Where do banks get their money from?

Freecall

It slightly ignores questions of liquidity and the issue of confidence, the latter largely doing for. Northern rock for example.

Absolutely, the whole system relies on confidence. There are of course many other aspects which could be considered but the answer to where banks get their money is fundamentally simple.

As you say it's regulation now that controls the banks dealings and failure of this which led to the 2008 crisis, as well a a hubris on many levels.

Yes, and the regulators got off fairly lightly in my view but that is another story.

It was the issue of holding reserves and maintaining liquidity that were at the heart of the Basel Accords. Brains better than mine along with the passage of time will decide if they have succeeded in getting things right.

gadgetmind

Freecall wrote: »

You go along to see your friendly Bank Manager (you would probably go on-line these days

We go on line for most things, but also have our bank manager's mobile number, which is nice.

As for the OP, rather than starting from fractional reserve banking, maybe look at capital ratios first. There are major changes being made to the regulations regards these to try and avert a future credit crisis.

http://en.wikipedia.org/wiki/Tier_1_capital

http://en.wikipedia.org/wiki/Basel_III

Thrugelmir

bigadaj wrote: »

Freecall, like that simple explanation. It slightly ignores questions of liquidity and the issue of confidence, the latter largely doing for. Northern rock for example.

Northern Rock had a flawed business model. While the queues to withdraw their savings made the headlines, The fundamental issue of wholesale funding was their downfall. All caused by BNP Paribas calling into question the value of US Mortgage debt. Causing inter bank lending to dry up overnight.

NRAM still has some way to go to repay the Treasury loan.

JohnRo

Put another but general way, where does their profit come from? Or who?

“It’s completely wrong to suggest we want to expropriate savers” – Mario Draghi

“When it becomes serious, you have to lie.” – Jean Claude Juncker

IronWolf

Oh not this again. This whole set of nonsense and lies about fractional reserve banking has been going round for years.