How money moves between banks

[Brother]

I always thought that when transferring money between different banks, there is a truckload of cash at some point in time. It didn’t fit in my head how money teleported from one bank to another. Not very well now, but I already know something.

I apologize in advance if among my subscribers there are those who understand banking, today's topic is not for you. By the way, if there are comments and corrections on the above, I beg you not to keep to yourself, but to express all this to me directly to Telegram . Everyone would benefit from this: you get an increase in HR, I get a valuable lesson, and the rest of your subscribers get better information as a result.

And for the rest, today I will begin to talk about how banks actually transfer money among themselves. As far as I know, not many people understand this process. This does not quite apply to the technologies that we are talking about on our channel, but it is both necessary and interesting to understand this.

Trivial case (transfer of accounts within one bank)​

Entrepreneur Akaki and LLC Alpy have accounts in the same bank, and they need to transfer money to each other. Akaki wants to make a cashless payment for one hundred cubic meters of alpine air. Everything is simple here. Somehow, there is already some amount on Akaki's balance sheet (which is reflected by a number in the bank's database opposite the Akaki's current account number). Suppose that this amount was there, Akaki first brought cash to the bank's cash desk.

The bank counted Akakiia's bills and put them in their pile of cash. In front of Akaki's account, the bank wrote a slightly lower amount. Yes, what did you think? After all, the bank performed a Settlement and Cash Service (CSC) over Akaki, and therefore took its own interest for this. By the way, this is reasonable - after all, a bank has to maintain a serious infrastructure to handle cash. And safes, and storages, and armored cash windows, and pay wages to cashiers, etc. etc. By the way, collection is paid separately. So, all these are expenses, and in the end they are paid by Akaki, who diligently and regularly hands over his cash proceeds to the bank.

Then Akaki creates a payment order. According to this document, the bank does three things. Firstly, it reduces the balance on Akaki's current account by a slightly larger amount (of course, after all, they again performed a cash settlement over Akaki!). Secondly, it increases the current account of "Alps" by a slightly smaller amount (it is time to make a cash settlement over the Alps!). By the third action, the bank increases the balance of one of its internal accounts by the amount of the settlement transactions performed over Akaki and the Alps.

The triviality of this case is that the money did not go beyond the walls of the bank. All work comes down to changes in the numbers on the accounts of the participants, the sum of all these changes does not exceed the amount of cash that Akaki humbly brought to the bank.

Commissions for cash management services, by the way, in this case are lower than other options. And the amount of interest for accepting and handling cash is usually higher than for transferring between accounts.

Transfers between banks within the country​

Let's complicate the situation. Akaki keeps his current account in ZhadiBank, and LLC Alpy - in SokhraniBank. And Akaki wants to make a non-cash transfer to the settlement account of LLC "Alp". The first steps are the same, cash - increasing the balance on Akaki's account. But then it is necessary to somehow do this so that the money from ZhadiBank is transferred to SokhraniBank.

And here a couple of cases are possible. The simplest one, and, by the way, quite used for itself, is this one. ZhadiBank opens its own account in SokhraniBanki and somehow deposits some amount of money on it (we will not find out how yet). But this account is not a simple settlement account, but has a special name - correspondent account. Because it is for interaction between financial institutions.

The translation now happens like this. Akaki brings the payment order to ZhadiBank, and ZhadiBank, through its banking channels, asks SokhraniBank to make a transfer from the correspondent account of ZhadiBank (opened in SokhraniBank) to the account of Alpy LLC. SaveBank kindly (or maybe not very kindly) reduces the balance of the correspondent account of ZhadiBank by the requested amount and increases the balance on the Alp account by a slightly smaller amount (and the Alps did not dodge CSC! The percentage is inversely proportional to the courtesy). SaveBank increases its internal income account for this difference. In principle, SaveBank can additionally write off some amount from the correspondent account of ZhadiBank in its favor, but here I did not hold a candle, the specifics of these relationships are unknown to me. He said just in case, because it is technically possible.

There is also a second listing option​

The Bank of Banks - ZuperBank appears on the stage. In Russia, this is the Central Bank. ZhadiBank opens its account in one of the RCC (Settlement and Cash Center is a branch of the Central Bank). SaveBank opens an account in some other RCC. But in the end, both of them have accounts with ZuperBank. And the calculation goes like this.

According to the payment order, Akaki ZhadiBank asks its RCC to send money to SaveBank. The RCC reduces the balance on the ZhadiBank account and increases the balance on the SaveBank account, simultaneously transmitting a message that this change was caused by a payment order from Akaki in favor of the Alps. SaveBank increases the balance in the Alps account by decreasing it in your ZuperBank account.

Honestly, higher financial matters have gone for me here, and in reality, I suspect, everything is not quite right there (or not at all). But the essence is something like this, money is likeremain within the walls of each of these banks, and mutual settlements take place through the mechanism of correspondent accounts. I write "as it were", because the higher in the financial hierarchy, the more ephemeral money becomes. Various financial instruments appear there, such as interbank loans, accounting for the cost of securities, credit issuance (when banks add money to their accounts), etc. It seems interesting to understand, but I have a latent dislike for the financial market. I have intellectual cramps when money comes out of the void (and this happens quite often in the financial markets and in the banking sector). Therefore, forgive me, I cannot go deeper here, and for our purposes this is not necessary. I will only note that, according to my information, one of the main conditions for the normal operation of this entire system is high-intensity account turnover. Neither Akaki, nor even the Alps make any weather here, but they pour their little trickles into the common Volga.

Transfers between banks of different countries​

On the surface, the mechanism remains roughly the same. As a result, the money, as it were, remains within each bank, and within each country. And in order to "smuggle" money across the border, you need some additional market participants. I, unfortunately, do not have information about all the possible options, but I will try to explain the technical feasibility on the example of one of them.

ZhadiBank's client Akaki wants to transfer money to Mr. Smith, a BurzhuyBank client in Afrop. The client of Bourgeois Bank wants to receive money in Afro currency, while Akaki's has crunchy rubles dear to us. ZhadiBank already has a correspondent account nominated in Afro at some J'upel-Bank located in Afrop. And on a payment order, Akakiia asks J'upel-Bank to make an interbank transfer for Mr. Smith at Bourgeois Bank. The amount in Afro is calculated by ZhadiBank itself, based on its internal, commercial Afro to Ruble rate. J'upel-Bank decreases the balance of the correspondent account of ZhadiBank and increases the balance of the correspondent account of BourzhuiBank (in this case, BourzhuiBank opened a correspondent account in J'upel-Bank). Or they both have accounts in the Afropean ZuperBank and then through this mechanism they change the numbers on the accounts. Hopefully, in this part it has already become more or less clear, we will not describe it.

All this became possible because ZhadiBank has a correspondent account in some Afropean bank, and there is a big sum in Afro on it. When payments go from ZhadiBank to some other African bank, the amount on this account decreases. When someone, on the contrary, transfers the amount to ZhadiBank, the balance of this account increases.

And at some point it became interesting to me how this tidy sum of Afro could end up on the account in J'upel-Bank. So, here, too, there are a lot of all sorts of options (do not forget that banks also like to lend to each other and make money on this). But one of them is like this.

ZhadiBank once turned to the stock exchange with the desire to buy a couple of billions of Afro, having a couple of hundred billion rubles for this (the rate is one to a hundred, for example). This operation was performed for him by a stock broker. It was this participant who solved the problem of teleporting money. The thing is that in order to become a broker, he must have two accounts - one in rubles, the other in Afro. Relatively speaking, he has a couple of billion Afros in one of the African banks, and there is a ruble account somewhere in a Russian bank. ZhadiBank is pouring money into the ruble account in one of the ways known to him, and the broker transfers a couple of billion Afros from his Afro-African account to the correspondent account of ZhadiBank in J'upel-bank.

In fact, everything there can be (and is!) Even more multi-stage, and the broker can work at all on borrowed (drawn on his accounts) funds ...

Yes, yes, in such places I begin to have intellectual spasms when trying to realize the Absolute Financial Emptiness ... But as you can see, as a result, the money seems to remain within the original banks and within the original countries.

So what about the plane with the dollars?​

In fact, logic dictates that this happens from time to time. There is a turnover of foreign currency in cash, but dollars are not printed in Russia, which means that they somehow need to be brought. They bring, of course, fellow citizens from long-distance travels in their wallets, and foreigners come to soak up the Crimean resorts But this cash flow, I suspect, is not enough. It turns out that new dollars must sometimes be brought to Shirokaya and Rodnaya. But this amount is many times less than the non-cash turnover, and is needed precisely for the purpose of servicing the turnover of cash. Yes, there are many times more non-cash money in the world than cash ... But here again the mysterious financial matter, which, I'm afraid, I will never comprehend, and God is with it.

And also within the countries there are special organizations that, if necessary, can transport cash from the Central Bank to ordinary banks (and in the opposite direction). In Russia it is RosInkas. By the way, they are allowed to use weapons. One of the tasks of such transportation of cash is the replacement of worn-out banknotes with freshly drawn ones. Because usually the bank has some kind of balance of incoming and outgoing cash, and there is no need to replenish the stock. You can replenish the cash flow by purchasing it at the Central Bank. But often you will buy - the Central Bank will pay attention The banking sector, at least in Russia, is a very highly regulated thing. Who knows why ZhadiBank often buys cash? Does he have some kind of financial pain, is it time for him to shorten his license? Or is he fond of criminals? By the way,

But this no longer applies to money technologies. This refers to the technologies of fraud, and to the global economic (non) reality, and our channel is not about that