The Impacts of Capital Requirements on Banks' Credit-Creation
CLASSIFICATION OF BANKS & CREDIT CREATION IN BANKS.
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Transcript of CLASSIFICATION OF BANKS & CREDIT CREATION IN BANKS.
CLASSIFICATION CLASSIFICATION OF BANKSOF BANKS
& &
CREDIT CREATION CREDIT CREATION IN BANKSIN BANKS
CREDIT CREATIONCREDIT CREATION
DEPOSITSDEPOSITS PRIMARY DEPOSITSPRIMARY DEPOSITS DERIVATIVE DEPOSITSDERIVATIVE DEPOSITS
MULTIPLE CREATION OF MULTIPLE CREATION OF CREDITCREDIT
LOANS & ADVANCESLOANS & ADVANCES MONEY AT CALL & SHORT MONEY AT CALL & SHORT
NOTICENOTICE DISCOUNTING OF BILLSDISCOUNTING OF BILLS INVESTMENTSINVESTMENTS
ILLUSTRATION:ILLUSTRATION:MAXIMUM EXPANSION OF MAXIMUM EXPANSION OF
LOANS & DEPOSITSLOANS & DEPOSITSBANKBANK DEPOSITDEPOSIT RETAINED AS RESERVERETAINED AS RESERVE LENTLENT
11STST 10,000.0010,000.00 2,000.002,000.00 8,000.008,000.00
22NDND 8,000.008,000.00 1,600.001,600.00 6,400.006,400.00
33RDRD 6,400.006,400.00 1,280.001,280.00 5,120.005,120.00
44THTH 5,120.005,120.00 1,024.001,024.00 4,096.004,096.00
55THTH 4,096.004,096.00 819.20819.20 3,276.803,276.80
66THTH 3,276.803,276.80 655.36655.36 2,621.442,621.44
77THTH 2,621.442,621.44 524.29524.29 2,097.152,097.15
88THTH 2,097.152,097.15 419.43419.43 1,677.681,677.68
99THTH 1,677.681,677.68 335.54335.54 1,342.141,342.14
1010THTH 1,342.141,342.14 268.43268.43 1,073.701,073.70
TOTALTOTAL 44,631.2144,631.21 8,926.258,926.25 35,704.9235,704.92
ADDIT.LADDIT.L 5,368.795,368.79 1,073.151,073.15 4,295.084,295.08
GRAND GRAND TOTALTOTAL
50,00050,000 10,000.0010,000.00 40,000.0040,000.00
DEPOSIT MULTIPLIER & DEPOSIT MULTIPLIER & CREDIT CREATION FORMULACREDIT CREATION FORMULA K= 1/rK= 1/r
K= Deposit multiplierK= Deposit multiplier
r= ratio of cash reserve to deposit r= ratio of cash reserve to deposit
LIMITATIONS OF CREDIT LIMITATIONS OF CREDIT CREATIONCREATION
ADEQUATE CASH RESERVEADEQUATE CASH RESERVE AVAILABILITY OF SECURITIESAVAILABILITY OF SECURITIES QUANTITY OF MONEY IN CIRCULATIONQUANTITY OF MONEY IN CIRCULATION ATTITUDE OF PEOPLE ATTITUDE OF PEOPLE POLICY OF THE CENTRAL BANKPOLICY OF THE CENTRAL BANK NATURE OF BUSINESS CONDITIONSNATURE OF BUSINESS CONDITIONS LEAKAGESLEAKAGES BEHAVIOUR OF OTHER BANKSBEHAVIOUR OF OTHER BANKS USE OF CHEQUEUSE OF CHEQUE
CLASSIFICATION OF BANKSCLASSIFICATION OF BANKS
1.1. COMMERCIAL BANKSCOMMERCIAL BANKS
2.2. INVESTMENT BANKS OR INVESTMENT BANKS OR INDUSTRIAL BANKSINDUSTRIAL BANKS
3.3. EXCHANGE BANKSEXCHANGE BANKS
4.4. CO-OPERATIVE BANKS CO-OPERATIVE BANKS
5.5. LAND DEVELOPMENT BANKSLAND DEVELOPMENT BANKS
6.6. SAVINGS BANKSSAVINGS BANKS
7.7. CENTRAL BANKSCENTRAL BANKS
BANKING SYSTEMBANKING SYSTEM BRANCH BANKINGBRANCH BANKING UNIT BANKINGUNIT BANKING
CORRESPONDENT BANKINGCORRESPONDENT BANKING GROUP BANKING GROUP BANKING CHAIN BANKINGCHAIN BANKING DEPOSIT BANKINGDEPOSIT BANKING INDUSTRIAL BANKSINDUSTRIAL BANKS MIXED BANKINGMIXED BANKING INVESTMENT BANKINGINVESTMENT BANKING NARROW BANKINGNARROW BANKING UNIVERSAL BANKINGUNIVERSAL BANKING LOCAL AREA BANKLOCAL AREA BANK