Return on equity as a parameter of an effective bank management system
The management of capital is an important andnecessary component of the management system of the bank or the enterprise as a whole, ensuring the stability of their work in the current market conditions. The model of capital management is a set of elements that include principles and management methods aimed at the formation of the optimal size and structure of capital, its efficient use, and where the main criterion is the return on equity.
The principles on which any such model is based are as follows:
- the level of involvement in the overall management system;
- the systemic nature of decision-making;
- Flexibility, adaptability and dynamism of management;
- plurality of management models;
- focus on the most important tasks of the development of an institution or enterprise;
- legal protection;
- management optimization, in which the return on equity becomes the main criterion for its effectiveness.
At the current stage of the development of the economy, the mainthe purpose of capital management is the profitability of the bank's own capital and ensuring financial stability and security in the long-term, taking into account the maximization of its market value.
Achieving this implies:
- withdrawal of the bank to the mode of operation, when the net profitability of equity and structure, will reach optimal parameters;
- distribution of formed capital by types of use;
- Creation of an environment for reaching the optimal return on equity, achieving maximum profitability with the expected level of risk;
- reduction of threats to financial risks at the planned level of its profitability;
- ensuring the financial balance of the bank;
- the necessary level of control by the founders;
- providing flexibility of management;
- bringing the indicators of capital turnover in line with what is the return on equity;
- timely reinvestment of the company's capital.
The control system includes the following subsystems:
- management of own capital, formed both from internal and external sources;
- management of borrowed capital, attracted using such internal sources as contributions of participants, issue of shares, etc .;
- organization of work with borrowed capital (bank, commodity loans, bond issue, etc.);
- structure optimization.
Management of the bank's capital is based onstrategy and tactics of management. The strategy can be presented in the form of the main line of the bank's activities in order to achieve the set goals. The strategy of capital management should not contradict the general development strategy of the bank itself, as it is its component. The definition of a capital management strategy should be implemented taking into account the specifics of its formation and use, environmental conditions, as well as the purposes and directions of the bank's activities. Therefore, the strategy of capital management should be aimed at improving the basic indicators that characterize the effectiveness of the formation and functioning of capital, and contribute to strengthening financial sustainability.
Management tactics involve the use of specific methods and techniques to achieve a goal in a specific situation, at a certain point in time.
Capital management involves the use of two groups of tools:
1. External instruments are a set of certain levers at the macro level, which influence the processes of formation and use of capital at the micro level (state regulation of banks' activity, asset market, currency regulation, availability of credit resources).
2. Internal management tools that are aimed at improving the efficiency of use by optimizing the internal factors of the bank's development, identifying hidden opportunities and reserves (the strategy of capital formation and the target financial policy, the method of choosing the optimal source of financing, the system of internal standards for certain aspects of capital formation, etc.) .
Thus, the management of capitalprovides for the search for and adoption of decisions that guarantee the specified efficiency of its use, by influencing the magnitude, return on equity, the structure and sources of capital formation. At the same time, the mechanism of capital management provides: the definition of goals and objectives of management, control over their implementation; development of strategy and tactics of money management; use of modern methods and models in the management process; timely analysis of the efficiency of the use of capital and the optimization of its management.