funds, investment companies, etc.) has increased. This was expressed both in an increase in the total number of new financial institutions and in an increase in their share in the total assets of all financial institutions. Such evolutionary processes have also affected many developing countries.

Important processes in the modern credit system of capitalist countries were:

concentration and centralization of banking capital; further strengthening of competition between different types of financial institutions;

continued merging of large credit and financial institutions with powerful industrial, trading, transport corporations and companies;

internationalization of the activities of credit and financial institutions and the creation of international banking associations and groups.

The credit system operates through a credit mechanism. It represents, firstly, a system of connections for the accumulation and mobilization of monetary capital between credit institutions and various sectors of the economy, secondly, relations associated with the redistribution of monetary capital between the credit institutions themselves within the framework of the existing capital market, thirdly, relations between credit institutions and foreign clients.

The credit mechanism also includes all aspects of lending, investment, founding, intermediary, advisory, accumulation, redistribution activities of the credit system represented by its institutions.

In the post-war period, the credit system helped provide conditions for significant growth in production, capital accumulation and the development of scientific and technological progress. Thanks to credit in its various forms, there is a mobilization of money capital and a huge concentration of capital investments in key, technically the most progressive sectors of the economy. Only powerful banks and insurance companies can carry out credit operations on the scale necessary to finance modern large industrial, transport and other facilities. Government funds involved in financing capital investments also often come to the economy in the form of credit.

The credit system plays a vital role in maintaining a high rate of economic accumulation, which is typical for most industrialized countries. However, in the United States this figure is slightly lower than in other industrialized countries. This is explained primarily by the fact that the processes of accumulation of monetary capital in the United States were influenced by such factors as frequent fluctuations in market conditions, a high share of military expenditures in the national income and budget, a drop in the purchasing power of money, a large share of investments in the non-productive sphere, and the stability of the securities market. until the end of the 60s.

Credit plays an important role in solving the problem of selling goods and services on the market. The large increase in consumer and housing mortgage lending to the population significantly expanded the market for durable consumer goods and played a significant role in the rapid development of the relevant industries and construction.

International conditions of reproduction are also largely shaped in connection with the development of credit relations in various forms and with the activities of banks on the world stage. These factors contributed to the growth of international trade, which in turn boosted production.

Monetary crises, which usually accompany cyclical economic crises and significantly intensify them, were weakly expressed until the late 70s and early 80s. Their most acute forms - the pressure of depositors on banks, the massive demand for loans, the bankruptcy of banks - were virtually absent before this time. This was explained by many profound changes in the economy, in particular, an increase in the elasticity of the monetary system in the absence of a gold standard, changes in the structure of credit institutions and the loan capital market, and state monopoly regulation.

At the same time, the credit system in the post-war period largely contributed to the strengthening of the social and property gap between different strata of society. Be more specific about the following factors. The stock business, which is a unique form of credit business, has been the source of a colossal increase in the personal fortunes of the wealthiest people in society during the last two decades. At the same time, the accumulation of the credit system of workers' savings chained them to the existing capitalist system and therefore often served as an instrument of additional financial exploitation. The latter became especially obvious and effective in connection with inflation, which continuously devalued savings in terms of their real purchasing power, especially in the 70s.

Although the credit system did not experience acute “traditional” crises in the post-war period, as in 1929-1933, the credit expansion of banks, the growth of the credit superstructure, the swelling of mortgage and consumer loans required urgent government intervention to prevent a crisis in the credit sector, which was closely associated with the crisis of the international monetary system.

While there are general patterns of development, the credit systems of individual countries have their own characteristics. In the 19th century England had the most developed and extensive credit system. Now the United States is such a leader in many respects. Other countries often seek to adopt the organizational forms and methods of American financial institutions, especially investment and insurance companies, corporate pension funds, institutions and consumer finance. At the same time, a number of countries in Western Europe are characterized by government institutions of a larger scale and universal nature than in the United States.

The processes of concentration in the banking sector, which largely determine the development of the credit system, have a number of important features in the post-war period. Significant changes are also taking place in the operations of banks and, in particular, in the forms of their relations with industry. Characteristic is a combination of functions and specialization, i.e. identifying special types of financial institutions with their own specific functions.

Monopoly capitalism led to the emergence of new credit and financial institutions, which began to develop rapidly after the crisis of 1929-1933. There has been a more complete delineation of functions between various financial institutions within the credit system. Insurance companies (mainly life insurance companies), pension funds, investment companies, savings and loan associations, and other specialized institutions quickly grew and took major positions in the capital market. They have become the main source of long-term capital in the money market, displacing commercial banks in this area.

However, the fall in the share of commercial banks does not mean a decrease in their role in the economy. They continue to perform the most important functions of the credit system: settlement operations, deposit and check issue, short- and medium-term financing, as well as a certain part of long-term financing.

Credit and financial institutions carry out their functions in the economy in three main areas: provision of loan capital and monetary savings of the population: ownership of fictitious capital. A wide network of specialized credit and financial institutions made it possible to collect free cash 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 the implementation of the scientific and technological revolution.

The credit system is a special branch of business activity, which is aimed at attracting and accumulating available funds, as well as distributing these funds between individual economic units with the condition of payment, urgency and repayment.

The modern credit system can be viewed as follows: firstly, it is a chain of various methods, forms and principles of lending, as well as various credit relations. All this together forms a credit mechanism; without it, the credit system cannot function.

The credit mechanism is:

A system of connections for the accumulation and attraction of monetary capital between different sectors of the economy and credit institutions.

Relations that operate within the framework of existing capital and are directly related to the redistribution of monetary capital between banks and credit institutions.

Relations between foreign clients and credit institutions.

The credit mechanism also includes all aspects of lending, investment, founding, intermediary, advisory, accumulation, redistribution activities of the credit system represented by its institutions.

Secondly, the credit system includes not only specialized financial and credit institutions, but also insurance companies and investment funds. They connect individual links of the credit system and significantly complement its activities.

In Russian and foreign literature there is no consensus regarding the concept of “credit system”:

The credit system is a set of various credit and financial institutions operating in the loan capital market and carrying out the accumulation and mobilization of money capital (E. F. Zhukov).

The credit system is a set of banks and other credit organizations that carry out credit relations.

Credit system - (in a broad sense) a set of credit relations, forms and methods of credit existing within a particular socio-economic formation; (in a narrow sense) a set of banks and other financial institutions that mobilize free cash capital and income and provide them on loan (L. M. Maksimova).

The essence and functions of credit are realized through the credit system. Credit is the movement of loan capital, which is lent out on the terms of repayment for a certain percentage. The loan performs the following functions:

accumulation and mobilization of monetary capital;

redistribution of monetary capital;

cost savings;

acceleration of concentration and centralization of capital;

regulation of the economy.

In the functional aspect, the credit system is represented by banking, consumer, commercial, government, and international credit. All these types of credit are characterized by specific forms of relationships and lending methods.

A commercial loan is provided by one operating enterprise to another in the form of the sale of goods with deferred payment. The instrument of such a loan is a bill of exchange paid through a commercial bank. As a rule, the object of commercial credit is commodity capital, which serves the circulation of industrial capital, the movement of goods from the sphere of production to the sphere of consumption. The peculiarity of commercial credit is that loan capital here merges with industrial capital. The main purpose of such a loan is to speed up the process of selling goods and the profit contained in them. The interest on a commercial loan, which is included in the price of the goods and the amount of the bill, is usually lower than on a bank loan. The size of a commercial loan is limited by the amount of reserve capital available to industrial and trading companies.

Bank credit is provided by banks and other financial institutions to legal entities (industrial, transport, trading companies), the population, the state, and foreign clients in the form of cash loans.

Currently, there are several forms of bank loans:

Consumer loans, as a rule, are provided by trading companies, banks and specialized financial institutions for the purchase of goods and services by the population in installments. Typically, durable goods (cars, refrigerators, furniture, household appliances) are sold with the help of such a loan.

A mortgage loan is issued for the purchase or construction of housing or the purchase of land. It is provided by banks (except investment banks) and specialized financial institutions. The loan is also issued in installments. The highest level of mortgage loans is in the USA, Canada, and England. The interest rate on the loan varies depending on the economic situation - from 15 to 30 or more.

State credit should be divided into state credit itself and state debt. In the first case, state credit institutions (banks and other financial institutions) lend to various sectors of the economy. In the second case, the state borrows funds from banks and other financial institutions in the capital market to finance the budget deficit and public debt. Moreover, in addition to credit institutions, government bonds are purchased by the population, legal entities, i.e. various enterprises and companies.

These relations are implemented and organized by specialized institutions that form the credit system in the second (institutional) sense. The leading link in the institutional structure of the credit system are banks. The credit system is a broader concept than the banking system, which includes only the totality of banks operating in the country.

Credit plays an important role in solving the problem of selling goods and services on the market. The large increase in consumer and housing mortgage lending to the population significantly expanded the market for durable consumer goods and played a significant role in the rapid development of the relevant industries and construction.

The modern credit system includes two basic concepts: a set of credit, settlement and payment relations that are based on certain, specific forms and methods of lending; a set of functioning financial institutions (banks, insurance companies, etc.). The first concept is usually associated with the movement of loan capital in the form of various forms of credit. The second means that the credit system, through its numerous institutions, accumulates free funds and directs them to enterprises, the population, and the government.

The credit system is based on the implementation of complex economic relations that have gone through a long historical path of development and play a consolidating role in the structure of all economic relationships during Russia’s transition to a market economy.

From the standpoint of the institutional approach, the credit system consists of several links, each of which performs specific functions for the accumulation and distribution of funds. The division of functions between units is objectively determined by differences in the methods and means of their activities and different roles. The organizational structure of the modern credit system is presented in Table 1.

Table 1 Organizational structure of the modern credit system

This system is typical of most industrialized countries. It is called four or three tier.

In the Russian Federation, the credit system consists of two levels: the first level - the Central Bank of the Russian Federation (Bank of Russia); second level - commercial banks and other financial and credit institutions carrying out individual banking operations, i.e. The second level includes banks and non-bank credit organizations.

The UK credit system includes three levels. The first is the country's central bank - the Bank of England. The second is the banking system. The third is specialized credit and financial institutions (non-banking).

Bank of England - one of the oldest central banks in the world. The reason for the emergence of this institution was the bankruptcy of the government in 1694 as a result of a half-century war with France. When the government found the treasury depleted and the country's population unwilling to buy government bonds after so many years of war and increased distrust of the government, it was forced to accept the Scottish financier's plan William Peterson. The plan called for the creation of a Bank of England, which would issue new banknotes and cover the budget deficit.

The bank was founded in 1694 by Act of Parliament as a private limited company as the Bank of England. He received the privilege of holding government deposits and issuing new securities to pay off government debt. The Bank's capital represented the country's first public debt. It was created not as a central bank of the state, but as a commercial credit institution that carried out operations on behalf of the royal court. Closer to the middle of the 18th century. it began to perform a number of central bank functions.

The Bank of England immediately issued new money in the amount of 760 thousand pounds sterling, which was used to pay off the debt. This caused a surge in inflation, and within two years the Bank was completely insolvent, which gave certain advantages to private jewelers. Bank of England notes could be freely exchanged for circulating metal coins.

With the adoption of the Banking Act of 1844, the Bank of England legally received monopoly right to issue banknotes. Other notes that were in circulation were gradually withdrawn and replaced by new ones issued by the Bank of England. Thus, the Bank of England officially received the status of a central bank.

In 1946, Labor carried out nationalization of the Bank, which placed it in the category of “public corporations.” The share capital was transferred to the treasury, and its former owners received compensation in the form of government bonds, which were 4 times the nominal value of the shares.

The activities of the Bank of England are regulated by the Law adopted in 1946. Bank of England Act. The bank has formal independence from the government, although it operates under the direction of the Ministry of Finance.

The numerous functions performed by the Bank of England can be divided into two groups:

• direct professional responsibilities arising from banking status (deposit and loan, settlement and issue operations);
• control functions through which the state intervenes in the monetary system, trying to influence the course of economic processes.

The Bank of England provides a number of services to its clients, among which the most important are activities related to:

• commercial banks - all clearing banks have accounts with the Bank of England. Clearing operations use clearing bank accounts with the Bank of England. Banks are required to have a certain amount in the account and are not allowed to exceed it. (All banks operating in the UK maintain 0.35% of the amount of all their deposits in the Bank of England account (deposit).) This reserve rate provides the main source of income for the Bank of England;
• central banks of other countries - they have accounts and hold gold in the Bank of England and can conduct business in London through this Bank;
• government - it has accounts in the Bank of England; payments, taxes to the budget and payments from the budget for social needs pass through the accounts of the Bank of England.

Thus, the Bank of England performs the following main Features:

• serves as a bank for national commercial banks and for most foreign central banks that maintain accounts there; through accounting houses, he also acts as a lender of last resort for the entire credit and banking system of the country;
• is the bank of the government, all government revenues and expenses are processed through it;
• carries out the issue of banknotes (change coins are issued by the mint);
• serves government credit operations: issue and repayment of treasury bills, issue and placement of bond issues of the government and nationalized corporations, payment of interest on them, etc.;
• carries out currency control, on behalf of the Treasury, conducts operations to manage the country's official gold and foreign exchange reserves, which are concentrated in the Equalization Currency Fund; sells and buys foreign currency for external commercial transactions, as well as for the purpose of maintaining the exchange rate of the pound sterling against other currencies;
• advises the government on monetary policy issues and is its conductor in the money market.

All functions of the Bank of England are aimed at achieving three main goals:

• maintaining the value of the national currency, mainly through market operations agreed with the government;
• ensuring the stability of the financial system through direct control over banks and participants in the City’s financial markets and ensuring a stable and efficient payment system;
• increasing the efficiency and competitiveness of the financial system within the country and strengthening the position of

The City of London as a leading international financial centre.

The governance and accountability structure of the Bank of England is set out in Bank of England Act 1998 Banking act In 2009 it was partially changed. The Bank of England is governed by a board of directors. Members of the board of directors are appointed by the Queen for a five-year period. Until June 2009, the board of directors consisted of the Governor (currently Mervyn King) two deputy governors (Deputy Governors) and 16 board members (Directors), appointed for a three-year period. The 2009 act provides for a reduction in the number of council members to nine. All members of the board are non-executives of the company. One of them is appointed Chancellor of the Exchequer.

The Bank cooperates with a number of other institutions to ensure both monetary and financial stability:

• UK Treasury (HM Treasury);
• UK Financial Services Authority;
• other central banks and international organizations in order to improve the international financial system.

One of the strategic priorities of the Bank of England's monetary policy is to reduce inflation to the previously planned 2%. In addition, as part of the fight against the global financial crisis, the Bank of England took other measures - it placed three-year bonds worth $2 billion to increase the country's gold and foreign exchange reserves.