Business and savings banks also perform other services. They provide guarantees that a borrower fulfills its obligations, they store and manage valuables, rent out bank accounts and transfer securities. In addition, they advise their clients on financial matters.
Banks conduct payment intermediation
Today, most payments in the community are made by transfers from one bank account to another, by check, giro or debit card. During the course of a day, funds are added to the accounts of a bank. The cheap loans do not come by themselves, and you can squeeze interest rates if you play the banks against each other or come up with good arguments when you show up for an interview.
These transactions have their counterparties in the movement of deposit accounts in other banks. Differences in payments and transfers between the banks are settled by daily settlements in the central bank.
Banks can create means of payment
When a bank pays out a loan to a customer, the customer will usually place a significant portion of the amount in their bank account. The following rule therefore applies to the banking system as a whole: lending creates deposits. You can usually take out bank loans with floating or fixed interest rates. With a fixed interest rate, with a bank loan you will not get any surprises along the way.
As the individual bank receives only a small portion of the deposit, the rule will not apply to this. The bank’s lending base will only increase with the portion of the deposit deposited into it, but for all banks as a whole, the rule will apply. Since payment settlement can take place by transferring funds from one deposit account to another, bank deposits can be considered as means of payment. By increasing their lending, the banking system can increase people’s access to means of payment; banks create means of payment.