Topic 4 - banks Flashcards
What is the purpose of banks(3)
To lend
To look after customer savings
To offer interest to customers
What is the main aim of banks
To make profit for its owners, make money via interest
What are the types of banks(3)
Central Banks
Investment Banks
Commercial Banks
What are central banks (4)
Banks responsible for -
monetary policy
supply of money
currency
setting interest rates
What are commercial banks
Banks which customers are the general public and general businesses
What do commercial banks do
Lend and save money to/for consumers and customers
they also provide services such as credit cards, etc
What are commercial banks also known as
Retailbanks
High street banks
What is the main objective of commercial banks
Make more money from interest on loans, than the money they give consumers for spending with them
Why would a commercial bank be partially government owneed
So if they fail, the goverment can support them without mass effects to the economy
What are barriers ot entering commercial banking
High costs of establishing It and branches
Custopmers are most likely to be reluctant to change banks
WHat are some commercial bank assets(4)
Cash
Loans (given out )
Securities (e.g. bonds )
Fixed assets
What are some commercial bank liabilities(4)
Deposits (that are given out (
Bonds
Loans (taken in)
Reserves ( given by other banks )
What would a commercial bank generally want it balnce sheet to look like
Where assets value is equal to liability value
How do commercial banks create credit
Via ainterest rates on loans and QE
What are some limits to the creation of more credit(3)
Regulatory policies
Whever consumers and business pay back/ how much they can afford to
The demand for loans and level of interest rates
