Some Central bankers continue to believe that first banks receive deposits and then create loans…

Reflecting on the recent speech by official of RBA where he criticised the long held view of banking: that banks receive deposits and then create loans.

Came across this recent speech by Salvatore Rossi, Dep Governor  of Bank of Italy:

As President Pellicanò has already said, this is an important day. We are celebrating the fiftieth anniversary of Credit Day, an annual occasion for taking
stock together of the world of credit and the role it plays in Italy. Italy has changed greatly over the last half century, at least in some respects. In 1968 Italy was emerging from the economic miracle that had turned it into a modern country and was heading for stormy years of social and political turbulence.

Today, it is still one of the leading advanced economies, though it is threatened by decline. Fifty years ago the credit system was almost entirely public and now it is almost all private.

Yet banks continue to do essentially what they have always done: they collect deposits from a vast array of savers and use these resources to make loans to a smaller group, consisting mainly of firms. Italy’s banks find themselves at a crossroads today, as loans may no longer be their fundamental prerogative.

Hmm..

 

One Response to “Some Central bankers continue to believe that first banks receive deposits and then create loans…”

  1. ashok singhania Says:

    murgi phele ayi ya anda.

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