Banking!

[hanbone]

Anyone on here work in a bank or have knowledge of banking laws?

[hanbone]

lol does anyone have a wife or girlfriend that works in a bank?

[howlin]

my budds girlfriend works at a bank ,what do you need ?mabye i can find out for you.

[just_dave]

Might not be too difficult to find on the net. What are you looking for specifically?

[hanbone]

Just wondering if anyone knows what the reserve requirement is for canadian banks?

[Alberta Bigbore]

the Girlfriends mom works at a bank for yeeeeeears.

[hanbone]

If your girlfriends mom understands the question, get her to explain it to you

[rugatika]

http://www.answers.com/topic/reserve-requirements

[hanbone]

I kinda already knew the reserve ratio lol i was just trying to bring light to the topic. Thanks for lookin though did you know before you searched the web?

[rugatika]

Originally Posted by hanbone

I kinda already knew the reserve ratio lol i was just trying to bring light to the topic. Thanks for lookin though did you know before you searched the web?

I thought it was 10% for some reason. Not sure where I got that number from. Maybe high school...did it used to be 10%???

[hanbone]

Yeah, I think over the years its changed a few times all depending on who is leading the country. The bankers no doubt pressure the fed gov to push it down as low as it can go. So finally its at 0!!! lol I have talked to probably ten banks, in a few different cities. Most of the managers when i ask em, either dont even understand the question. Or they do and beat around the bush, or get even a little hostile. Ask why i would even ask a question like that. Royal in Grande Praire told me he couldnt answer for security reasons lol Only one bank, answered truthfully and openly.

[North of Owlseye]

Yeah I thought it was 10% too. Maybe it was from the US. I think most people think it is dollar for dollar. I was very suprised it was zero in some of the better economies like Canada.

[Grizzly Adams]

Apparently ZERO. Deposits are guaranteed by the federal government. Used to be 35,000., but I think that has been increased.

http://gilliganscorner.wordpress.com...-requirements/


Grizz

[Svejk]

Your average retail banker will not know this; it has very little to do with our daily work and we have no training about it.

Here is an interesting footnote from the Bank of Canada Review about it though:

"14. This change—the reduction of the required reserve ratio to zero—was
less radical than it might appear. By the mid-1990s, the high demand for currency to stock automated teller machines, which also, of course, could be used to satisfy reserve requirements, combined with the stagnant demand for
demand deposits, meant that the existing ratio was barely binding."

Ref: p 12 http://www.bankofcanada.ca/en/review...-06/redish.pdf

Yeah, with every loan I approve; my bank account is worth a little less.

[hanbone]

So Svejk, would you say that even if there was a 99 % reserve requirement there is still money being created, brand new credits(money)? If so, then a 300 000 $ mortgage is a full brand new created 300 000 $ that did not have to come from the banks reserve?

[hanbone]

Would be awesome to talk to someone with deep insight on economics, monetary system, banking, etc. The public school system failed me just a little, or i just wasnt very interested lol But now i m as curious as ever, and from what ive gathered from the web and books. Either im learning from conspiracy theories, or since the late 1800's people have been gettin bent over.

[slough shark]

The big 5 banks in Canada have somewhere in the ballpark of 9-12% Tier 1 capital reserve. They were pressured by the government to increase lending to help the economy and at the same time maintain/increase their capital reserves in order to pass stress tests. Most of the banks either issued bonds or stock in order to increase their reserve requirements to be well above the minimum. Offhand I believe the actual requirement is 7% although I would have to confirm that as these things are subject to governmental change.

[Lonnie]

not sure if this even a plies to the post but years a go the banks were allowed to lend $22 for every dollar that was on diposit

[geo]

There is so much misinformation out there on this "evil" fractional reserve nonsense. A little bit of knowledge is so dangerous!

Banks don't lend out $22 for every $1 they have. They don't create money. Money creates itself. Let me educate...

Me, geo, goes to local bank and deposits $500 because I'm mega-rich. The bank likes my money. They pay me 0.005% on it because they are so generous. Then they take my $500 and lend it to hanbone because he needs some money to go take Economics 101 at the local college, as he's very interested in banking. Hanbone isn't going for another few months so he leaves the $500 in his account. The bank lends out that $500 again to slough shark. There is now $1,000 in circulation, technically.

The whole system works because not everyone withdraws/demands their loans at the same time.

The "tier 1 capital" ratio that you hear about is actually the banks equity or near equity... what the owners of the bank have invested. Tier 1 capital is the buffer if the value of the bank's portfolio (loans to slough shark and hanbone) go fall in value. The loan portfolio could decline 10% in value before my deposits as geo are in any danger.

So for all the liabilites of a bank, mostly deposits, the bank needs to have that many assets (loans) PLUS an extra buffer called the tier one capital.

So, unfortunately, there is no vast conspiracy. Banks can't make money up.

If you want to find a beef with banks though, determine what their effective interest is on loans or credit cards once fees and other charges are factored in. Or how much that $10/mn fee waiver for keeping $5k in your account is really worth.

Or the fact that the guys that sell investment products are commissed salesmen... financial "advisors" don't exist in a bank. Inherent conflict of interest.

These are real problems. Reserve ratios and that sort of stuff are an internet conspiracy created and maintained by those with a little bit of information and a misunderstanding of economics/banking.

[Svejk]

The Required Reserve Ratio is 0% but everyone is holding more anyways in ATMS etc.

Plus depending on their tier they have other different requirements to maintian status and stay in business.

Here is a start for those interested: http://mises.org/daily/4499.

The system of fractional reserve banking (because there is reserve even if it is not required specifically) does create money and everytime I activate a loan I am creating a tiny fraction of a $CDN. And it is a real $CDN which will be one day printed or minted. If the Required or Incidental Reserve Rate is 7% then a $100 deposit can create $1,428.57. If the Required or Incidental Reserve Rate is 99% then $100 can create $101.

Part of the trick to wrap your mind around it is that money is not wealth: it is a medium of exchange. As the Money Supply increases, say on a mortgage on a house (debatable that is a real asset but anyways), the Value of the house would increase by the same amount as well (monetary inflation).

I read up on this stuff alot in university (instead of the required readings) and eventually stopped as it didn't help me make decisions. Maybe a rich man will disagree. My advice would be to learn what it is and move on with life unless you have $$$$.

[Okotokian]

Originally Posted by hanbone

Would be awesome to talk to someone with deep insight on economics, monetary system, banking, etc.

Well you have come to the right place. That's why I joined the AO board.