Conventional introductory financial textbooks generally treat banking institutions as financial intermediaries, the part of that is for connecting borrowers with savers, assisting their interactions by acting as legitimate middlemen. People who generate income above their immediate usage requirements can deposit their unused earnings in a bank that is reputable hence making a reservoir of funds from where the lender can draw from to be able to loan down to those whoever incomes fall below their immediate usage requirements.
While this whole tale assumes that banking institutions require your hard earned money so as to make loans, it is in reality somewhat deceptive. Continue reading to observe how banks really use your deposits to create loans and also to what extent they require your cash to take action.
Key Takeaways
- Banking institutions are believed of as economic intermediaries that connect savers and borrowers.
- Nevertheless, banking institutions really count on a fractional book banking system whereby banking institutions can provide more than the volume of actual deposits readily available. Continue reading “Why Banking Institutions Never Require Your Hard Earned Money to help make Loans”