Why do banks loan money to people and companies?

Banks lend money to companies to encourage them to use business checking and savings accounts, financial advisory services, tax preparation services and even investment banking services in a different branch of the bank. Banks borrow and lend money in the interbank lending market in order to manage liquidity and satisfy regulations such as reserve requirements. The interest rate charged depends on the availability of money in the market, on prevailing rates and on the specific terms of the contract, such as term length.

The banks lend money to customers at a higher rate than they pay to depositors or than they borrow it. The difference, known as the margin or turn, is kept by the bank. For example, if a bank pays 1% interest on deposits, they may charge 6% interest on loans. Another way banks make money is through charging fees.

Money is created when banks lend. The rules of double entry accounting dictate that when banks create a new loan asset, they must also create an equal and opposite liability, in the form of a new demand deposit. In this sense, therefore, when banks lend they create money.

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answer: the risk-return relationship. generally, the higher the potential return of an investment, the higher the risk. there is no guarantee that you will actually get a higher return by accepting more risk. diversification enables you to reduce the risk of your portfolio without sacrificing potential returns.

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wages and job opportunities have grown slowly since the recovery began five years ago, while technology continues to change the nature of work. while many workers enjoy opportunities unimaginable a generation ago, many others feel the economy has left them b

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