Banks

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Banks

1. Iain (Menzies). born 1954, Scottish novelist and science fiction writer. His novels include The Wasp Factory (1984), The Crow Road (1992), and Dead Air (2002); science-fiction (under the name Iain M Banks) includes Look to Windward (2000)
2. Sir Joseph. 1743--1820, British botanist and explorer: circumnavigated the world with James Cook (1768--71)

Banks

 

special economic institutions that accumulate money and savings, grant credit, handle monetary payments, put certain types of money into circulation, issue securities and deal in them, and perform other functions. Banks arise in society on the basis of commodity-monetary relations. The socioeconomic role of banks is determined by the specific nature of the corresponding social systems.

The rudiments of banking existed in slave-owning and feudal societies. Money changers and also persons to whom moneys in the form of precious metals had been entrusted for safekeeping loaned out these moneys for interest. Usurious credit reached a significant stage of development, and usurious monetary capital historically was one of the first forms of capital.

In the Middle Ages, banking developed first of all in the commercial-industrial cities of northern Italy. The terms “bank” and “banker” derive from the Italian word banco meaning “table.” The moneychangers and usurers carried out their transactions from behind a table. Subsequently, the growth and evolution of banks in Western Europe occurred in close relationship to the development of capitalism. Many methods of capitalist banking were most fully developed in England, which was the most advanced capitalist nation in the 18th and 19th centuries. Banks began to attract large amounts of money from the industrial and merchant capitalists, the profits of rentiers, and so forth. Bankers moved from granting loans in metallic moneys to crediting the capitalists and other borrowers with the bank’s own debt obligations (bank notes) and by crediting money to the current account of the customer. Banks developed as separate capitalist enterprises organizing the movement of loan capital. The extraction of profit is the basic goal of their activity. In many instances they have become joint-stock companies, a change which has sharply expanded the possibilities of their growth.

With the development of capitalism, the necessity for institutions offering the services of arranging credit and payments has continuously grown. The banks take in free monetary capital and loan out this money for various terms. They keep the current accounts of the enterprises and handle the payments between them. These operations had grown to a large scale even under premonopolistic capitalism, and to a significant degree contributed to the development of its productive forces. Gradually the largest banks emerged from the numerous smaller ones. The concentration of banks became particularly intensified in the era of monopolistic capitalism, that is, imperialism. Underlying this concentration was the concentration of production and capital in industry. At the same time, the amalgamation of the banks in turn had an effect on industry and all spheres of entrepreneurial activity, by contributing to the consolidation of enterprises and to the development and growth of monopolies. The concentration of banks has grown both as a result of the particularly intensive accumulation of capital and the growth of large banks and through mergers and absorptions of some banks by others. At present, in a number of capitalist nations, the number of banks runs into scores and even hundreds, but in fact the transactions are predominantly concentrated in the hands of a few banking monopolies. Moreover, the multiplicity of small banks depends to the greatest degree upon a few giants. In the various nations, the largest banks have numerous branches scattered across the nation and often overseas. In Britain, for many years, five giant deposit banks (the so-called Big Five) have been of decisive significance in the banking system; in 1968 as a result of mergers their number was reduced to four. In West Germany, three so-called Grossbanken play the basic role. In the United States, in 1968, there were more than 14,000 formally independent banks, but the ten largest commercial banks handled about one-quarter of all transactions.

The concentration and monopolization in industry and banking significantly changed the role of banks. The banks have moved from the episodic crediting of individual enterprises and the handling of payments between them to systematic crediting of definite sectors and enterprises, and particularly to providing long-term loans (up to eight to ten years) for investing in fixed capital. The banks have developed particularly close ties with industry on the basis of the banks’ issuing and underwriting operations, that is, the bank’s issuing and placement on the market of securities (stocks and bonds) of industry, transport, commercial, and other joint-stock companies. The banks hold large portfolios of securities of such companies. The so-called trust banking operations have also grown more important; in these the banks themselves “under trust” handle the customers’ money, converting this money mainly into securities. These operations are not reflected on the bank’s balance sheets. They serve as an important channel for bank ties with industrial companies. All of this strengthens the position of the banks and leads to their becoming the most important structural element and support of financial capital. Major banks frequently stand in the center of monopolistic financial groupings that unite by more or less close ties a number of financial and industrial companies under the control of a financial oligarchy. For example, the Morgan Guaranty Trust Company, the Bankers Trust Company, and Morgan, Stanley and Company are at the center of the Morgan group in the United States.

In describing the new role of banks in the era of monopolistic capitalism, V. I. Lenin wrote: “As banking develops and is concentrated in a few institutions, banks grow from the humble role of middlemen into omnipotent monopolists who have control over virtually all the monetary capital of the entire aggregate of capitalists and small proprietors, as well as over a large proportion of the means of production and raw material sources in a given nation and a whole number of nations” (Poln. sobr. soch., 5th ed., vol. 27, p. 326). The specific forms of the ties and interlocking of the banking and industrial monopolies have developed and changed. They have taken on particular features in individual nations. However, the main features and patterns of financial capital remain universal.

The role of the state in the banking system became stronger particularly after the world economic crisis of 1929–1933. The bourgeois states have used banks and credit in their attempts to regulate and stimulate the economy. Extensive development of state ownership in the banking sphere has occurred, including the nationalization of the central issue and major commercial banks, the creation of new special state banks, particularly for financing certain sectors of the economy, and so forth. Both the state and the private banks are important sources for financing the governments, and particularly their military outlays. In all the capitalist nations, there are involved systems for regulating the banks and supervising them on behalf of the state. All these processes reflect the exacerbation of capitalism’s contradictions and the search by the ruling classes for a way out of the system’s growing difficulties.

In the developing nations, banks have many special features; in the nations that are characterized by an anti-capitalist orientation in their development, the banks have assumed fundamentally new features. Previously the banking monopolies of the imperialist states held sway in these countries. Now, in a number of states, private national banking capital has developed. However, the most important process is the concentration of the banks in the hands of the state. Under certain conditions this concentration makes it possible to use them in developing the national economy. The most radical changes occurred in the 1960’s in the banking systems of Burma, the UAR, Syria, and certain other countries, where a democratic nationalization of the foreign and private banks was carried out and where their activities were focused on financing the key sectors of the national economy and particularly the state sector. In the young independent states, the role of banks depends greatly upon the nature of the state system.

Basic types of banks and their operations. In a capitalist economy, there is a complex banking system at work, as well as related types of financial credit institutions such as insurance, investment and financial companies, savings and construction funds, and pension funds. In their aggregate they form the credit system. In terms of their functions and character, the banks themselves can be divided into the following types: central issue banks, commercial (deposit) banks, investment banks, savings banks, and special-purpose banks (mortgage, agricultural, foreign trade, and so forth). In terms of the form of ownership, banks can be divided into joint-stock banks, banking houses (non-joint-stock), cooperative banks (in the United States, mutual banks), municipal and communal banks, state banks, mixed banks with state participation, and intergovernmental banks.

The central issue banks (the Federal Reserve System in the United States) supervise the entire credit system and are used to carry out the state’s credit and monetary policy. The central issue banks hold the temporarily free or obligatory reserves of other banks, issue cash in the form of bank notes, and provide credit predominantly for the state and commercial banks. The investment banks (in England, banking houses; in France, banques d’affaires) are basically engaged in issue underwriting operations and handle the buying and selling of securities. Commercial banks, the most universal type of banks, are engaged in a broad range of operations. However, their specific functions are the receiving of deposits, the granting of loans, and the handling of payments. These banks, as a rule, constitute the backbone of the entire banking and credit system of a nation. In the postwar period, international banks, particularly the International Bank for Reconstruction and Development, the Bank for International Settlements, and the European Investment Bank, have come to play a significant role in the capitalist world.

Banking operations are divided into passive and active. Passive operations are those by which the banks form reserves for crediting, while active operations are those by which the banks use these resources for the purpose of extracting a profit (extending loans, purchasing securities, and so forth). Deposits are divided into time (or savings) deposits and current accounts. Time deposits cannot be withdrawn without notification, and they must be held until a certain date in order to collect interest. Ordinarily, clearing transactions are not made with them. Current accounts are used for clearings using checks or payment authorizations, and withdrawals can be made without notification. Banks pay a lower interest or no interest at all on current accounts. The clearing system is of extremely important significance for the functioning of the capitalist economy. The volume of clearing transactions and the uniformity of technical operations impel and make possible the wide use of mechanization and automation of the operations. Electronic computer equipment is being introduced more and more widely in the large banks. For example, while in 1962 electronic computers were used by 116 American banks, in mid-1967 the figure was 943 banks.

Banks offer all types of loans in terms of periods, the character of collateral, and the type of borrower, and they also acquire and hold state and private securities. The relationship between the passive and active operations of the banks is complex and unique. On the one hand, a loan is extended using monetary capital collected by passive operations. On the other hand, the banking system possesses the ability to “create deposits” by transferring the amount of the loan to the account of the customers. This possibility is restricted by objective economic factors, as well as by the necessity of maintaining bank liquidity, and in particular by the obligation to keep a portion of the funds on accounts with the central bank. The possibilities, limits, and consequences of credit expansion for banks are a major problem in banking and credit theory, as well as in practical activities and state policy in the capitalist nations. Without doubt, banks can contribute greatly to an excessive swelling of credit during a phase of a cyclical economic upswing and can accelerate inflation by their credit expansion.

The economic role of capitalist banks. Banks provide for the transfer of monetary capital from those spheres of the economy and society where it accumulates into those spheres where it is used. Because of banks, a spontaneous mechanism acts for the distribution of capital through the spheres and sectors of production, and a certain equalizing of the rate of profit occurs. Banks play an important role in saving social distribution outlays and in rationalizing all the processes involved in the circulation of commodities and capital. The functioning of banks is closely tied to monetary circulation. Banks continue to be centers of economic life and to play a prominent role in the processes of the centralization and concentration of capital, as well as in the development of the monopolistic structure of the economy. Banks and the credit system as a whole make it possible for the financial oligarchy to assume control of not only the capital of rentiers and the temporarily free monetary capital of enterprises but also the savings and gradually spent income of all strata of the population. Banks concentrate in their hands the payments between enterprises and to a large degree the payments between entrepreneurs and consumers.

In intensifying the socialization of production and at the same time contributing to the concentration of control of society’s wealth in the hands of a narrow group of monopolists, banks exacerbate the contradictions of capitalism. This role of theirs is most clearly demonstrated in the fact that they intensify the economic crises of overproduction. In crediting capital investments and an expanding of products, banks intensify overproduction and an excess of production beyond the limits of effective demand. In the course of the crisis itself, the banks can exacerbate it, as they curtail loans and raise the interest rate. The frequent bankruptcies of banks particularly intensify the crisis. On the other hand, banks play a most important role in carrying out state monopolistic measures aimed at attenuating the cyclical nature of a capitalist economy.

Banks and credit serve as one of the important factors for creating the material prerequisites for a transition to socialism within the very heart of capitalism. This was pointed out repeatedly by K. Marx and V. I. Lenin. Marx wrote that the banking system, in its formal organization and centralization, “represents the most refined and perfect creation to which the capitalist method of production leads generally .... In the banking system, of course, a form, but only a form, of social accounting and distribution of the means of production on a social scale is given” (K. Marx and F. Engels, Soch., 2nd ed., vol. 25, part 2, p. 156). However, in terms of their content, this general accounting and the distribution are private capitalist ones and serve the goals of increasing the profits of the bourgeosie.

Within capitalism, no banking system can transform the method of production and actually organize the planned distribution of the means of production in the interests and on the scale of the entire society. The banking system created by capitalism is used by a socialist state for developing the productive forces and building socialism.

A. V. ANIKIN

The banks of the socialist nations service monetary circulation and credit relationships in the socialist economy, as well as providing accounting and control over the economic-financial activities of the state and cooperative enterprises.

The founders of scientific communism criticized the various sorts of petit bourgeois reactionary “theories” concerning the socialist transformation of society by merely changing the credit system. Marx wrote that “the credit system will serve as a powerful lever during the transition from the capitalist method of production to a production method of associated labor, but only as an element related to the other great organic changes in the very method of production” (ibid., p. 157). The use of banks as levers of socialist transformation in a society is possible only through socializing production by the dictatorship of the proletariat and by creating socialist production relations. The process of establishing a new economic system includes not only the socialist socialization of production but also the creation of a socialist system for the distribution and exchange of social product. This system would include, in particular, the banks and the apparatus of accounting and distribution.

The programmatic positions of Marx and Engels concerning the use of banks by the socialist state were developed creatively by V. I. Lenin in consideration of the new historical conditions and on the basis of the practices of the Great October Socialist Revolution.

In defining the main direction in the work of banks after the socialist revolution, Lenin wrote: “Banking policy, without being limited to the nationalization of the banks, should gradually but constantly be directed toward converting the banks into a unified apparatus of accounting and regulating the socialistically organized economic life of the entire nation as a whole” (Poln. sobr. soch., 5th ed., vol. 36, p. 220).

Lenin’s plan for the socialist transformation of the banks included, in addition to nationalizing the capitalist banks, the following basic elements: unification of the nationalized banks into a single nationwide state bank, an increase in the network of its affiliates and their spread across the entire nation, the democratization of banking affairs, the concentration of all monetary circulation in the nation in the hands of the state bank, and the development of clearing transactions through the banks. Lenin pointed out that only a state monopoly of banking made it possible for the socialist state to direct and control the work of the banks in accord with the tasks of planned economic development and a steady growth in the prosperity of the people. With a banking monopoly it was possible to use the banks as a means for controlling the course of fulfillment of the national economic plan as well as for strengthening the alliance between the working class and the peasantry. Without large banks as part of the socialist state apparatus, socialism would be unfeasible.

Lenin’s theories about banks as an apparatus of accounting of, and control over, the economic activities of socialist enterprises are valid for all socialist nations. The dictatorship of the proletariat uses banks, turning them into one of the powerful levers for building socialism. Under socialism, banks differ fundamentally from capitalist banks and have a decisive advantage over them. Credit investments of the banks have a productive and socially useful character. They are used for developing the economy and for raising the standard of living of the people. All the funds accumulated by the banks go to develop production, as well as into the sphere of distribution and circulation. Here, fictitious values cannot serve as an object of credit. The income from banking operations is used for the needs of the national economy and the population. Banks are not subject to monetary-credit crises, since the socialist economic system excludes the possibility of their occurrence. The volume of credit, payment, and cash operations of the banks grows in accord with the continuous growth of production and circulation, contributing to the rapid rate of expanded socialist reproduction.

Because banks are a means for the redistribution of money, they in a planned way organize and concentrate the state funds for crediting the national economy; provide the direct, special, and repayable (short-term and long-term) crediting of the economy; grant loans to the population for consumer needs; and provide free financing of capital construction using the state budget and special-purpose funds. Through banks, the socialist states provide credit to other nations of the socialist community and give credit help to the developing nations that have thrown off the yoke of colonialism.

In fulfilling the function of clearing centers of the socialist economy, the banks organize and carry out clearing operations between enterprises for material commodities and services and also handle the payments of enterprises to the financial and banking system. Banks handle payments arising out of foreign trade and other economic interrelationships with foreign states.

The single issue bank of a socialist state (such as the USSR State Bank) provides the emission and cash services for the socialist economy and the population as well as the planned day-by-day regulation of monetary circulation. The bank centralizes, holds, and uses foreign exchange funds.

Banks provide economic incentives and control over the economic and financial activities of socialist enterprises, as well as over the course of economic plan fulfillment. Bank control is one of the important forms of state control over enterprise operations.

Since all the monetary circulation of the national economy passes through the banks, they fulfill the role of a statewide system of accounting and bookkeeping for the socialist economy. In keeping the accounts of the enterprises and organizations and in providing their payment and cash services, the banks help to safeguard the money in the national economy and to save this money.

By the aid of credit and through the payment and cash services extended to kolkhozes, banks help to strengthen the economic alliance between the working class and the peasantry and between the state and cooperative sectors of socialist production. Banks provide help to the kolkhozes in compiling their production and financial plans, in organizing accounting and reporting, and in systematizing their financial system.

Banks contribute to a further strengthening of economic collaboration and mutual aid between the socialist nations by providing credit, payment, and foreign exchange services for the foreign trade and other relations between these nations.

As a rule, the reconstruction and development of banks for the world socialist system have had common characteristic features. The basic features are the elimination of surplus elements in the banking system and the organizing of this system along functional lines; the transition from commercial credit to direct bank crediting of the enterprises; the concentration of short-term crediting, payments, and cash-issue services for the national economy in a statewide central bank; the organization of clearings of intercompany accounts; the providing of credit planning and monetary circulation planning; and the organization of economic control over the production and financial activities of the enterprises through credit, payment, and cash operations.

At the same time, each socialist nation shows inherent characteristic differences in the structure of the banks, in the methods of crediting, payments, and cash services for the economy, and in credit and cash planning, as well as in bank control over enterprise operations.

The USSR banking system. The USSR State Bank is the basic element in the Soviet banking system. This bank is the only cash emission, credit, and clearing center of the nation. In 1968 the network of State Bank institutions consisted of 4,115 branches and divisions and 76,548 savings banks. The State Bank provides all short-term crediting for the national economy (except construction organizations), as well as financing and long-term crediting of the state agricultural organizations and long-term crediting for the kolkhozes and other types of cooperatives. The total credit investments of the State Bank at the beginning of 1969 were 98.4 billion rubles, including 88.9 billion rubles in short-term credits, or more than 90 percent, and 9.5 billion rubles in long-term credits, or less than 10 percent.

The State Bank also provides clearing services for the national economy. The payment clearing turnover passing through the State Bank was around 1.25 trillion rubles in 1968.

The State Bank provides credit and cash planning. The compiling and fulfillment of the credit plan are carried out on the basis of the national economic plan and its fulfillment. In turn, the credit plan is used for bringing active pressure to bear on the progress of fulfilling the national economic plan, as well as for detecting and mobilizing additional internal resources in the economy. The State Bank’s cash plan determines the amounts of its monetary turnover.

The State Bank concentrates and builds up the nation’s foreign exchange (in the form of precious metals and foreign currencies), and it carries out payment relating to foreign trade and other economic relations between the USSR and foreign states. The State Bank provides economic incentives and exercises ruble control over the economic and financial activities of enterprises. The effectiveness of this control is achieved by a differentiated approach to the enterprises by providing material incentive for the effectively operating enterprises in the form of preferential crediting, whereas poorly operating enterprises are penalized, or converted to special crediting conditions.

Through the network of savings banks, the State Bank accepts and holds the wage savings of the population in the form of various deposits and also provides services for the population in transactions relating to state loans and clearing operations (it transfers money from depositor accounts to pay for public utilities and so forth). Interest (or prizes) are paid by savings banks on deposits that are refundable upon the first request of their depositors. The total deposits of the population in 1969 were 32.4 billion rubles, an increase of 17.5 times in comparison with 1950. The average balance in 1968 reached 473 rubles; this was an increase of almost 3½ times over the 1950 level. The increase in deposits shows a significant rise in the prosperity of the workers.

The AU-Union Bank for Capital Investment Financing, or Stroibank, is the second element of the USSR credit system. This bank serves capital construction in all sectors of the national economy except agriculture (bank servicing of the latter is carried out by the State Bank). The Stroibank holds funds that are especially allocated by the economic bodies and the budget for carrying out the capital investment plan. Using these funds, the Stroibank provides free financing for capital construction through long-term credit for capital construction, reconstruction, and repairs, as well as short-term credit for the construction organizations to form working funds. In 1968 the network of the Stroibank consisted of 457 offices and divisions and 517 representative points (under the State Bank).

The USSR Foreign Trade Bank (Vneshtorgbank) credits Soviet foreign trade, handles foreign exchange operations, and transacts payment operations for the importing and exporting of commodities and the rendering of services.

Banking system of other socialist nations. The experience of the USSR in creating the socialist banking system has been used creatively by the other socialist countries to accommodate their specific conditions. In certain countries (Mongolia, Cuba, and Albania), bank servicing of the entire economy, including the country’s foreign economic relations, has been concentrated in a single state (national) bank. In the Republic of Cuba, the National Bank has been combined with the financial bodies and fulfills the functions not only of the banking system but also of the state financial system. This situation is due to the fact that a significant proportion of the industrial enterprises is on so-called semiestimate financing, with the National Bank providing free financing from the state budget.

In China, bank services for the economy are provided by a single statewide bank (the People’s Bank), but special banks have been set up for the foreign trade of the nation.

In Hungary, North Vietnam, East Germany, North Korea, Rumania, and Czechoslovakia, as in the USSR, banks aside from the general state banks have been instituted for foreign trade and capital investments (construction or investment). In East Germany, Bulgaria, and Poland, there are also specialized banks for serving agriculture (the German Peasant Bank in East Germany, the Bulgarian Industrial Bank and the Bulgarian Agrarian and Trade Bank in Bulgaria, and the Agricultural Bank in Poland).

In some socialist nations (North Vietnam, East Germany, Yugoslavia, and Poland), a credit cooperative is used for serving the privately owned peasant farms. Credit cooperatives are particularly widely used in Poland. In East Germany, along with the agricultural credit cooperative (the peasant commercial credit cooperatives), a special form of credit cooperative is used for serving the cooperatives of artisans and trades workers. These are the so-called artisan-trades banks, which are member-owned societies of artisans. The savings banks that serve the population in the USSR, Mongolia, Czechoslovakia, Cuba, Albania, and China are part of the central state (national or people’s) bank system. In the other socialist nations, the savings banks are an independent system under the nation’s ministry of finances. In Hungary, East Germany, and Rumania, the savings banks, in addition to the usual operations, offer loans to the population for housing construction and consumer credit.

The credit system of Yugoslavia differs substantially in terms of its organizational structure and operating methods. It consists of the statewide People’s Bank of Yugoslavia, business banks, savings banks, and a credit cooperative. The People’s Bank, as a rule, provides credit, clearing, and cash services not directly for the economic organizations but rather for the business banks. The latter are economic bodies established by enterprises and sociopolitical organizations (by a federation, by the republics, and by the municipalities) on shareholder principles. The business banks (there were more than 170 of them in 1968) are divided into investment and commercial. Commercial crediting is allowed on transactions between enterprises. One of the special features of the Yugoslavian credit system is the wide use of loan interest as a regulator of credit investments.

Expanding the role of bank credit. Under the conditions of the economic reforms that were carried out in the middle of the 1960’s in the USSR and the other socialist nations, the process of concentrating the state funds for long-term and short-term crediting of the national economy within the system of the State Bank has been intensified. The limits of bank crediting have been significantly broadened, and the methods of credit and payment services for the economy have been improved. Credit is being more actively used as a tool for encouraging production and for ruble control. This has increased the role of bank credit in the socialist economy. The strengthening of the enterprises’ own financial base makes it possible to increase the state loan funds by having the banks accumulate the money left at the disposal of the enterprises.

In the USSR, bank credit has been expanded primarily by crediting capital investments. At the present stage of communist construction, bank credit, along with the funds of the state budget, is becoming one of the main sources for providing capital investments with monetary resources. The free budget financing of capital works to expand and reconstruct operating enterprises is giving way to long-term crediting. Those new enterprises for which capital investment can be paid back within five years after the enterprise is put into operation are being built using bank credit and the industry’s own funds (the latter as anticipated in the financial plan in accord with the centralized plan). The transition from budget financing to long-term crediting of the designated projects should encourage the faster completion of new capacity and the economically effective use of funds for capital investments, since the credit method envisages their full reimbursement within the planned time.

Banking credit is being granted on a significantly larger scale than before the economic reform, in order to introduce new technologies, provide mechanization, improve and expand production, cover expenditures related to the output of new products, and carry out measures to improve quality, dependability, and durability of the products. The limits of bank crediting of working funds are also being broadened, primarily by a further extension of crediting for fixed (normed) production expenditures in the nonseasonal sectors of industry. In this way the credit ties of the State Bank with the leading economic sector, heavy industry, are strengthened.

A new feature in the credit relations of the State Bank with industry is the method of financing working capital; instead of the former practice of budget financing for a shortage of internal working capital, a bank credit of up to two years is provided.

In spite of the diversity of the specific changes in bank work—changes resulting from the economic reforms in the various socialist nations—these changes have the following basic features: (1) an increase in the role of bank credit in the expanded reproduction of fixed funds by changing from budget financing to bank crediting for part of the capital investments, chiefly for the reconstruction and expansion of operating enterprises and the construction (when its cost can be quickly repaid) of new enterprises; (2) a further broadening of bank crediting limits for working funds; (3) a strengthening of crediting for agriculture, in particular for measures to intensify agricultural production; (4) the development of progressive crediting methods making it possible for bank credit to provide the money for continuous expanded socialist reproduction in all its stages. At the same time, bank credit is gaining great flexibility, elasticity, and maneuverability. Credit and loan interest are being more actively used as important levers of material incentive and economic pressure on the enterprises for the purpose of raising the efficiency of social production. The principle of democratic centralism is being developed in banking, and in particular, the rights of the lower level banking institutions are being broadened in the area of credit planning and maneuvering.

At the same time, bureaucratic elements are being overcome in bank control over enterprise operations, and economic methods of bank control are being developed as widely as possible in the process of credit, payment, and cash servicing of the economy. The level of bank economic work is being increased, and the scientific soundness of credit and monetary circulation planning is being improved. The changes made in the work of the banks are organically related to all the elements of the economic reforms being carried out in the USSR and a number of other socialist nations. Also related are such changes as the conversion of the enterprises to full economic accountability, the revision of wholesale prices, and the establishment of the new procedure of economic production planning, profit distribution, enterprise payments to the state budget, and working funds formation. All of this has been carried out in the USSR in accord with the decisions of the September (1965) plenum of the CPSU Central Committee and the 23rd CPSU congress. Banking must contribute to the better utilization of money, credit, and loan interest for encouraging greater efficiency in social production.

The banking system plays an important role in expanding the economic collaboration of the socialist nations. In the first development stage of the world socialist system, collaboration between banks was expressed in credit, payment, and foreign exchange ties, as well as in mutual aid and the exchange of experience in banking matters. At the present stage, a new and higher form of interbank collaboration has appeared. On Jan. 1, 1964, the International Bank for Economic Collaboration (MBES) began operating in Moscow. This bank was established by the socialist countries, the members of COMECON. By providing credit, payment, deposit, and foreign exchange operations, the MBES contributes to a further broadening of economic ties between the socialist nations.

M. S. ATLAS

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