They also use international reserve assets , like gold, or international reserve currencies , like the dollar. Banks act as middlemen between savers and borrowers. They accept deposits from savers and use those deposits to make loans to borrowers. Domestic banking is heavily regulated, whereas international banking is not. Because they are not restricted by regulations, international banks can usually offer depositors and borrowers better terms than can domestic banks.
Banks create money by making loans up to the amount of their excess reserves.
The banking system can increase the money supply by the deposit expansion multiplier times the excess reserves in the system. Economic Resource Links Copyright Houghton Mifflin Company . All Rights Reserved.