Reforms in China’s Monetary Policy Reforms in China’s Monetary
(V) Actual Operation of Banks—Dynamic Analysis
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| (V) Actual Operation of Banks—Dynamic Analysis
We have analyzed the static lending possibilities of a bank, and now we will consider the following dynamic situations. In a bank, the monetary base flows out and flows in. The distribution of the monetary base among banks is the key factor determining a commercial bank’s lending capability based on its monetary base. Two important activities determine the distribution of the monetary base among commercial banks. The first one is the interbank transfer of clients’ deposits, including banks’ efforts to absorb the cash held by residents. As mentioned above, since more cash is withdrawn than deposited, such efforts can only slow down the speed of withdrawing cash and have limited impact on the monetary base. The second one is the direct monetary base trading among banks, namely, the money market transactions. In reality, a commercial bank’s clients can transfer their deposits to other banks so that the bank’s monetary base will flow to other banks. Similarly, other banks’ clients may also transfer their deposits to this bank, and thus adding to the bank’s monetary base. Given that banks have almost the same deposit inter- est rates, and some countries have deposit insurance systems, and people have confidence in the central bank as the lender of the last resort, commercial banks should have deposit-absorbing capacity. If a bank cannot maintain a stable amount of deposits, the bank may have gone bankruptcy already. Therefore the transfer of clients’ deposits will distribute the monetary base in a balanced way. Deposits transfer largely depending on clients’ intention. The intention of individual clients may have great uncertainty whereas that of clients as a whole is more predictable. However, since there is still uncertainty in deposits transfer, it may affect the distribution of the monetary base among com- mercial banks. Therefore there is an interbank monetary base trading sys- tem within which banks can participate according to their own needs—the money market, including interbank lending and repo, and etc. The highly efficient money market leads to a more balanced distribution of the monetary base among commercial banks. If such distribution becomes more balanced, the activity an individual bank will be similar to that of banks as a whole. Especially for large banks, they can underwrite a larger amount of loans than the amount of their mon- etary base, and meanwhile their deposits will increase and the total amount 32 ● Reforms in China’s Monetary Policy of the monetary base will remain unchanged. An significant mistake of the conventional money theory is the assumption that clients will always with- draw or transfer all the money cash they received from bank loans. Moreover, banks regard such behaviors of their clients as the entire business activities of an individual bank. Therefore, the maximum lending amount is equal to the amount of the monetary base held by banks, and the available loans of an individual bank in excess of the amount of the monetary base held by the bank are transferred to the other banks. In reality, in their operation, banks have to take into account the impact of large amount cash withdrawal or transfer by individual clients on the monetary base instead of separately con- sidering the impact of each loan on the monetary base. Banks need to think about the relations between the monetary base held in hand and the money. tải về 1.53 Mb. Chia sẻ với bạn bè của bạn:
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