Conditions influencing the level of revenue interest and financial result in the credit activity of banks
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The most important item of revenue in the banking business is interest income whose sources lie in the loans granted. Depending on the methodology of calculation of income, as well as on the method of securing debts, the financial outcome and the value of bank assets varies across different periods of the credit. The currently binding rules enforce the usage of evaluation of financial instruments maintained until assents maturity, at amortized cost using the effective interest rate. This correctly reflects the relationship of income interests and other payments to the duration and method of repayment of loans. As a result of misunderstanding of the essential role of accounting in the presentation of balance-sheet amounts according to the present value, criticism may arise, especially in situations of crisis in the financial markets. Going back to the method of evaluation of financial instruments according to the nominal value would not change the size of the banks’ financial reserves, but may statistically improve some of their indicators in the short term. Current experience shows that the presented scenario cannot be rejected.
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