3 ms·
To complete the picture, it's helpful to point out that what banks need to create loans is capital, not deposits. If a bank is constrained by the Basel capital
by atq2119 6y ago
To complete the picture, it's helpful to point out that what banks need to create loans is capital, not deposits.
If a bank is constrained by the Basel capital requirements, it can e.g. attempt to issue bonds. If it does so successfully, it can then create new loans corresponding to a multiple of the value of those bonds.