The Financial Bank

This is where a third category of economic agents: banks. Banks are the only agents who have the power to transform resources to short term demand deposits (current accounts) in employment over the medium to long term credit bank. Banks therefore establish the necessary bridge between households and businesses, historically they have played and still play an essential role in financing the economy.

Each bank has the right to distribute the form of credit virtually all of the money (but not all! Cf. Below) placed on deposit by clients on the accounts. But the credit distributed by the bank not necessarily invalidate the filing, which remains available to the client. There has thus creating money by the bank. These funds, awarded in the form of deposits, cash swell the banks and thus their ability to distribute new money, etc.. The deposits are funds, which themselves are deposits, etc .... This is called the "multiplier credit.

The power of money creation is obviously banks, and fortunately, not infinite. It is initially limited by the fact that only part of the credit granted will remain as a deposit. The rest will be converted to currency (banknotes) by withdrawals. This is to ensure the ability of banks to meet withdrawals that the central bank requires them to block a percentage of their deposits as reserves, not suitable for dispensing credit. The reserve requirement ratio is an instrument of control by the central banks of the quantity of money in circulation.

In addition, a company can not only finance the credit beyond a certain level of debt, financial expenses end up penalizing an intolerable results at which time the banks no longer willing to lend . Companies must also find ways of funding more long term financing that is becoming payable in the event of dissolution of the corporation: capital, or very long maturity of such bonds. The total capital and long-term debt now represent the so-called "capital" of a company.

The banks, especially banks, are also involved in financing long-term business, but it is not their primary purpose is rather to move money. To provide companies with capital, it requires economic agents ready to immobilize large amounts over long periods, for course of securing a profit: investors.