Re:The digital pound: A new form of money for households and...
by neffy on Wednesday February 08, 2023 @09:24PM
(#34718971)
It's statistical multiplexing essentially. To create a loan a bank performs the double entry book keeping operation:
[debit loan, credit deposit]
Which creates a loan instrument on the asset side, and creates a matching deposit in the borrower's account. When the borrower repays capital on the loan, the operation is reversed.
Old time banks would have a roughly 1:1 ratio of loans to deposits, these days because banks are also borrowing from other entities, that can ratio can get a bit squirrel.
[debit loan, credit deposit]
Which creates a loan instrument on the asset side, and creates a matching deposit in the borrower's account. When the borrower repays capital on the loan, the operation is reversed.
Old time banks would have a roughly 1:1 ratio of loans to deposits, these days because banks are also borrowing from other entities, that can ratio can get a bit squirrel.