BANKING AFFAIRS

Detailed explanation-1: -Banks generally make money by borrowing money from depositors and compensating them with a certain interest rate. The banks will lend the money out to borrowers, charging the borrowers a higher interest rate and profiting off the interest rate spread.

Detailed explanation-2: -They make money from what they call the spread, or the difference between the interest rate they pay for deposits and the interest rate they receive on the loans they make. They earn interest on the securities they hold.

Detailed explanation-3: -Interest rates are influenced by the supply and demand for loans and credit. Central banks raise or lower short-term interest rates to ensure stability and liquidity in the economy. Long-term interest rates are affected by the demand for 10-and 30-year U.S. Treasury notes.

Detailed explanation-4: -Banks create new money whenever they make loans. The money that banks create isn’t the paper money that bears the seal of the Federal Reserve. It’s the electronic money that flashes up on the screen when you check your balance at an ATM. Banks can create money through the accounting they use when they make loans.