- a
bank is a financial intermediary
- uses
liquid assets (i.e. Bank deposits) to finance the investments of borrowers
- process
is known as Fractional reserve banking
- a
system in which depository institutions hold liquid assets less than the
amount of deposits
- Can
take the form of:
- Currency
in bank vaults
- Bank
reserves- deposits held at the federal reserve
- T-Account
(balance sheet)
- statements
of assets and liabilities
- assets
( amount owned)
- items
to which a bank holds legal claim
- The
use of funds by financial intermediaries
- liabilities(
amounts owed)
- the
legal claims against a bank
- The
sources of fund for financial intermediaries
Federal reserve bank
- 12
district federal reserve banks
- Each
are quasi-owned
- Functions
of the fed
- issues
paper currency
- Sets
reserve requirements and holds reserves of the bank
- Lends
money to the banks and charged them interest
- They
are a check clearing service for banks
- Act
as a personal bank for the government
- Supervise
member banks
- Control
money supply in the economy
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