Coupon Accepted Successfully!

 Depository Institution


      Thrift institutions

      Mutual Funds

Their Functions:


      Create liquidity: Use short-term deposits to make long-term loans.

      Act as financial intermediaries: Lend at lower cost than borrowers could achieve by seeking out individual lenders.

      Pool default risks: Hold a portfolio of loans & monitor their risks.


Risk management by Depository

      Proportion of various types of loans

      Percentage of deposits

      Types of deposits

      Share of owner’s capital

      Deposit expansion multiplier = 1 / required reserve ratio.

      Potential increase in money supply = Deposit expansion multiplier * Increase in excess reserves.


Test Your Skills Now!
Take a Quiz now
Reviewer Name