The Original and Modern Essence of a Bank

Abstract

The peculiarity of the modern stage of economic science development is that many of its issues appear to be considered just logically, with neglect towards significant aspects. Among such issues is the question of the nature of a bank and the banking system, which are most frequently defined simply as credit institutions. The present article argues the thesis that banks and the banking system in general, despite fulfilling the credit function, are not in essence credit institutions. The essence of banks and the banking system is conditioned by their adhering to the monetary system of the country. In the course of the monetary system genesis, the banking system underwent transformation. Without understanding this natural relation, it is impossible to identify the essence of banks and the banking system, or to solve practical tasks of economic development. The methods of scientific abstraction, natural sequence, deduction and others were used in the study. As a result, it was concluded that the essence of banks and the banking system is that in the modern monetary system conditions, they are the functioning legal medium of the volume of monetary units. Keywords—money; monetary system; banks; banking system; bank functions; credit; borrowing and settlement