How Commercial banks manage their liquidity to satisfy reserve requirement without bearing huge costs? Could you give me some example.

Q: What entity decides what the reserve requirement is?

A: Reserve requirement is the monetary amount that commercial bank has to keep with the federal Bank as…

Q: If federal deposit insurance is provided to banks at no cost to them, who pays when an insured…

A: Federal deposit insurance is a government-backed program in the United States that provides…

Q: The table shows the commercial banks' balance sheet (aggregated over all the banks). The commercial…

A: Excess reserves are the excess of money a commercial bank hold with the central bank of country over…

Q: What is the risk if a bank does not diversify its loans?

A: The banks are the biggest financial institutions that operate in the country and indulge in…

Q: Why does the firm have to borrow the bank's liability rather than use its own? Explain briefly.

A: Start-ups and small businesses seeking to expand frequently have one thing in common: they require…

Q: How is a bank able to lend more money than it has in reserves?

A: Banks depend on a fractional reserve banking due excess lending of actual deposits on hand by banks…

Q: Hank is confused as to what banks do. He reads that banks “transform assets,” but he has no idea…

A: Hence asset transformation is a process through which banks transforms bank liabilities (deposits)…

Q: Should bankers be empowered by law to inquire into the sources of their customers' deposit?

A: Every day, bankers, often referred to as retail bankers, work with customers by helping them with…

Q: what is a real life example of a commercial bank

A: Commercial banks are the financial institutions which provide people with facility of loans and…

Q: Why are banks able to maintain reserves that are only a fraction of the demand and saving deposits…

A: Bank reserve refers to the amount of deposit that banks keep with them and do not lend to the…

Q: Banks should have to hold all of their deposits.  True or False?  Explain.

A: Banks provide financial services to the people by accepting their deposits and keeping them safe…

Q: Should banks be more focused on traditional banking, or should banks be able to provide…

A: Financial institutions are the institution that provides the financial service services. It includes…

Q: Why do banks practice fractional reserve banking

A: When a customer deposits a certain amount of money in a bank, the bank does not lend out the entire…

Q: “When a commercial bank makes loans, it creates money; when loans are repaid, money is destroyed.”…

A: Bank balance sheet indicates the liabilities, assets and bank capital, of a bank.  Identity of bank…

Q: Why banking system is said to be on fractional reserve.  Please explain.

A: The fractional reserve banking system in which the banks accept the deposits from the public and…

Q: Why has the number of bank holding companies dramatically increased?

A: A bank holding company is a company that exercises management and control over the banks they own…

Q: Why can banks continue to hold reserves that are only a fraction of the demand deposits of their…

A: Bank reserve is the amount of deposit, which is kept by the bank and is not lent to the borrowers.…

Q: What are the roles of banks in the financial system?

A: Financial markets (such as those in which stocks or bonds are traded), securities (from bank CDs to…

Q: Why have banks been losing cost advantages in acquiring funds in recent years?

A: Banks have to bear an amount of cost to acquire the funds, but there are some cost advantages that…

Q: how could we focus on bank governance and culture?

A: By 'governance', It mean broadly the oversight that comes from banks' own shareholders and other…

Q: hold 100% of their deposits

A: 100% reserve system in which banks keep the total amount of each depositor’s funds in cash. This…

Q: "Banks make a profit by paying depositors a high rate to attract funds and making loans at a low…

A: The statement is incorrect. Banks create to make a profit if the interest rate they gather on the…

Q: What types of regulations commercial banks are subject to and why commercial banks are subject to…

A: It is very important to have a strong and well developed banking sector in order to maintain…

Q: How does federal deposit insurance encourage greater risk taking by banks?  Could the banking system…

A: Banks are the financial institutions regulated by organized or unorganized authorities. Banks work…

Q: what if the Bank of Cheap Loans tries to charge an even lower rate?

A: A number of banks and housing finance companies reduce the interest rate for a fee on the floating…

Q: How do private commercial banks multiply the quantity of money placed in circulation by the Federal…

A: Answer: Introduction: Federal Reserve is responsible for maintaining money supply in the economy. It…

Q: Where does the Central Bank's profit go?

A: Central Bank of an economy cab earn profit in terms of interest income as it provides loan to the…

Q: Why does the Federal Reserve limit how much a bank is allowed to "multiply" its deposits?

A: when commercial banks receive a deposit they keep a certain part of that deposit with them in form…

Q: Why silicon valley bank shutdown?

A: Commercial bank Silicon Valley Bank had its main office in Santa Clara, California. With a 25.9%…

Q: Why do we call a bank a financial intermediary?

A: An individual or a firm or a party who is placed between two other parties are called Intermediary…