credit, lending and borrowing, liquidity ratios and capital ratios, stability of financial institutions
When it is done well, banking makes a positive difference for individuals, businesses and society. The existence of banks means that savings are looked after securely, finance is provided that enables people to buy their own homes, and businesses can invest in new equipment. At the macro level, they allow capital to be efficiently allocated. However, mistakes can have severe consequences for individuals and lead to broader financial crises. To appreciate what causes these benefits and risks, we need to explore how banks work and what makes them special organisations.
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