What is a loan for adjustment?

Edit loan is a short -term loan provided between the central bank of the nation and Komerční banka. These loans help commercial banks to maintain liquidity and are not to be a rescue rope to save the bank and therefore a short -term life of the loan. Most countries have a relatively complex banking industry based on a number of loans provided between banks. The central bank is responsible for determining fiscal or monetary policy, which will provide a stable interest rate, sufficient money supply and the ability to lend money to individuals and investors. Reiserve fractional banking allows commercial banks to lend part of the money they receive in customer deposits. For example, the central bank may require banks to maintain only 10 percent of the total resources in the treasures of the organization. This means that commercial banks can lend 90 percent of money deposited to individuals and businesses. This can create the need to modify the modification if the bank experiences a large number of cash withdrawals. Rather than calling loans on payday ináb, Komerční banka generates a short -term loan with a central bank.

The next reason for the modification loan is when the money supply is tight and the bank cannot generate sufficient capital from lending money. Central banks can set high interest rates, which will increase loan costs. While this new loan may have several outstanding loans that have exhausted the cash offer of the organization. Because individuals and businesses cannot get new loans for financial purposes, they can withdraw money from their savings or account checks. A tight money supply means that Komerční banka will most likely need to modify adjustment from the central bank to help provide cash for these selections. Net add to the money supply because the bank has already posted this money.

short deadlines using the Central Bank loan process may not lead to immediate repaymentSTI. Komerční banka can use a bill of exchange that gives the bank for a long time to repay the central bank. This provides enough time to the Komerční banka to collect the main and interest payments from previous loans to repay the adjustment adjustment. In classical economic theory, this form of tight money and fractional system of the banking system can create a bubble. When the directional note is due and Komerční banka cannot repay, the bank may have to call loans or find other capital sources to pay credit, leading to the decay of the house of the card.