Interest rates provide the price signals for borrowers, lenders, and banks. Banks make these loans to businesses, other financial institutions, individuals, and governments (that need the funds for investments or other purposes). They then use those deposits and borrowed funds (liabilities of the bank) to make loans or to purchase securities (assets of the bank). Banks borrow from individuals, businesses, financial institutions, and governments with surplus funds (savings). What risks might you face as a saver (borrower)?īanks operate by borrowing funds-usually by accepting deposits or by borrowing in the money markets.Would you be able to borrow (save) as much as you need, when you need it, in a form that would be convenient for you?.This is not just an academic exercise many former eastern-block nations began facing this question when they began to create financial markets and develop market-oriented banks and other financial institutions.
One way to answer your question is to imagine, for a moment, a world without banking institutions, and then to ask yourself a few questions. These financial services help to make the overall economy more efficient. They provide specialized financial services, which reduce the cost of obtaining information about both savings and borrowing opportunities. As a key component of the financial system, banks allocate funds from savers to borrowers in an efficient manner. Commercial banks play an important role in the financial system and the economy.
0 kommentar(er)
