NON-DEPOSIT POTENTIAL OF BANKS AS A DEVELOPMENT FACTOR OF MODERN BANKING INSTITUTIONS

Abstract

This paper analyzes the non-deposit potential of banks. Although the main source of funding for banks and their competitors, savings banks, is yet a deposit, today almost all depository institutions complement to attract funds through the sale of non-deposit borrowings with deposits of money on capital markets. Non-deposit potential makes 15 - 20% of the total financial resources of modern banks. Non-deposit bank funds are additional funds established institutional channels or additional bank activity, whose importance is increasing as a result of the increasing share of non-deposit relative to deposit funding sources. The importance of these resources in the last 50 years has significantly increased. It shows an example of the United States, where the share of non-deposit sources increased from 10% to 30% in the 1990s. Non-deposit sources often appear as more expensive form of financing smaller banks, while bigger banks may under favorable conditions to adjust the prices, because they substitute sources of liquidity reserves with non-deposit sources and meet the demand for loans. Due to its share in total banking sources, a non-deposit sources represent additional banking resources, which enable bank management to effectively respond to the occasional increasing demand for bank loans. Most of these funds are an extremely passive position of the bank which is forced to accept the market rate, to provide additional funds to cover the unexpected demand for banking resources.