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2 years ago

How a bank gets its money quizlet?

1 answer:

5 0

The spread, or the difference between the interest rates they pay on deposits and the interest rates they get on loans they make, is how they generate revenue. On the securities they own, they receive interest.

Diversified banks generate revenue in a variety of ways, but at their foundation, banks are thought of as lenders. Banks typically generate income by borrowing funds from depositors and paying them back at a predetermined interest rate. By charging the borrowers a higher interest rate and making money off the interest rate spread, the banks will lend the money to borrowers.

Furthermore, banks typically diversify their lines of business and make money through nontraditional financial services like investment banking and wealth management. However, the following categories can roughly be used to describe the money-generating activities of banks:

interest income

revenue from capital markets

fee-based revenue

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