Questions tagged [banking]
Use for questions about banks, their operations, and their role in the broader economic and financial system.
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Are bailouts destabilizing the global economy?
I saw this posited in this WSJ opinion piece here
Notes on the Fed
In 1998, engineering a \$3.6 billion rescue of the giant hedge fund Long-Term Capital Management.
In 2001, slashing interest rates ...
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10-K missing for bank on sec.gov [closed]
PACW filings
If I search for PACW on sec.gov, I get a page with links to the 10-K and other filings:
https://www.sec.gov/edgar/browse/?CIK=1102112&owner=exclude
...
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Federal Funds Rate & Reserves Market Contradiction
Edit: I do understand this isn't how things work anymore, since we are in a "Ample-Reserves Framework" and the quantity of reserves no longer makes a difference that much and it is primarily ...
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Reserve ratio from H.8 report
Reserve ratio definition
Macroeconomic textbooks define reserve ratio as reserves / deposits.
So for example, the following bank:
has a reserve ratio of ...
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Do banks pay interest on the money they create?
A bank takes in \$10 in deposits and makes \$100 in loans, creating \$90 of new money. They pay the depositor interest on the \$10 and earn interest on the $100 loan.
It looks to me like they don't ...
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How would a Central Bank Digital Currency be different from a private bank deposit?
Both are digital, both can be transferred digital, and both are denominated in the same currency. A CBDC is "a direct liability of the central bank, rather than of private banks or coin issuers&...
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Bank runs, deposit guarantees, and moral hazard
I understand the concept of moral hazard. If a government guaranteed all bank deposits 100%, bank customers would simply go to the bank with the highest interest rates and rely on the guarantee that ...
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Money Creation Confusion
I've been studying money creation recently and have come across some contradictory statements and different types of theories that I'd like to clear up.
The classical theory of money creation which ...
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Paid-off reversal in MERS eRegistry
I'm a technical writer working on eOriginal for Wolters Kluwer. In a section of the user guide I'm working on details of search variables for eRegistry status events, one of which is "paid-of ...
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Taking a loan to pay another loan with the same interest
I had a discussion with family members about how taking a loan to pay another loan with the same interest is basically wasting money and they didn't agree.
To make things clearer, say loan 1 is 100 ...
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In the Diamond-Dybvig model, why does the long-term investment not offer a liquidity risk premium?
In the basic version of this model (see link below), both the short-term asset (deposit) and the long-term investment (“technology”) are considered to be risk-free (that is, there is only one possible ...
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Commercial bank holdings of shares and bonds since 2005
I would like to know how the amount of shares and bonds held by private banks has changed over the past 15 years or so. I dare say the data is available on FRED (or similar) but I don't know exactly ...
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What have banks mostly done with their "excess reserves" obtained during QE
I put excess reserves in quotes because I know that in many countries there are no reserve requirements, so what I really mean by "excess reserves" is reserves in excess of what banks like ...
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CDOs, Synthetic CDOs and 2008 financial crisis
I have recently been researching about the 2008 financial crisis and after hours of reading, I have been left with some gaps in my understanding of the events that lef to the collapse of the market in ...
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What is a Bank-Run Equilibrium (Diamond-Dybvig Model)?
I have an assignment on Bank-Run Equilibrium, studying the Diamond-Dybvig Model. The question goes as:
Suppose the mass of depositors is equal to 10, θ = 1/2, and r = 1. Suppose that y1 = 1.2 which ...
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Who insures the FDIC in case it fails?
I understand that the Federal Deposit Insurance Corporation (FDIC) failing is unlikely, but the probability of such a failure is still positive. In case the FDIC fails, who covers the customers' ...
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Why are full reserve banks called such, when they still have depositors?
Why do full reserve banks put all their depositors' money in reserve while depositors still have the right to deposit?
Why is it called full reserve banking when people can deposit their money there?
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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 ...
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Representing insolvency on a T-account
Example balance sheet
Section 16-3d of Mankiw's Principles of Macroeconomics textbook shows the following balance sheet:
Simulator
I have a simple C# program that models this sort of example. So if I ...
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Are interbank positions branch-specific?
I have a hard time envisioning the inner workings of the interbank market. In particular, I am somewhat unsure about the role of banks vs branches.
When I think about banks, I typically think about ...
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Why are banks providing mortgages?
Currently I'm learning about finance and I want to understand the following. In the Netherlands the interest on a mortgage is about 3%-4% depending on the payback period. When learning about stocks ...
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How central banks can lend money and always expect more money
for making this question clear let's create a simplified world when there are only 3 private banks (bank A, bank B, bank C) in the world, and 1 central bank. let's also assume that all the citizen in ...
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What incentives do private banks have not to lend money
It is generally accepted that banks can create money by lending. If sb. wants to take a loan the bank simply extend the balance sheet by creating that loan. The bank has to adhere to reserve and ...
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Mechanisms to discover unbacked creation of foreign currency
Suppose there's a country called Crook Islands.
The president is John Crook, one of his sons owns a bank called Crook Island Bank domicilated on Crook Islands, and the other son is the Minister of ...
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How do banks trust each other especially in cross-border situations?
Maybe my question is far too trivial for this community. But let's see. I don't have an economic background.
I wonder how banks trust each other when money gets transferred from one bank to another ...
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What is a "full blocking" sanction on a bank?
In the wake of the Russian invasion of Ukraine, the United States announced a range of sanctions on Russian banks. These include (Source)
"full blocking sanctions on VTB Bank, Russia’s second-...
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Does the money from Fed buying bonds go to Excess Reserves?
Suppose the Fed decides to buy $\\\$x$ of a bank's bonds. In the bank balance sheet, does the entirety of the money get added up in the bank's excess reserves (which the bank can loan out)?
Thanks
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loan to deposit ratio
I'm straggling to understand why loan to deposit ratio could be greater than 1. According credit creation theory every creation of new loan is matched by creation of deposit, so assuming some ...
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should I weigh an average net margin calculation of Eurozone banks per number of banks or per asset size to validate parallel trends?
I'm trying to perform a DiD regression analysis in order to evaluate whether bank profitability has decreased with the implementation of a negative interest rate policy (NIRP). The regression is ...
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Interest and Installment
Suppose that a sum of x (in dollars) is being repaid by n equal yearly installments at a fixed yearly ...
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Why can't banks print infinite money by running up huge debts at the secondary discount window rate?
Banks in financial trouble can borrow from the Fed at 1% interest. Would anything stop a bank from borrowing $1M every year plus the interest on all prior debt? Since their ability to make interest ...
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optimal lending levels
Many ratios are mentioned to allude to what caps the amount of money a bank could lend. But none is really convincing. Usually debt ratio and solvability (Basel) ratio are mentioned. Elsewhere there ...
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BA in econometrics with mathematics vs BA in econometrics with computer science [closed]
Uni applications start quite soon and I have a hard time deciding which degree should I choose.
I’m more interested in mathematics than in CS. However, it isn’t my greatest strength.
I was thinking ...
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What would happen in global bank run
Bank runs are self-amplifying. What would realistically happen if the entire earth would experience a simultaneous bank run?
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When a country is banned from using SWIFT, what alternative ways do banks within that country still have to transfer or receive money from abroad?
If Russia invades Ukraine one of the sanctions that the west might impose is banning the banks in Russia from the SWIFT network. I've watched a short video from a financial news channel that explains ...
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How leveraged are banks in the United States?
My understanding of fractional-reserve lending is that it allows for banks to only keep a small fraction of raw currency in reserve, and lend out the rest. When this lent out money is put into banks, ...
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Are major banks in US necessarily going to benefit from the rise of federal fund rates?
https://wtvbam.com/2022/01/05/fed-funds-futures-see-rate-hike-in-march-after-minutes-of-policy-meeting/
It is believed that Fed is very likely to raise the Federal Fund rates in the next a couple of ...
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Banking system in countries without their own currency
I am interested in the working of the banking system in countries that don't have their own currency, e.g., Ecuador or Panamá. Can you point me to studies or articles about it?
For example, do banks ...
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Are there examples of state banks in history?
Today most banking is private. Has there been any period in history where banking was (in part) state-owned and why was it privatized?
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What is fiat currency and what are its ledgers?
How are these ledgers maintained and who does it? A practical example would be very helpful.
Thank You
Edit: I was learning about the history of money and ledgers. Because Bitcoin is a ledger in the ...
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How do banks restore capital adequacy ratios and what are the consequences
How do banks restore capital adequacy ratios in the event of a fall in the value of their capital? And in particular do the required actions shrink the money supply? If the actions do indeed shrink ...
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Is new money created when banks buy Treasury Bonds in primary auction?
From my understanding of the current monetary system when a bank issues a loan it is effectively creating money for the receiver of the loan i.e Mortgage. This increases the M1, M2, M3 numbers of the ...
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Why do banks need to borrow money (i.e. bond issuance)?
When a bank gives out a loan, a simultaneous liability and asset is created on their balance sheet, and 'external' funding doesn't fit into this picture... so why do they need to borrow money?
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Cash flow of a loan (perspective of a bank)
if you receive a loan from a bank, how does the cash flow of the bank look like?
I found the following:
https://fincomplete.com/ratgeber/artikel/wie-berechnet-die-bank-meine-kreditzinsen-2
(...
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How do currency boards maintain a 100% foreign reserve backing in the presence of fractional reserve banking?
Under a currency board system, money in circulation has to be 100% backed by foreign reserves. Suppose the domestic currency (A\$) is 100% backed by a foreign currency (B\$), with a fixed 1:1 ratio. ...
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Are there any state-level data on US banking regulation stringency?
In Barth, Caprio, and Levine (2008) Rethinking bank regulation: Till angels govern. Cambridge University Press, authors assemble and showcase large dataset on stringency of banking regulation and ...
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Understanding Adam Smith's assertion about the incentives of receipt holders and bank money holders
At Chapter III of Book IV of The Wealth of Nations, Adam Smith makes the following assertion:
Even in ordinary and quiet times, it is in the interest of the holders of receipts to depress the agio, ...
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A bank approves a loan: where does the money come from?
In the naïve picture of the banking system, banks strike a balance between savings invested in them by savers and the loans requested of them by borrowers. The money loaned to borrowers is the same ...
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Does bank loan support affect companies in negative way?
I'm new to the economics exchange environment. My question may seem amateurish, but I did not find a satisfactory result by doing the necessary literature search.
A question that has been on my mind ...
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Is The Money Masters (1996) correct in its main thesis?
The Money Masters is a 1996 documentary film that discusses the concepts of money, debt, taxes, and describes their development from biblical times onward.
Its main points were summarized by a ...
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