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Journal section "Critical economic issues"

Investments of Banks in Securities: the Essence and Development Trends under Current Conditions

Mazikova E.V., Yumanova N.N.

6 (42), 2015

Mazikova E.V., Yumanova N.N. Investments of Banks in Securities: the Essence and Development Trends under Current Conditions. Economic and Social Changes: Facts, Trends, Forecast, 2015, no. 6 (42), pp. 185-202. DOI: 10.15838/esc/2015.6.42.11

DOI: 10.15838/esc/2015.6.42.11

Abstract   |   Authors   |   References
The implementation of modern banking activities involves the realization of investments. Investment is a complex discussion economic category, characterized by a number of features. The types and forms of investment are manifold and can be transformed with account of the state of the economy and the level of development of industrial relations. The faster growth of the financial sector in the economy has stipulated the development of financial investment. Banks as financial and lending institutions actively make financial investments in securities. Banks’ investment in securities pursues a number of purposes which determine the selection of securities for investment and their quality. The article identified the targets of bank investments in securities and their development trends under current conditions on the basis of the analysis of the actual data for 2010–2014. Negative revaluation and the actual decrease in the value of corporate securities of Russian issuers reduce their commercial appeal. Banks refuse to speculate on the stock market in favor of the securities that ensure liquidity. Banks’ investments aim to purchasing securities from the Lombard List of the Bank of Russia in order to obtain loans and participate in the repo transactions. Thus, during the analyzed period, banks’ investments in securities transformed from systemically important assets that generate substantial profit into the mechanism that provides liquidity. It should be noted that a significant part of investment resources of Russian banks services the debt obligations of Russia’s Government. The article also identified a trend of banks’ increasing investment in the participation portfolios of subsidiaries and associated joint stock companies. The official data of the Central Bank of the Russian Federation (Bank of Russia) [15], and the Federal State Statistics Service [14] were used as the information base for the study

Keywords

investments, securities, commercial banks’ investments in securities, debt obligations, lombard list, bank liquidity, earnings, shares of subsidiaries and associated companies

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