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To license & supervise banks & hold commercial banks reserves & lend money to them.
No. They can lend only a % of their total cash reserves. It depends on the Cash Reserve Ratio and Liquidity Ratios set by the Central Banks (Reserve Bank, Federal Reserve etc)
excess reserves
By reducing the discount rate
Reduce interest rates to 1 percent. No matter how low you make the interest rates. People are scared to borrow money. Banks are scared to lend. Banks do not want to lend out their excess reserves.
The prime rate is the rate at which the central bank lends to the commercial banks whiles the base rate is the rate at which the commercial banks lend to the public
bank can lend amount equal to its excess reserves
First of all, banks are financial institutions that take in deposits from people and use their money to give out loans to others. The reason why banks provide this service for free is because they earn a profit by letting people deposit their money. Banks charge higher interests rates on the money they lend out compared to the money deposited. All in all, banks are both borrowers and lenders. People trust banks to store their money. The deposits allow banks to lend out money with rates with the expectancy that the loans will be paid back. Banks have something called a required reserve ratio, mandated by the Fed. This is the ratio of reserves to total deposits that banks are supposed to keep as reserves. Banks also have the right to increase the reserve ratio. They lend out the remaining percentage. For example, the bank has a 10% reserve ratio meaning it reserves 10% of its total deposits. It will then lend out the remaining 90%. When a person deposits $100, the bank is able to lend out $90 and keeps $10 for reserves. The $10 does not count as money since it is used as a reserve and may not be used for lending. So far, the bank has $100 and $90 currency lended out. This is a total of $190 created as opposed to $100 before. Currency held by the public is money. Of course, the borrower doesn't simply keep the $90 but he will spend it. For instance, he will spend his money for a pair of soccer cleats at the Nike store. Now the Nike store has $90 but it will then deposit it back into the bank. The cycle then repeats itself. If the bank has more borrowers, it will certainly make a profit. It it lends again, it will lend out $81 and keep $9 on reserves. The way banks create money is a cycle and over time, the profit compounds on top of each other and the original $100 can be exist potentially as $1,000.
First of all, banks are financial institutions that take in deposits from people and use their money to give out loans to others. The reason why banks provide this service for free is because they earn a profit by letting people deposit their money. Banks charge higher interests rates on the money they lend out compared to the money deposited. All in all, banks are both borrowers and lenders. People trust banks to store their money. The deposits allow banks to lend out money with higher interest rates with the expectancy that the loans will be paid back. Banks have something called a required reserve ratio, mandated by the Fed. This is the ratio of reserves to total deposits that banks are supposed to keep as reserves. Banks also have the right to increase the reserve ratio. They lend out the remaining percentage. For example, the bank has a 10% reserve ratio meaning it reserves 10% of its total deposits. It will then lend out the remaining 90%. When a person deposits $100, the bank is able to lend out $90 and keeps $10 for reserves. The $10 does not count as money since it is used as a reserve and may not be used for lending. So far, the bank has $100 and $90 currency lended out. This is a total of $190 created as opposed to $100 before. Currency held by the public is money. Of course, the borrower doesn't simply keep the $90 but he will spend it. For instance, he will spend his money for a pair of soccer cleats at the Nike store. Now the Nike store has $90 but it will then deposit it back into the bank. The cycle then repeats itself. If the bank has more borrowers, it will certainly make a profit. It it lends again, it will lend out $81 and keep $9 on reserves. The way banks create money is a cycle and over time, the profit compounds on top of each other and the original $100 can be exist potentially as $1,000.
Money lenders and banks.
people at banks
Yes, banks take your deposit and combine it with all the other deposits and loan it out. Some banks lend it mainly to home buyers and car loans, while others emphasize business and commercial loans. The bank has to keep a certain percentage of your money available at all times. Banks actually borrow money from other banks and institutions to get enough money to loan to customers. It is a very funny business overall.