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 indefinitely, and spend it on luxury goods, keeping the bank in debt until they die, at which point they don't care anymore.
e.g. if the bank starts out for the first time, and obtains 1 B in cash deposits which it has as reserves, it could have a 10% reserve ratio, and lend 900 B to the owners, which they use to party and buy yachts. The other 100 M they keep as reserves.
Assuming a bank run doesn't occur, this can be stable indefinitely.
Does this ever happen? examples? or why not?
e.g. if it does not happen, is that because it is illegal, or are there incentive reasons intrinsic to banking why it would never happen?