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Questions tagged [banking]

Use for questions about banks, their operations, and their role in the broader economic and financial system.

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The U.S. government's red-lines in regulating the banking industry and preserving the health of market competition

The presupposition that pursuing one's interest will eventually result in greater good for the whole society rest upon the underlying assumption that bad behaviors will eventually receive punishment, ...
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Does the Fed grant free money to itself durring QE? [duplicate]

From my understanding of the credit theory of money, private banks credit newly created money to borrowers in exchange for an IOU from the borrower. Likewise, the Fed credits money to private banks ...
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Bank Runs During the 1930s

Why were there numerous banks run right after the stock market crash of 1929? Why would a bank fail because the stock market crashes?
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35 views

Breaking Up The Big Banks

How can banks break themselves up? If they refuse to how can the federal government force them to break up or break them up themselves?
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Why having Silver/Gold cover can be bad for bankers?

I was randomly reading on the assassination of John Kennedy. And I found that some of the possible reasons why he was assassinated, is because he was planning to issue some kind of silver cover. Such ...
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Can one single payment contain multiple Merchant Category Codes (MCC)? [closed]

Some payment cards can be limited for certain purposes only (e.g. for paying only for food, or only for car fuel). When you try to pay for a different purpose, the system rejects the payment. I ...
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23 views

financial crisis '08: what is it meant by the banks were saved by the states?

Were banks literally saved with tax payers' money? Or is it that states borrowed the banks, consequently, the banks must return this money back at some point? Can someone please give me some ...
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1answer
14 views

Do banks pay each other from their reserves?

Suppose Alice wants to buy Bob's house but they use different banks. Alice gets a loan from bank A and needs to transfer her new deposits to Bob at bank B to pay for the house. Obviously Alice's ...
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99 views

Would capitalism without banks work?

According to Merriam-Webster's dictionary, capitalism is "an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, ...
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31 views

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 ...
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Why don't we mint more m0 instead of creating m1 through fractional reserve banking?

From what I understand, m1 money is just as liquid as m0 since an individual can withdraw it from the bank at any time and in any quantity (up to the amount (s)he deposited). Because of this I don't ...
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71 views

Why doesn't the central bank extend loans directly?

I've been thinking about the credit theory of money lately and how it creates money. Since Banks look for sufficient reserves after extending a loan, and since the central bank always loans out money ...
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49 views

Money supply and Capital Flows

I have a super basic question on international macro. I read that an increase in the capital inflows (say because of favorable macro enviroment) can increase the domestic money supply. However, it is ...
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How printed money gets to the commercial banks?

can you please clarify this for me? Gov't need money for deficit elimination, so they issuing bonds (lets say 1T, 10 years, 2%). Fed is buying the bonds with fresh money, so the gov't now has new 1T$ ...
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What is the easiest and cheapest way to store big money with option to any moment get then in cash? [closed]

Imagine I have a lot of money and my number 1 aim is to store them somewhere where I can get them fast if I need them. I don’t want to have dividends from my money but if I will it would be great. ...
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Required bank reserves in Brazil

Currently studying about the tools of monetary policy and one of them is changing the required reserves ratio of banks in order to reduce loanable funds or increase them. Although the reserve ratios ...
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1answer
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Hyman Minsky's view on Bank Examination

In Stabilizing an Unstable Economy (1986), Hyman Minsky argues that "bank examination is largely perfunctory... rather than an inquiry into the economic viability and the exposures to risk of banking ...
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1answer
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Can the amount of loans and deposits in entire banking system differ significantly?

Can the amount of loans and deposits in entire banking system differ significantly? When regarding the entire banking system, what factors impact the loans to deposits ratio? Is it roughly constant ...
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payment being applied to interest and principle is not consistent with HELOC consumer loan algorithm

I've been getting really suspicious that my bank has their program logic incorrect for a HELOC (Home Equity Line of Credit) consumer loan I opened up in November 2016. It's a 15 year, 3.7% interest, ...
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1answer
69 views

Why are required reserves so trivially low?

We know that required reserves are the reserves that central bank requires banks to hold in reserves. Reserves= Required Reserves +Excess reserves. But I see that in 2017 Total Reserves (RESBALNS) = ...
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Why do banks offer less interest on larger deposits?

This may be a UK only thing but... I have noticed that it is very common to see current accounts that offer some interest on the first couple of thousand pounds deposited with them and then less ...
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What is Statutory Protection to a banker?

I come across things like statutory protection to paying banker and statutory protection to collecting banker etc. I'm trying to understand from reading on the net but I cannot get it clear. Can ...
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Securitization impact on maximum of money multiplier?

In economic textbooks, it is argued that in fractional reserve banking, the reserve requirement put a brake on the money banking system can create such that it can at most be the product of base money ...
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1answer
21 views

What is the concrete meaning of Britain saying they export Banking Services?

Today I read: One of Britain’s chief exports is Banking Services. Now I presume that doesn’t mean consumer savings accounts. I presume it means investment loans to companies and equities holdings ...
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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 ...
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32 views

Bank Capital and Profit

I am struggling a bit with understanding the meaning of capital ratios, and bank profitablity. It seems to me that capital requirements stipulate that a certain fraction of banks' risk weighted assets ...
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What were the liquidity requirements prior to Basel III?

I am investigating the impact of enforcing the Basel III liquidity requirements with a focus on the LCR. I have found some information about regulations in fore prior to Basel III in Sweden and ...
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How does increase in repo rate arrest inflation? How does price of goods come down?

When the repo rate is increased, how does it reduce demand? What happens to supply on reduction in demand? Why can't the people spend the money, even when(suppose) they have no transaction with banks?
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1answer
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Where does bank’s Tier1 capital lie [closed]

Banks need to maintain certain minimum capital as per Basel norms but where does this money lie. If it lies in a bank account, what would happen if that bank goes bankrupt? Say, SBI keeps its Tier1 ...
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1answer
52 views

Bank maturity mismach

So my question is about maturity mismatch and what is the appropriate method to calculate it. I have seen some simplified examples in academic books but, when I tried to approach it in a holdings bank,...
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1answer
37 views

Open market purchase of securities and it's effect on balancesheet

An open market purchase of securities lead to increase in bank reserves ( Liability side) and increase in assets(asset side) of central bank balance sheet. My doubt is why it leads to increase in ...
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1answer
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Effect of the Bank Home Loans of Property Prices

my name is Nick and I'm from Sydney, Australia. In the last 5 years, our big cities such as Sydney and Melbourne has experienced rapid property price growth, they went so high and so fast that Sydney ...
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3answers
67 views

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 liability (account "deposits") also go up by 100 (which is the extra 100 added to the ...
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1answer
46 views

Do institutions buy debt with credit?

I am reading Money Power book, from 1932 (http://www.worldcat.org/title/money-power-and-human-life/oclc/3783026). The author explains how the War Loans in the UK worked. He says that the government ...
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What would be the possible effect on a country's economy if private banks are declared as non-profit?

Suppose, there are 100 banks in a country. 50 of them are government owned. What would be the possible effect on a country's economy if private banks are declared as non-profit? I.e. they can not ...
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165 views

Difference between Unit Banking and Direct Banking

As the title says, I want to understand the differences between Unit Banking Systems and Direct Banking Systems. Here are the few questions that'll help me understand: Direct banks provide remote ...
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1answer
105 views

Do banks make profits by selling bonds to the central bank?

I am a bit puzzled by the quote below, from here (emphasis mine): Modern monetary theorists have helped clarify the obvious point that private banks are not essential to the design of the system. ...
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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 ...
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1answer
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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 ...
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Would this alternative to fractional reserve banking work?

While reading the answer to Implications of abolishing Fractional Reserve Banking on mortgages and interest rates, I started to wonder if there wasn't a simple solution to the problems that would ...
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1answer
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What aspects of macroeconomics should I address for convincing an investor to invest in a certain country? [closed]

I have a task at my internship which is to write 2 pages about the economic conditions in my country. My question is what I could include in my research. Surely, I'll address inflation, currency ...
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Why a bank never combine all benefits/promotions and issue a single Credit Card

Bank today issues multiple type of Credit Cards with different promotions linked to them. Any reason stopping a bank from issuing a single card with combined benefits/promotions, wouldn't that be more ...
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237 views

Isn't the liquidity trap about real interest rates?

Here is a so-called thought experiment. Suppose the inflation rate is negative, the nominal interest rate slightly negative, and the real interest rate positive (call it $r$). I think people would ...
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Where is there more money: Bank Accounts or Brokerage Accounts?

There is a significant amount of money in the stock market in US companies. For example, look at the largest US company by market cap - Apple. It is currently worth over 800 billion US dollars. I've ...
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1answer
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Do banks really have people on the boards of corporations, and why?

I read somewhere that in the United States, there are often people from banks on the boards of executives of corporations. Note, I don't mean ex-bankers who now work for that corporation, I mean ...
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116 views

Do credit cards create more printed money

As far as I know, when people take a loan from a bank, most of the loan value is electronically printed money, i.e. money that did not exist before. Is it also what happens with consumer credit cards? ...
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267 views

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 ...
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3answers
217 views

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 ...
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5answers
115 views

What is a dollar, currently?

What is the definition of a dollar now without gold backing? It seems that a dollar is now just an entry in a book somewhere in some bank. Or it is the federal reserve note? Or is it both? I ...
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131 views

Why did the stock of consumer loans held by commercial banks jump in March 2010?

The graph below refers to "Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks", from here. What happened in March 2010? The data come from the balance sheets of commercial ...