![]() ![]() ![]() Of course, the money generated will gradually disappear with the repayment of the loan. As soon as the client withdraws an amount from the account, either in cash or through the interbank payment mechanism, the money enters the economic cycle. Banks put the credit created through a loan to a client into the client’s demand deposit account. Credits are granted thanks to existing deposits, but credits also create deposits. There is a two-way relationship between deposits and loans. This capacity involves money creation, coming from the bank-lending process. Banks keep money in deposits on behalf of other agents, but their activity is mostly characterized by the capacity to use these deposits, especially for financial investments. Ongoing banking activities include cash and accrual processes that take place within and across banks. ![]() In addition to summarizing potential research directions, this paper provides market participants with a strategy fact-sheet.īanks play a unique role in the modern economy by issuing claims that work as money, facilitating payments across economic agents, increasing the monetary base through credit creation, holding fractional reserves, and lending to each other. Furthermore, they address factors that influence banks’ strategies to maintain their lending relationships and mitigate default risk. Then, our detailed study findings on 160 recent works indicate elements that affect central banks’ strategies in reducing systemic risk and preventing financial contagion, as well as managing the interbank network in a way that makes it more stable and resilient to shocks to conserve market confidence. To identify the most significant factors influencing actors’ strategies, we first present the five underlying patterns discovered through a bibliometric analysis of 609 scientific documents in this field: contagion and systemic risk, stability, market structure, relationship and trust, and default and failure. The aggregate uncertainty derived from stochasticity of the overall level of the demand for short-term liquidity and the likelihood of domino failures of tightly connected competitors who lend themselves vast amounts of liquidity explains the complexity of decisions in this environment. As the reallocator of liquidity from banks with excess to banks with a deficit, the interbank money market (IMM) plays a fundamental role in the proper functioning of the banking system and the economy as a whole. ![]()
0 Comments
Leave a Reply. |