Questions tagged [banking]

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

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20 views

Investments during recession

During Recession, banks loans decrease which leads to financial constraints and ultimately Investment suffers and declines. my question is - "Are loans lower because of demand or supply?" My ...
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One Week U.S. GC REPO Bid Rate Exceeds Ask Rate

I have recently downloaded a time-series of one-week U.S. Generalized Collateral Repurchase Agreement Rates from Bloomberg (Ticker: USRGCY1Z CURNCY). While looking through the data, I noticed that the ...
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21 views

Can a bank have deposits at another bank?

Can a bank create an account at another bank and get a loan in the form of deposits at that bank? If so, could these deposits at the other bank be used to satisfy the first bank's reserve/liquidity ...
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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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142 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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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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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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27 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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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

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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36 views

Explaining the size of the canadian banking sector

Canadian banks are among the largest in the world and I think that only the UK compares in terms of having your economy dominated by banking. Of course some of the US banks are much larger but so is ...
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Do you have a list of books about the evolution of the banking sector?

I'm looking for interesting books to read about the banking sector. Topics: Changes in the banking sector, Adaptation of financial services in the digital age, European and US banking regulations ...
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25 views

Why is Double-entry Bookkeeping always equal? (Part 2)

In this question, with answer here Destroying the Dollarhypothetically a hack is used to trick whatever programme is used to make sure accounts balance, so say a transfer is made from Bank manager A ...
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54 views

A country with dual payment system

Is there any country with dual domestic payment system? For instance, in the USA there are CHIPS or Fedwire both help wire transfer of USD within the USA. They give services to international ...
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42 views

Is Eurodollar borrowing close substitute for Fed funds borrowing?

It is often stated that eurodollar borrowing is clost substitute for Fed funds borrowing. In other words, when US banks cannot fund themselves domestically, they might go to the eurodollar market and ...
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58 views

Is the ECB a lender of last resort for european governments?

One of the usual functions of a Central Bank is to be the last resort of commercial banks, and governments. Does the ECB behave in this usual way toward European Governments? What about toward banks?...
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2answers
100 views

long run growth of money supply

I am trying to understand how the money supply (bank deposits + currency) grows over time. That's the end goal. This is the first part of my awful struggle. I'm superconfused, and almost everything I ...
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1answer
65 views

loanable funds theory: why is the supply of loanable funds equal to saving (+ dishoarding + new money)?

It seems that the loanable funds theory suggests that all that is saved is supplied in the market for loanable funds. This makes sense when we are talking about 'household saving' (i.e. household ...
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2answers
84 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 ...
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1answer
56 views

How does the private bank reserve increase when money is being withdrew?

The federal government raises 400 million by selling bonds to the general public in order to pay for a construction program. The program cost 440 million so the government withdraws 25 million from ...
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69 views

What happens with corporate deposits when a bank goes bankrupt?

When a bank goes bankrupt the money of the private individuals who saved in that bank are lost but a part of the money are guaranteed by the government. But say for example Apple has 10 billion ...
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2answers
79 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
30 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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2answers
48 views

Will banks in the US continue to offer CDs?

Earlier this year, the Fed abolished the reserve requirement. My understanding was that the motivation for banks offering CDs was because the Fed didn't impose reserve requirements on CDs, so banks ...
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1answer
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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 ...
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43 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-...
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1answer
39 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 ...
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1answer
364 views

Are there countries with free banking?

Are there any countries in which banks do not need to follow any special regulation other than the regular business regulations. If not, are there any countries that come close? For more information ...
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90 views

Is the equity lending involved in naked short-selling structurally equivalent to fractional-reserve banking?

Fractional-reserve banking consists in banks lending out more money than they actually possess. This can also be seen as "money creation", or at least "money substitute creation"-- ...
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106 views

Can the money multiplier happen within a single bank / a single loan?

Many tutorials explain the money multiplier effect by involving a chain of banks (e.g. khan academy) So if reserve requirements are 10% and bank A owns 1000€ reserves, bank A can lend 900€ to bank B; ...
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44 views

Must a EU bank pay 500€ to the ECB, if I deposit 100k€ into that bank?

Given that the current ECB reserve rates are negative (-0.5%), I suspect that if I deposit 100k€ into a EU commercial bank, that bank must in turn deposit my money at the ECB and pay 500€/year to ECB (...
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55 views

Why do all/majority of loan contracts charge nominal interest rate instead of fixed real interest rate?

As far as I understand, all/majority of loan contracts charge nominal interest rate, there are (almost?) no loan contracts that charge fixed real interest rate. Why is it so? Normally I would expect ...
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33 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?
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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....
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1answer
37 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 ...
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43 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 ...
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1answer
83 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: ...
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178 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 ...
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1answer
39 views

Do banks take money to repay deposits from required reserves?

Say I deposit 200 dollars in the bank and 20 dollars is set aside for the required reserves. Other customers also deposit money and more money goes into the required reserves. If I go and get the 200 ...
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96 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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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
69 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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87 views

How would banking in EU change if taxpayers withdrew their support for Deposit Guarantee Scheme?

Disclaimer The question pertains mostly to EU but I believe counterparts to Deposits Guarantee Scheme exist world-wide. Assumption Let’s suppose that support for liberal ideas and free market rises ...
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7k views

What does it mean when a bank is "fully loaned up"?

Please briefly explain the situation when a bank is "fully loaned up".
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How is it not arbitrage that EURIBOR (EUR) is around -0.5% and LIBOR (USD) is around 0.5%?

Why can I not borrow $1B of EUR at EURIBOR (pays me 50bps per year), convert it to USD (also pays me 50bps per year), lend it out at LIBOR, and collect a 1% spread? Am I missing somethign obvious? ...
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22 views

is it better a low or high WACC for a company valuation?

I'm doing a statistical report of some italian banks and I'm looking for correlation between Corporate governance practices and bank values. I'm focusing on WACC and I would like to understand if an ...
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2answers
104 views

Why would a digital Yuan (or some other national currency turned into a CBDC) "help fast-track international settlements" in that currency?

I'm trying to understand the basis of this claim As the main mode of transaction in the world's second biggest economy, China's currency should be a natural contender for the spot. However, the U.S. ...
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why federal fund rate vs treasury bond yield generally move in the same direction?

My own thought is, if the fed lowred federal fund rate, peoole should look for investment with greater return, like treasury bond. More demand=decline in yields but why do they generally move in the ...
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Resources to learn about banking and financial services industry [closed]

Can you recommend resources to learn about how the banks and modern financial system work?
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63 views

Why is the ECB asking EU banks to hold off on buybacks?

In the wake of the Covid-19 pandemic, the ECB requested EU banks not to pay dividends as well as refraining from buying back their own shares until the end of 2020. And that even if they had already ...