Use for questions about banks, their operations, and their role in the broader economic and financial system.
Questions tagged [banking]
307 questions
8
votes
3 answers
What does Varoufakis mean by 'banks can make up money' in 'Talking to my daughter about the economy'?
Varoufakis' book contains some arguments and explanations. I don't have the book in English with me, so this is a 'free translation' of a couple of points (bold is mine):
"Contrary to the entrepeneur, the banker does not organize production. (...)…
johndoe
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6
votes
2 answers
How can there be an electronic bank run?
I read that at 2008 there was an electronic bank run.
From what I undestand bank runs occur due to the fractional reserve banking system. The actual real money you can hold on your hand are a fraction of the total money in banks. So if everyone goes…
user2832080
- 171
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4
votes
2 answers
If banks started simply depositing money with each other, then what else?
[Source:] If banks started simply depositing money with each other, all else aside, then what would happen? Keep in mind that the interest rate is basically the price of money. Supply-and-demand would dictate that ... ♦ a huge inflow of capital =>…
user4020
4
votes
1 answer
Can one bank be the correspondent bank of itself?
http://www.investopedia.com/terms/c/correspondent-bank.asp
Correspondent bank is like a delegator in a country to operate on behalf of the delegatee who doesn't normally has established business in that country.
However, I heard that for some bank…
user2001850
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4
votes
1 answer
How successful is the Islamic banking model?
Under Islamic law (Sharia), any interest is considered usury and is prohibited. This makes banking in Islamic ruled countries difficult as the normal way for banks to create profit is through lending money at a rate of interest. Rather, Islamic…
MrMineHeads
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4
votes
2 answers
Can banks buy stocks?
Can a bank use its excess reserves to purchase stocks? If so, does this inflate the cost of borrowing for your average Joe since he has to offer returns (interest payments) that are competitive with stock market returns? Or, on the other hand, maybe…
Jonah
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3
votes
1 answer
How compensating balance works?
Assume a clothing store needs a 100,000 line of credit (LOC) to
manage its operating cash flow each month. The store plans to use the
LOC to make inventory purchases at the beginning of the month, and
then pay down the balance as the store…
q126y
- 133
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3
votes
3 answers
Could a bank simply eliminate a loan from its books?
Assume a bank gives a loan to Mr X. for, say 100. The bank's assets (account "loans") increases by 100, and its liabilities (account "deposits") also goes up by 100 (which is the extra 100 added to the current account of Mr X. who asked for the…
chatGPT
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3
votes
2 answers
How does lending money contribute to society?
I essentially asked this question here, but IMO didn't get an answer from anyone who knew what they were talking about.
Normally someone gets paid because they work in a job, i.e. they contribute to society. I get paid by lending money to other…
Peter
- 81
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3
votes
5 answers
Could massive derivatives exposures at banks lead to disaster?
A while back I posted this question about the possible risks of banks having massive derivatives exposures.
The most upvoted answer (by BKay) said that there was little risk because banks mainly hold pairs of opposite bets. So for example it may…
Mick
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2
votes
1 answer
Reserve ratio and risk
If the reserve ratio is 0 (e.g. in Hong Kong), why isn't lending riskless for banks?
They effectively generate assets without creating a liability (even if the reserve ratio is > 0, they can lend and find reserves later, not generally constraining…
justasking
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2
votes
0 answers
What qualifications does a bank need to create USD funds?
It is my understanding that, while any entity can create dollar-denominated assets (stocks and bonds) and sell them on the open market, only banking institutions in the United States can engage in fractional reserve banking and thus truly increase…
Nimrod
- 121
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2
votes
1 answer
World Bank lending categories
I need to do data visualization of World Bank lending category for some countries using source from their page. When I was going through it I found some inconsistencies in categories they use to describe lending groups. According to the World Bank…
Radek
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2
votes
3 answers
Do privately owned banks ever indefinitely lend money to their owners?
By privately owned bank, I mean specifically a bank that is not registered as a corporation with publicly tradable shares.
Does it ever happen that such banks create money by lending it to their own owners? The owners could simply borrow the money…
user56834
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2
votes
3 answers
What Happened in 2008?
Some say "housing crash" but I suspect the existing global banking system imploded. Am I off-base, or ...?
In my experience, CME S&P futures, for example, require a performance bond of something less than 10% of the market value of the underlying…
Ronnie Royston
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