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No bank has full trust of any other entity. It's not black and white. They use ratings (either Standard and Poor's or others) to determine the risk involved in
by fragsworth 9y ago
No bank has full trust of any other entity. It's not black and white. They use ratings (either Standard and Poor's or others) to determine the risk involved in a liability. Even the U.S. Government has a certain amount of risk.
- emodendroket 9y agoWe're talking about whether transactions are legitimate and not the creditworthiness of the institutions.
- acchow 9y agoDon't banks hold deposits at each others institutions?
- Lazare 9y ago> No bank has full trust of any other entity. It's not black and white. For interbank transfers, it is. That's simply how the financial system works. > They use ratings (either Standard and Poor's or others) to determine the risk involved in a liability. No. The reason why your $50 ACH transfer to your cousin takes so long to clear isn't that recipient bank is checking Standard and Poor's to see if Wachovia is good for it.
- patmcc 9y ago>>>No bank has full trust of any other entity. It's not black and white. Banks basically have full trust in each other and central banks, actually (for these kind of transactions, not investments or whatever). If you're a bank and you fuck up to the degree where you don't properly handle ACH and other transactions, guess what happens: you're no longer a bank, the government swoops in and takes over, and everything gets sorted out and you go to jail. It works pretty well.