Questions tagged [banking]

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

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2answers
65 views

Why is common stock included in bank capital?

Capital represents the loss-absorbing capacity of a bank. I do not understand how shares issued in the past provide any indication of a bank's loss-absorbing capacity. I understand that common equity ...
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2answers
57 views

In what kind of economic environment would the cliche of “keeping money under the mattress” be warranted?

I'm trying to apply (ideally empirical-backed) economic theory to an age-old cliche. We must be very articulate about the assumptions, because if it's a total collapse of the dollar, then that ...
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1answer
188 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 ...
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1answer
70 views

How do people check or trust that central bank is not cheating? [closed]

How people can be sure that somebody, cooperating with central bank (or working in it), is not creating money in digital or paper form for themself, so that nobody else notices it?
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1answer
67 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 ...
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3answers
156 views

How important are capital requirements for controlling broad money supply?

Interestingly, the Bank of England (BoE) is one of the few central banks that does not have reserve requirements. Canada, the UK, New Zealand, Australia, Sweden and Hong Kong have no reserve ...
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0answers
115 views

Why was the Bank of England nationalized after World War 2?

After the Second World War the new Labour government nationalised the Bank of England. Did this give the British Government any new capabilities? For example, could the Government print money before ...
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1answer
11 views

Which measure of total loans is more relevant to Financial Stability?

I am writing a paper on the financial stability of the banking sector. One factor im looking at is the amount of new loans or credit issued (credit growth). I have two different total loan measures. ...
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0answers
16 views

Lifeboat vs bailout

I have encountered the term lifeboat in these two contexts: Floating a “lifeboat”: The Banque de France and the crisis of 1889 The 1974 rescue in the UK's secondary-banking crisis. Is the term ...
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1answer
31 views

What country has the highest requirements for loans?

I was looking to find countries with the toughest regulations on loans(general loans not any specific ones) By that I mean: I mainly care to know where it is toughest for people to get a loan from a ...
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1answer
24 views

What's the combined wealth of the US banks?

How much is the amount of money of the US banks? In terms of: assets their own money (the banks make profits and they can keep the profits for further investments) The question is only about the ...
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1answer
58 views

What are the costs of requiring banks to have more equity?

In The Bankers' New Clothes: What's Wrong with Banking and What to Do about It (2013), Admati & Hellwig recommend much higher equity requirements: Requiring that banks’ equity be at least on the ...
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1answer
119 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,...
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0answers
40 views

“The odds of a bailout in the next century are still nearly 70%.”

In a 2017 Wall Street Journal op-ed, President of the Minneapolis Fed, Neel Kashkari, wrote: The odds of a bailout in the next century are still nearly 70%. I found it surprising that anyone could ...
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22 views

Since the financial crisis, what measures have been taken to solve the too-big-to-fail problem?

Ben Bernanke (2010): If the crisis has a single lesson, it is that the too-big-to-fail problem must be solved. So, what measures have been taken to solve the too-big-to-fail problem? To what ...
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33 views

How does the central bank fund open market operations?

This may seem like an extremely simple question, but I have been unable to find any satisfactory information on this. How, practically, does the central bank generate the funds to purchases ...
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1answer
36 views

Differentiating through this integral in banking loans?

Working through the math which gives the following profit function for a bank but I can't seem to solve this first order condition. The profit function is defined as follows, \begin{equation} \pi_t = ...
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0answers
114 views

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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1answer
319 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
45 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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25 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
36 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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2answers
244 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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124 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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1answer
48 views

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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1answer
169 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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1answer
47 views

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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5answers
137 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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1answer
22 views

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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2answers
5k 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 ...
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1answer
46 views

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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3answers
269 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 ...
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14 views

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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1answer
45 views

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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1answer
106 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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2answers
48 views

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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1answer
24 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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0answers
26 views

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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2answers
88 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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0answers
15 views

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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1answer
23 views

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
84 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
176 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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3answers
487 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 ...
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1answer
86 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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3answers
140 views

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
847 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 ...
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1answer
324 views

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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2answers
54 views

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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23 views

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 ...