ECON 1110 Lecture Notes - Lecture 18: Mortgage Loan, Reserve Requirement, Excess Reserves
Document Summary
A bank that acts as a banker to the commercial banking system and government. Publicly owned corporation, all of its profits are remitted to the government of canada. Consists of a governor, deputy governor, deputy minister of finance, and 12 directors. Banker to commercial banks: lender of last resort. Supporter of financial markets: set interest rates. Privately owned, profit seeking institutions that provides financial services. Clearing house: institution in which inter-bank indebtedness is computed and the net amounts are calculated. Competition for deposits of active among commercial banks. Commercial banks keep sufficient cash on hand to be able to meet depositor"s day-to-day requirements for cash. Bank run: a situation in which many depositors rush to withdraw their money with sometimes leading to the bank"s collapse. A fractional reserve system ensures that banks have the cash to meet depositor"s everyday cash requirements.