Banking 101

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.

This short video provides an introduction to a bank’s income statement and the concept of income statement in general.

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 […]

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 […]

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.

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.

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.

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 […]

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.