Flows of funds in banking
e-Bank is a regular commercial bank. Two of its main functions are to collect deposits and to lend money. Its clients can be households (the retail market), firms (the corporate market) or the public sector.
e-Bank also deals with other commercial banks on the interbank market, the place where banks lend or borrow from one another. The interbank lending rate is called the ask rate, while the interbank borrowing rate is called the bid rate.
Finally, in many countries, banks are required to maintain a fixed percentage of their deposits in an account with the central bank. This is called the reserve requirement (Figure 1.1).
Figure 1.1. The flow of funds in banking
The balance sheet of e-Bank is a picture of the company ...
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