Macroeconomics › Section N · Money and banking › Topic N.3
The role of banks
Banks stand between people who save and people who borrow, and they run much of the machinery that moves money around. Their balance sheet shows both why they are so useful and why a bank can fail in days.
In this topic
- Why banks matter
- Banks as financial intermediaries
- Maturity transformation
- The bank balance sheet
- Worked example: a bank's capital cushion
- How the value of loans is judged
- Two ways a bank goes broke
- Worked example: squeezed by rising rates
- Protection, and the danger of a run
- Common mistakes to avoid
- Key takeaways
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