Abstract
The purpose of the paper is to provide arguments for the statement that despite the fulfillment of their lending function, banks are not actually credit institutions. Their essence does not reduce to simple enumeration of functions; it is rather the belonging to the monetary system of the country. The genesis of the latter was accompanied by the transformation of the former. Without understanding this organic connection, it is impossible to reveal the essence of banks and the banking system and, hence, it is impossible to understand how a modern banking system should be organized, or what its operation should be directed at. The subject of the study is the banking system. The paper concludes that in the modern monetary system the banking system plays the role of a functioning national currency intended to provide conditions for a stable balanced development of the market (country) as a result of the national gross income formation.
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