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How do commercial banks create credit?

Level:
A-Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 21 Mar 2021

Old-fashioned textbooks are wrong! Banks create credit by extending loans to businesses and households – pure and simple! They do not necessarily need to first attract the savings deposits of customers. This short revision video looks at bank lending and some background data on commercial bank loans and overdrafts in the UK in recent years.

How do commercial banks create credit?

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