tag:blogger.com,1999:blog-8764541874043694159.post7053737950545281166..comments2024-03-19T07:27:21.299+00:00Comments on Coppola Comment: To lend or not to lend?Frances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-8764541874043694159.post-87441892248671472702012-04-26T12:38:41.928+01:002012-04-26T12:38:41.928+01:00Before lending a book do you note how friends or l...Before lending a book do you note how friends or loved ones handle books, weighing whether they are trust worthy to borrow a work? Or are you a throw caution to wind lender, not worried at all about the state of the book upon return.Bank Lending Criteriahttp://businessloans.doobizz.com/bank-loans-2/2011/12/bank-lending-criteria/544/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-20430863387578536612011-06-06T19:02:21.470+01:002011-06-06T19:02:21.470+01:00Rick, I would be the last person on this earth to ...Rick, I would be the last person on this earth to suggest that bank lending doesn't increase the money supply. It does. Massively. Far more than it should. My point is that capital reserve requirements do NOT restrict bank lending. They raise the cost, which - as Worstall points out in his comment, above - does mean that bank lending should fall due to reduced demand.<br /><br />Banks do not lend against available reserves. They lend, and then obtain the reserves to support the lending they have ALREADY DONE. Intra-day - and, I suspect, intra-regulatory reporting periods - banks FAR exceed their nominal capital reserve limit.<br /><br />The risk they take is that having lent so much they are then unable to fund their reserve accounts. Prior to Northern Rock collapse reserve account funding in the UK was always done through interbank lending, with the BoE only providing emergency funds. However, the BoE now has a permanent discount window facility (similar to the Fed's facility, which has existed for a LONG time), which "tops up" reserve deficits if banks don't obtain funding through interbank borrowing. <br /><br />I hope this is clear?Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-71027165462796477952011-06-06T18:49:54.827+01:002011-06-06T18:49:54.827+01:00Not sure I'm quite following you here.
I unde...Not sure I'm quite following you here.<br /><br />I understand the bit about reserves not being a consideration when banks make lending decisions but are you also saying that bank lending doesn't increase the amount of money in the economy?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-32697725787048968042011-06-06T11:19:07.520+01:002011-06-06T11:19:07.520+01:00"What higher capital reserves do is increase ..."What higher capital reserves do is increase the cost of borrowing, not reduce the availability of credit."<br /><br />Which means that your point makes no difference. Higher prices equals lower demand: we still get a contraction of credit/money supply out of higher capital requirements for banks.<br /><br />Please note that my snarl was at those who demand both an expansion of credit and higher capital reserves: the two are not compatible.Tim Worstallhttps://www.blogger.com/profile/13161727860817121071noreply@blogger.com