Banking - Key Concepts Explained (Financial Economics)

Here is a short selection of key concepts used in the study of the economics of commercial banks and credit creation.

Banking credit

• An arrangement with a bank for a loan, or bank lending in general

Bank

• A business that makes its profit by paying interest to people who keep money there and charging a higher rate of interest to borrowers who borrow money from the bank

Bank capital

• Bank capital is the value of the bank's assets minus its liabilities, or debts

Bank reserves

• Money and liquid assets (such as securities that can be sold quickly) held by banks in order to meet withdrawals by customers

Banking system

• The way banks work together to make payments, make money available

Co-operative bank

• A bank that lends money, collected from its members, at low rates of interest

Internet banking

• The services provided by banks that only exist on the Internet

Shadow banking

• Non-deposit taking financial intermediaries including investment banks, hedge funds