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They don’t lend out their customer’s savings directly per-se but you have to have deposits in order to have assets to lend against. Otherwise, why wouldn’t you
by ericmay 6y ago
They don’t lend out their customer’s savings directly per-se but you have to have deposits in order to have assets to lend against. Otherwise, why wouldn’t you be able to create a bank out of thin air and loan money? Customers cost money, why even have them?
I think what you missed in the article you linked is the concept of reserve requirements. What the person you’re responding to said is actually correct, again otherwise why wouldn’t a small regional bank be able to lend the same amount of money as JPMorgan Chase? The more deposits you have, the more you can lend.
- 082349872349872 6y agolooks like reserve requirements are currently 0% https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm
- pintxo 6y agoLending is tight to a banks equity. Prior to Basel II (early 2000s) this was some 8% per loan. So the more equity you have, the more loans you can provide. As small regional banks are unlikely to have the same amount of equity than JPMorgan Chase, they cannot provide the same amount of loans. Under the followup regime (Basel III) its: https://en.wikipedia.org/wiki/Basel_III#Leverage_ratio https://en.wikipedia.org/wiki/Basel_III#Leverage_ratio
- ergothus 6y ago> Customers cost money, why even have them? That certainly seems to match the customer service attitudes I've seen from many banks...