Questions tagged [banking]

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

Filter by
Sorted by
Tagged with
-2
votes
0answers
29 views

What can I do now that my bank (Nordea in Sweden) will permanently kill their “simplified login” feature, crippling all automation? [closed]

In the past days, I've attempted to ask this on the "Personal finance" and "Superuser" categories. Both were downvoted and closed for no reason, as is so often the case on this ...
0
votes
1answer
18 views

What is the difference between a bank's Treasury department and ALCO?

I know that the treasury manages and controls the bank's capital. While the Asset-Liability Committee deals with the assets and liabilities in order to stay solvent, right? What are the similarities ...
0
votes
0answers
12 views

Relative importance of the federal funds market in the post-2009 US economy

In the pre-financial crisis US economy, depository institutions had almost no excess reserves. Hence, it would make sense for some banks to have shortages of reserves and some with excess of reserves. ...
1
vote
3answers
165 views

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?
0
votes
1answer
19 views

There is a paragraph about the history of credit rating agencies that I don't understand

"For a few decades, ratings were nothing more than private assessments, no different from any other form of consultancy provided to investors. Born out of a need in the burgeoning industrial world of ...
3
votes
0answers
76 views

Perfect Bayesian Equilibrium for banks

I'm reading this paper on credit lending cycles and trying to understand how it works for the case of one bank. This is the set-up of the model: There are two players, a bank and the market. There ...
-1
votes
2answers
37 views

Transparent Fractional-reserve banking as an alternative to the current system

I come from a layman perspective, but I've been trying to understand macroeconomics and finance. Currently I'm struggling with the current topic. Here I'm not worried about the system transition just ...
0
votes
1answer
29 views

Why do banks keep vault cash instead of depositing all reserves at the central bank?

In what way to commercial banks benefit from keeping some of their excess reserves in the vault as opposed to depositing all of their excess reserves with the central bank (assuming the central bank ...
2
votes
1answer
44 views

How do transactions in different currencies work?

Very basic question but I have not much knowledge in this field so sorry: Say I have a bank account and over the past year there were transactions in different currencies. I am guessing that a ...
0
votes
1answer
24 views

What's the difference of economic capital and liquidity buffer?

Economic capital is what for example a bank has and uses in order to stay solvent. Isn't this in a way a liquidity buffer? or what would be the difference between them?
0
votes
1answer
20 views

What are the differences between hedging with swaps, options or futures?

For instance if a bank wants to hedge against interest rate risk, it could use interest rate swaps, or options or futures contract. Or in any other example, when a manager is hedging against risks. ...
0
votes
1answer
34 views

What's the role of money multiplier in the banking system?

On the internet , there are lots of people claming that the banking system has an immense power because it can multiply money obtained by deposits ( 'make money out of thin air' ) and then lend this ...
0
votes
0answers
15 views

Bank lending rate & ROE

When a bank lends money to a company, does the bank (typically) demand an interest rate higher or lower than the ROE (Return on Equity)? I have always thought they demand a higher interest rate but I ...
9
votes
4answers
1k views

Mortgage loans from foreign banks at lower interest rates

I had a thought - what if I live in a relatively poor country like let's say Russia and I would like to buy a house. In order to do that, I need to take a mortgage loan. In Russia however, interest ...
2
votes
3answers
98 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 ...
0
votes
1answer
18 views

Can a commercial bank lend money from transaction/checking account as it would from a deposit account?

Transaction/checking accounts are highly liquid - M1 Deposit accounts are less liquid - M2 Per fractional reserve system, banks lend deposited money as credit to clients provided they keep a reserve ...
2
votes
2answers
588 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 ...
2
votes
1answer
19 views

Who holds the Reverse Repo and Repo respectively in a Repurchase Agreement?

According to investopedia.com in this definition A reverse repurchase agreement, or "reverse repo", is the purchase of securities with the agreement to sell ...
0
votes
1answer
26 views

Are FedWire transfers and volume tracking exchanges of reserves between banks that have accounts at the Federal Reserve?

Looking at Fedwire® Funds Service - Monthly Statistics it appears that these transactions are between banks but I'm trying to confirm is whether the stuff they are exchanging is classified as reserves....
0
votes
1answer
31 views

Why is it that when a bank provides loans to people, it is considered a 'liability' on the bank's balance sheet? (Khan Academy Video-Related)

I am watching the Khan Academy Banking Video Series: (https://youtu.be/On3c86V5A_E) . (https://www.khanacademy.org/economics-finance-domain/core-finance/money-and-banking/money-and-banking/banking-and-...
2
votes
1answer
36 views

Is there unnecessary duplication for borrowing in this circular flow of income diagram?

Here is a circular flow of income that I took from Krugman's macroenomics textbook. We can see that when firms want to borrow they can go to the financial sector and borrow savings of national and ...
0
votes
1answer
19 views

How do the Government, Firms and the Foreign sector pay their debts in this circular flow of income?

Here is a circular flow of income that I took from Krugman's macroenomics textbook. Please notice, in this diagram households just give their savings to banks (which are part of the financial sector) ...
0
votes
0answers
30 views

Must US Treasury backstop US Federal Reserve?

The Constitutional Case for the Fed's Treasury Backstops | Cato @ Liberty writes no, I think? But I don't quite understand the financial terms iike "lever-up", backstop", "helicopter money". I looked ...
6
votes
2answers
138 views

Who regulates the balancing of the books for commercial banks? How? Is it public information?

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. This article brings about a lot of questions in my mind. This article talks about money being created ...
0
votes
1answer
40 views

Banks and Stock Market in Germany

Why does Germany have such a small stock market, but very large powerful banks?
0
votes
2answers
114 views

What will happen to a poor country’s economy if it replaces its entire banking system with the Islamic banking system?

I don't know much about economics. So, I am just curious about the Islamic banking system. What I understand is: I know that the USA is the dominant economy and the USD is the dominant currency in ...
-1
votes
3answers
34 views

Why can't someone have their money restored if someone they paid in advance goes bankrupt?

A friend paid a travel company €3000 for a holiday in Australia. However the travel company went bankrupt so now her €3000 is lost. She has been informed by the liquidator that the company had such ...
0
votes
1answer
33 views

What happens on a banks balance sheet when the borrower submits loan payments?

When the banks lends me money my demand deposits end up in his liabilities and my loan is on his assets. Lets say I paid that money to somebody who has an account at another bank. Lets ignore how the ...
2
votes
1answer
44 views

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, ...
0
votes
1answer
25 views

Would saving money outside of banking system be able to reduce monetary base?

First of all, here is definition of monetary base taken from Investopedia A monetary base is the total amount of a currency that is either in general circulation in the hands of the public or in ...
0
votes
1answer
36 views

What is the difference between the discount window and Fed repos?

I'm wondering how the Fed's discount window differs from it's involvement in the repo market. To the best of my knowledge, both are tools used to conduct monetary policy and both are also short-term, ...
0
votes
2answers
26 views

Time series in monetary policy

I wanted to learn how time series analysis is used to study monetary policy/ money and banking data, such as how and which techniques are used to study which data, what kind of problems are studied ...
1
vote
1answer
34 views

Run On The Banks Age of Credit Cards

Is the risk of a general run on the banks greatly reduced now that most transactions are done electronically?
1
vote
1answer
36 views

How does a mortgage-backed security issued by a bank allows it to borrow cheaper and make more loans?

I am currently reading a book called "Austerity, the history of a dangerous idea" by Mike Blythe. I am not an economist, but I am interested to learn more. Blythe writes (p.24): "The old 3-6-3 ...
1
vote
1answer
45 views

Beginner wanting to learn about economics/finance to explore career options?

I want to explore the banking/financial industries more for potential career options, can you recommend any books/ free online courses and sources in general as a starting point to build on my ...
1
vote
1answer
45 views

Real Income and a Fixed Money Supply

What would happen to nominal income and wages if the money supply were fixed (100% reserve banking). Would real wages increase, even though nominal wages would stay the same or even decrease?
7
votes
4answers
8k views

What institutions are examples of “shadow banking”?

I often hear the term shadow banking tossed around when discussing the United States and Chinese economies. What exactly is shadow banking and could you give examples of some specific companies that ...
-1
votes
3answers
85 views

Does Shadow Banking (i.e. non-Commercial Banking) produce transaction-useful money?

In shadow banking amongst primary dealers & large institutions...I understand repurchase agreements function similar to deposit accounts (Gorton, et al). Additionally, I understand how traditional ...
-3
votes
1answer
39 views

What's wrong if, to raise money, banks are selling Treasuries below their market price?

The Fed just pumped $1.5 trillion into the financial system. Where did the money come from? Where does it go? : AskEconomics so basically the banks sell their assets to the FED at a price that ...
0
votes
1answer
18 views

Bank of Canada operating band

I read the following quote about the Bank of Canada's "operating band" for inducing target overnight loan rates: ...
3
votes
3answers
300 views

Sanity of lending out made-up money

Background I've done some research to get an understanding into the issue I want to ask about. Regrettably, I found out general descriptions of the mechanism and/or evidently biased explanations, ...
0
votes
2answers
126 views

Banks are allowed to print money out of thin air. Black magic or what? [duplicate]

Today it is wide spread notion that the commercial banks cat create a money out of thin air. Simply by typing numbers on computer. Every time a bank gives a load to a borrower, the loan money do not ...
0
votes
1answer
56 views

The financial crisis in 2008 explained in my own words [closed]

I'd like to double check if I understand the cause of the financial crisis in 2008. Correct me where I'm wrong please. So when people buy a house they can take a mortgage. This is basically a loan ...
16
votes
4answers
4k views

Why is fractional reserve banking allowed?

I learned about banks' fractional reserves and that revolted me. How is that not considered to be fraud? The idea doesn't seem too sophisticated, on the contrary, it sounds very simple: the bank ...
-1
votes
1answer
50 views

Shouldn't the total global debt amount to zero and not $253 trillion?

In Jan 2020, the Institute of International Finance (IIF) came out with a report (read summary here) that the total global debt is expected to climb to a new all-time high of more than $257 trillion ...
1
vote
2answers
53 views

Do reserves at Bank of Canada count as money?

I read the following three statements concerning M1 and M2 in Canada: a) "M1 consists of currency held outside the banks and chequable deposits of individuals and businesses." b) "M1 does not ...
2
votes
1answer
94 views

In the context of banking, how (if at all) do the terms 'capital', 'net worth', and 'equity' differ?

In banking, are the three terms capital, net worth, and equity simply identical and exact synonyms? If not, how do they differ? (Aside: And what about in other contexts? For example, does the same ...
9
votes
1answer
198 views

How does a bank convert one currency to another?

Say for example I sell ZAR and buy USD. What happens behind the scenes so that the local ZAR bank is able to deposit USD into my account? Does the bank require some sort of USD cash reserve? How do ...
0
votes
1answer
51 views

How does an increase in the minimum reserve requirement affect the monetary base?

Monetary base is defined as currency+currency held by banks+deposits of banks at central bank. We assume that the current reserve is below the minimum reserve requirement. Which component of monetary ...
0
votes
0answers
18 views

Fed vs Treasury: 2008

Re-visiting the issue of the Troubled Assets Relief Programme (https://www.thebalance.com/tarp-bailout-program-3305895), both the Treasury and the Federal Reserve had a role to play in the "bailout". ...

1
2 3 4 5