BRIAN KANTOR: Banks are different — their stability cannot be taken for granted
For managing the payments system at considerable expense they deserve support should they become unstable
Banks are different to other financial intermediaries. They do more than borrow and lend. They manage the payments system, without which any modern economy is unable to function. The payments system cannot be allowed to fail and banks deserve support should their stability come into question. As was apparent in the US recently, this cannot be taken for granted
Banks maintain the payments system by supplying deposits to their clients and transmitting many of them on demand. They bear the operating costs of doing so, which are considerable. They have to remain viable businesses, so they have to cover their operating costs with transaction fees and, more importantly, by lending long and borrowing short — realising net interest income, essential to their profits and survival...
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