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Commercial banking

QuestionAnswer
Banks lend savers’ deposits to people who need to borrow money.
They also create credit by lending the same original deposit several times.
How much credit banks can create depends on the reserve requirements.
Before lending money, banks have to assess the risk involved.
The interest rate on a loan depends on how risky it is for the bank to lend the money.
Banks always need liquidity, so they can’t lend all their money in loans with long maturities.
Created by: Gergana Hristova
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