Saturday, April 4, 2009

international Bank lending (1)

in its coverage of money and banking ,your introductory economic course ,made the implicit assumption when examining banks balance sheets that loans and deposits of the banks were entirely domestic in nature .In other words,deposits (which are assets of the depositors and liabilities of the banks) placed into banks (and other depository institutions) were presumed to come from domestic citizens .These deposits provided checking account with the depositors could carry out economic transaction ,and savings and time deposit accounts from which the depositors could earn interest and thus provide for future consumption .the deposits provided funds from which the banks could,after satisfying bank legal reserve requirements ,make domestic loans (which are assets of the banks and liabilities of the borrowers) .however ,this simple ,straightforward textbook treatment has become less and less realistic over the past several decades ,as depositors now seek international outlets for their savings and banks increasingly seek international borrowers for their funds .in addition , the domestic banks themselves now often have many branches located in foreign countries.

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