Banks and Banking

There are at least two ways to look at this. From the point of view of a bank, the purpose of banking is to make a profit. Banks are companies just like any other, trying to make money. They...

If literally everyone who had money deposited in a bank were to ask to withdraw that money at the same time, the bank would most likely fail. It would simply run out of money. The reason for this...

I believe that the previous answer misunderstands the meaning of the quote. The meaning is that banks are more willing to loan money to those who do not need it as badly, at times when they do not...

In banking terms, “credit” means something like “the amount of money that a bank is willing to lend to a given individual.” If I have X amount of credit at a bank, they are willing to lend me X...

Strictly speaking, none of the options is technically correct. A correct answer would be that deposits represent both a liability and an asset. Option (d), "an asset in some cases and a liability...

The correct answer to this question is A. All of the other answers would be consistent with a situation in which the Fed actually lowers the reserve requirement. A reserve requirement requires...

The more that we human beings are protected from the consequences of our actions, the more risks we are likely to take. Think about it this way: if you were going to try to do a trapeze act,...

Banks which have both a physical presence and an online presence offer customers the best of both worlds. They offer the convenience of online banking, but they also have the physical branch...

There are a number of pros and cons to banking with a bank that has no “brick and mortar” presence. Let us look at a few. Online banks tend to have better rates. They have fewer expenses because...

For the purposes of this answer, I will assume that you are asking about the lending practices of banks at the time of the housing bubble of the early to mid-2000s. During this period, there were...

The Federal Deposit Insurance Corporation (FDIC) was established in 1933 in response to the financial ruin millions of Americans faced when the mass-scale bank failures that accompanied the Great...

There are two ways to answer this. The required reserve ratio for a bank is determined by the central bank of the country in which the bank does business. In the US, the Fed determines the...

Traditionally, there have been two purposes for interest rates with regard to banks. Today, only one of them is really relevant. The purpose for interest rates that is now obsolete is to attract...

With 59 of its banks currently on the Federal Deposit Insurance Corporation's Failed Bank List, Illinois is certainly well-represented in the category of bank failures. While other states,...

One strategy that has successfully been used by many regional and national enterprises in banking and other industries (so it has been widely tried) is that of developing a Careers center on a...

To argue that the government should not do this, you should focus on the idea that the government is not the most effective judge of who is and is not creditworthy. The government lacks the...

Risk based capital adequacy standards have to do with the proportion of its deposits a bank must hold and not lend out. A risk based standard is one that takes into account how risky a bank's...

The correct answer to this question is A. A reserve requirement tells the bank what percentage of its deposits it must hold and how much it may lend out. Before the deposit in this scenario, the...

Yes, banks have. Of course, they are not perfect. Some of them charge excessive (in the eyes of the consumer) fees or take risks with their depositors' money. But overall, they are certainly...

Most people would not be affected tremendously if there were no federal deposit insurance. These days, people do not tend to keep that much money in banks. Theoretically, the lack of deposit...