What is emission?

Lyudmila Fedotova
Lyudmila Fedotova
December 19, 2014
What is emission?

The term "issue" is characteristic of the banking and economic fields of activity. Today, this concept is used in numerous materials about currency and stock markets, the monetary system and the economy as a whole.

What is emission: definition and species

Issue refers to the process of issuing new financial instruments into circulation: bank notes and coins, securities, plastic cards, etc.

The right to issue emissions are exclusively Central Banks (CB) and treasuries. With the permission of the Central Bank or the Treasury and within its competence, non-cash issue is also conducted by commercial banks.

There are two main types of emissions:

  • issue of money
  • issue of securities.

Money issue, in turn, is divided into cash and non-cash. In the first case we are talking about the manufacture of new paper banknotes and metal coins. Non-cash issue of money is, in fact, the issuance of loans to enterprises and individuals. Among the main tools of this issue are:

  • bank multiplier - a special financial rule that allows commercial banks to provide customers with loans in sizes that significantly exceed the bank’s own funds;
  • bill - a debt obligation, performing the role of money.

At the same time, cash and non-cash money are closely interconnected and can be transformed from one form to another. Therefore, it is considered that today, regardless of the type, additional means of payment come into circulation through credit operations.

The issue of securities represents the issuance and placement of certain financial instruments on the market or their distribution among investors. In most cases, these are shares or bonds that entitle their holder to receive income from the invested funds.

Why is emission required?

Money issue is carried out to replace unfit, damaged banknotes, as well as to stimulate the country's economy. Due to the issuance of securities, an enterprise has the opportunity to expand production, modernize it, or solve other problems, as additional financial resources appear.

But it should be understood that the issue of additional shares entering the market, and not distributed among the owners of the enterprise, reduces the share of the original shareholders. Therefore, the issuance of such securities should be carried out with great care.

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