This short video provides an introduction to a bank's income statement and the concept of income statement in general.

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A Bank's Income Statement

The banking system operates as a fractional reserve system in which only a portion of the banks deposits are held in reserve.

The Fed sets a lower limit for the fraction of deposits that must be held in reserve: the reserve requirement ratio. Since banks earn profit by lending at higher interest rates than they give on deposits, the reserve requirement is generally a binding limit. 

This video explains the fractional reserve banking system and the money multiplier effect.

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Fractional Reserve Banking System

The banking system as a whole can create an amount of money that is a multiple of deposits. The bank lending leads to new deposits in the banking system and a multiplier effect on the money supply. In a check-able deposits only system (no cash), the money supply equals bank reserves divided by the reserve ratio.

M = 1/ reserve requirement (RR) Currently: M = 1/0.1 = 10 M  x  bank reserves = money supply 

The size of the money multiplier is reduced when funds are held as cash rather than as check-able deposits. The maximum deposit expansion possible (i.e., max growth in money supply) is excess reserves times the money multiplier.

This video how "money" is created in a fractional reserve banking system. It provides M0 and M1 definitions of the money supply.

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Banking: Multiplier Effect and the Money Supply

A bank note is a note issued by a bank representing its promise to pay a specific sum to the bearer on demand and acceptable as money. It is often known as a bill, paper money or simply a note.

This video explains the concept of a bank note and how it works.

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Banking: Introduction to Bank Notes

This video explores how bank notes and checks are used as a unit of exchange as an alternative to gold. It explains, in plain english, the concepts of how payments work through banks.

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Banking: How Bank Notes and Checks Work?

This simple video from Khan Academy explains how a bank gives out loans to people without actually losing their equity. The video provides an helicopter view of the core banking system which involves deposit taking and lending.

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Banking: How Banks Give Out Loans?

Reserve requirements are the amount of funds that a bank  must hold in reserve against specified deposit liabilities.

The dollar amount of a depository institution's reserve requirement is determined by applying the reserve ratios specified by the central bank of a country. This is also referred to as the "cash reserve ratio" (CRR). 

The reserve ratio affects the money supply in a country.

This video explains the concept of reserve ratio and how reserve requirements limit how much lending a bank can do.

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Banking: Understanding Reserve Ratios

This video explains the concept of leverage from a bank's perspective. It talks about what leverage is, and why it is good and bad. It also explains the relation between leverage and insolvency.

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Banking: Introduction to Leverage

<p>This video provides an introduction to how a bank works and how they make money. It takes simple examples to explain the core business of taking deposits and lending money</p>



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How a Bank Works?

Banking 101

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COURSE

Banking 101

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