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QuinPin Latest Questions

Payal Agarwal
Helping Hand

How does a bank work?

1 Answer

  1. Should should get a book from your local library. This requires too long an answer for a Quora response.

    Areas that need to be understood:

    regulatory environment (and note the difference between commercial banks and investment banks, they are entirely different types of companies);

    lending environment (commercial, consumer, real estate and credit cards are all different from each other); on-line versus branch banking;

    banking and the economy (commercial lending is how money is created; see articles about the Swiss referendum coming up in about a month about changing the relationship between the banking system and the central bank);

    the role of the Federal Reserve in the banking system; the role of the FDIC and other regulatory/oversight organizations

    the role of pseudo-currencies (e.g., bitcoin, Etherium, etc.) in the money supply and the payments systems)

    Interest rates for deposits and for lending; what effect does a rise in the Fed Funds rate and the 10-year T-bill have on consumer, real estate and commercial lending rates

    And, perhaps most importantly, why do people trust that a computer entry on a ledger will allow you to take fiat currency from an ATM that other people will accept for physical goods. Without those levels of trust, banking would not exist.

    Good luck. Believe it or not, banking is an interesting subject.

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