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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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16
votes
3answers
536 views

If I don't pay a debt, then the creditor takes my goods. Why, then, do Greek creditors not take Greece?

Normally, when you don't pay a debt, your creditors take your goods (house, car, etc...). If Greece cannot pay its debt, can its creditors take Greek goods (structures, cities, industries, lands, etc....
14
votes
4answers
3k 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 ...
13
votes
4answers
1k views

Implications of abolishing Fractional Reserve Banking on mortgages and interest rates

Suppose for a moment that someone with legislative power decides to abolish Fractional Reserve Banking and passes a law that forces banks to only lend the money they own, that is M0. What would be the ...
9
votes
2answers
100 views

Are the figures quoted in this liblabcon's blog post accurate? (topic: UK banks)

Background With regards to the UK government. I have recently been involved in a debate stemming from figures mentioned in this blog post (the blogger was advocated by Occupy London's facebook page ...
9
votes
1answer
179 views

Banking Regulatory Frameworks, between the 1973 collapse of Bretton Woods and the introduction of the Basel Accords in 1988?

Does anyone know of any work on banking system behaviour, and in particular the governing regulatory frameworks that applied between the 1973 collapse of the gold standard based Bretton Woods system ...
9
votes
1answer
103 views

How did the Bail-In in Cyprus Work?

I've seen some articles online about the Cyprus-style bail-ins When the bail-in actually happened there, they took money from people's accounts, but from where did they take the money? For example, ...
8
votes
3answers
14k views

Why hasn't massive derivatives exposures at banks already led to disaster?

I recently heard that Deutsche Bank had $72trillion of "derivatives exposure", which is many times greater then the entire German GDP. Now as I understand it, derivatives are essentially just bets ...
8
votes
2answers
1k views

List of EU banks that received state aid

Is there a list of EU banks that got state aid / bailed out since 2008 crisis? I know EU state aid commission approves the fundings to banks, but does anyone keep track of which banks are tapping into ...
8
votes
2answers
1k views

What is the necessity of the FDIC in the US banking system?

A bank's basic function is to "borrow short and lend long". In other words, it borrows money from depositors over the short term, promising to repay it on demand, while it lends most of that money out ...
7
votes
1answer
18k views

How much money is wire transferred every year worldwide?

How much money is wire transferred every year worldwide? Estimates are fine.
7
votes
1answer
92 views

Banking System, Canada & US

Why are the way banks are established and spread out in Canada and US so different? Canada: There are only six major banks and most products offered are very competitive. Its almost unusual to hear ...
7
votes
1answer
133 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 ...
6
votes
3answers
5k 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 ...
6
votes
3answers
216 views

Fractional reserve banking and the value of someone else's currency

Suppose there are two countries: $A$ and $B$. $A$ is a large, stable, democratic country with its own currency, the dollar. $B$ does not have its own currency. All prices and financial transactions in ...
6
votes
3answers
2k views

How does inflation impact the welfare of the economy?

When the government causes inflation through printing money, the individuals who saved their money in the bank are poorer. Is there a way to determine how different inflation rates impact the welfare ...
6
votes
1answer
109 views

Why are banks allowed to resell mortgages?

It just seems like a way to get around money creation limits imposed by liquidity requirements. For example if a bank creates new money by extending new morgages then securitizes them and resells them,...
6
votes
2answers
105 views

Why do banks and stock exchanges close/have fixed hours?

Banks and stock exchanges all around the world seem to adhere to quite a strict regime of 9-5, Monday - Friday, in the countries local time. This can have the effect of where an event that happens ...
6
votes
2answers
4k views

When was fractional reserve banking introduced?

According to Wikipedia's history of banking article: Modern banking practice, including fractional reserve banking and the issue of banknotes emerged in the 17th century. The article on fractional ...
6
votes
3answers
154 views

What is Islamic Banking?

What is "Islamic banking," and how is it similar to and different from banking as it occurs in the U.S.? I have heard Shariah Law prohibits usury, the taking of interest on loans. How do Muslim ...
6
votes
4answers
8k views

How does the money supply behave when bank loans are repaid?

In a fractional reserve system when banks lend out money, that money is created out of thin air by a accounting journal entry, and the money supply goes up by the amount of the loan & when the ...
6
votes
2answers
118 views

Who regulates the balancing of the books for commercial banks and how is this done? 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 ...
6
votes
4answers
446 views

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 ...
6
votes
2answers
115 views

How will London's role as a financial center be affected after the Brexit and what are possible alternatives?

I looked around on this site and couldn't find anything close to what I'm asking on Economics SE, so I hope it is the right place to ask. I am interested in but have no background in economy, so all ...
6
votes
1answer
303 views

How is monetary policy sustainable, or even fair, in the current economy? [closed]

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. I'm trying to wrap my head around this from multiple points of view, since it brings about a lot of ...
5
votes
2answers
840 views

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 ...
5
votes
1answer
140 views

Why shutdown the banks (Greece)?

What benefit is there to shutting down the banks in Greece? It seems that this would do more harm than good. Won't this impede economic growth by not allowing companies and startups access to capital? ...
5
votes
3answers
246 views

Is money mostly created (out of nothing) by banks making loans?

In the Bank of England's Quarterly Bulletin, 2014 Q1, McLeay, Radia, & Thomas write a pair of articles titled: "Money in the modern economy: an introduction" and "Money creation in the modern ...
4
votes
5answers
609 views

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 ...
4
votes
1answer
185 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 ...
4
votes
3answers
141 views

How can the share price of a company be less than its (theoretical) liquidation value?

A recent article from Bloomberg states that Deutsche Bank's share price is less than half its theoretical liquidation value. According to Investopedia, liquidation value is defined as: The total ...
4
votes
2answers
125 views

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 ...
4
votes
2answers
263 views

How does the central bank changing interest rates change interest rates in the commerical banking sector?

I understand that the federal reserve manipulates the federal fund rate in order to change interest rates in the wider banking sector. What I am struggling to understand is how the changing the ...
4
votes
1answer
80 views

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 ...
4
votes
1answer
709 views

List of commercial banks by country in Europe

How do I find a list of all operating commercial banks by country? I am only interested in commercial banks. Not building societies nor community banks. I expected that that list should be made ...
4
votes
1answer
159 views

Federal Reserve capital injections

What were the specific conditions that the Federal Reserve attached to the capital injections forced upon the major Wall St. banks during the Great Recession? How and why do they differ from normally ...
4
votes
1answer
47 views

Is there any mainstream criticism of the Benes-Kumhof conclusion that the Chicago Plan would improve the US economy nowadays?

A 2012 IMF Working paper by Benes and Kumhof "The Chicago Plan Revisited " has this abstract, finding in favor of the Chicago Plan an all counts basically: At the height of the Great Depression a ...
4
votes
3answers
181 views

If all Banks in the world are emptied..?

What would happen if every person in the world pulled their money out of their bank accounts?
3
votes
4answers
279 views

What is the justification for it being a problem if loans are not paid back?

As far as I could understand, the loan system applied by banks which is based on a fractional reserve system works as follows: Assumptions: The bank has initially 1000$. The fractional reserve is ...
3
votes
3answers
201 views

By what steps and contracts does new money enter the economic system?

Like many noneconomists who read about economic history and finance, I always remain somewhat baffled by the opaque generation of currency under the federal reserve system. My understanding is that ...
3
votes
1answer
172 views

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 ...
3
votes
2answers
229 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, ...
3
votes
1answer
51 views

Could the Troika's economic plan work for Greece?

There are a number of things that are confusing me about the current Greek financial crisis. The first is this. Is it plausible that if Greece did everything the Troika asked then the Greek ...
3
votes
2answers
98 views

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 ...
3
votes
2answers
75 views

VaR and rating for commercial banks

I would like to know if there exist a database where Value at risk of commercial banks are. Beyond that if there is a connection between the rating from agency (as S&P, Fitch etc..) and the VaR ...
3
votes
1answer
2k views

How often do banks borrow from the Federal Reserve?

Though I've seen plenty of articles talk about in what circumstances banks borrow from the Fed, I haven't seen any quantification on that note. On average, what percent of the money that banks lend ...
3
votes
2answers
115 views

Fractional reserve banking and bank insolvency

I am trying to understand the fractional reserve banking system (with say 10 % reserve ratio). If a bank becomes insolvent because 100 % of the loans of a bank go bust, then who really becomes liable ...
3
votes
3answers
174 views

Does the current situation of excess reserve imply failure of QE?

Excess reserve @ Fed In the past it was assumed that excess reserves should be kept around 0 and banks should be lending to each other as much as they are borrowing. The central banks would correct ...
3
votes
1answer
56 views

Total amount of bank loans in a country

I am looking for total amount of customer loans banks are giving in a country. I can find data for US at http://research.stlouisfed.org/fred2/series/CLSACBW027SBOG However I am looking for ...
3
votes
1answer
249 views

How does the fractional reserve banking system work?

I would like to understand better exactly how this works. I have heard a lot recently (particularly since the 2007-08 crash and Occupy movement) about money creation in particular (usually with a very ...
3
votes
1answer
160 views

Why will these steps NOT fix the problems with LIBOR?

I am new to finance and recently came across the LIBOR scandal that happened some time in 2008. From my limited understanding of finance, it looks like a scandal that was obviously going to happen and ...