https://padlet.com/davidclark81/l1m74u2xp6dz4xfu en-us 2022-11-17 17:04:21 UTC 2025-04-10 17:54:19 UTC hello@padlet.com davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388670816 2022-11-17 17:13:28 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388670816 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388671262 I chose this picture because it breaks sources of a banks revenue - loan fees, mortgages, capital markets and asset management, services charges, and net interest income - into an easy to digest pie chart.]]> 2022-11-17 17:13:43 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388671262 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388672296 One thing I learned about how banks make money that surprised me the most is how easy it is for banks to increase the total money supply (without increasing the amount of physical cash in circulation), i.e. how they can easily turn a deposit of $1000 into a total amount of upwards of $10000 through fractional reserve banking.]]> 2022-11-17 17:14:19 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388672296 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388673003 I just recently got a credit card and have been researching on how to start building a good credit score early. I have also been looking into some investment services provided by my bank, such as mutual funds.]]> 2022-11-17 17:14:42 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388673003 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388673710 I think the most important thing to pass on would be the importance of paying loans and credit cards off. Loans and credit cards are big ways that banks make money due to very high interest rates - the sooner you pay off loans, the better, and it's always best to pay off credit cards before the payment is due so that you don't have to pay any interest.]]> 2022-11-17 17:15:09 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388673710 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388674824 This Padlet goes over the origin of banking; how banks create money; how banks make profit; and limitations to the profit they make.]]> 2022-11-17 17:15:54 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388674824 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675022 https://www.youtube.com/watch?v=fTTGALaRZoc]]> 2022-11-17 17:16:02 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675022 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675151 Out of the over 30,000 banks worldwide, the top ten alone account for roughly $25 trillion USD alone. Banks started around the 11th century, and the word "bank" actually comes from the Italian word "banco", which translates to "bench" (where currency exchange would typically happen before banks existed).

Today, banks are typically in the risk management business (e.g. lending credit - some people will end up defaulting, so it's a calculated risk of who they lend to). People store money in banks and in turn receive a small amount of interest. Banks then lend out some of that money at a high interest rate to make money.

Other sources of income for banks include accepting saving deposits; trading currencies; investing; and the credit card business. Many modern-day banks have abandoned the traditional role of offering long-term saving products in favour of high-risk short-term gains.

Many new models of providing financing are appearing - e.g. new investment banks (charge yearly fee, no commissions on sales); credit unions (provide same financial services as banks but focus on shared value rather than maximizing profit); crowdfunding (allows for risk to be spread over a very wide array); and microcredits (many small loans handed out in developing countries).]]> 2022-11-17 17:16:08 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675151 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675359 I chose this video because it provides a short history of banking including its origin; the video goes over a bit about how banks make money; the video mentions how banks have changed in modern times; and lastly, the video also talks about new models of how financing can be provided.]]> 2022-11-17 17:16:14 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675359 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675572 https://www.youtube.com/watch?v=O5DaC1Ujrrg]]> 2022-11-17 17:16:24 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675572 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675712 Money gets deposited into a bank account, where it earns a small amount of interest. Banks then take the deposited money and lend it out to businesses and people at a high interest rate. The difference between the interest charged and the interest they pay to depositors is the bank's profit. In order to create more money, banks need to attract more deposits. More deposits = more loans.

Banks use fractional reserve banking. The banks need to keep a certain percentage of deposits and then are able to loan out the rest. The reserve percentage is mandated in some countries (e.g. in the USA the reserve percentage is 10%). In Canada, there is no set reserve requirement.

The main limitations to banks creating money are profitability (when making a loan, the bank must take into consideration the cost of running the bank and the loss if the customer is not able to pay back the loan) and capital limits (amount of money banks are required to keep in the bank instead of distributing).

]]> 2022-11-17 17:16:29 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675712 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675840 I chose this video because it goes a lot more in depth about how banks make money than the first video does. 

This video also goes into a little bit of detail about limitations to the amount of money that banks can make.]]> 2022-11-17 17:16:34 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388675840 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388676034 https://www.youtube.com/watch?v=gd8B-zrMSYk

]]> 2022-11-17 17:16:41 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388676034 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388676209 Each new deposit into a bank by a customer creates both an asset and a liability for the bank. The bank gets money in their reserves (asset), however the depositor could come and ask for all of that money at any given time (liability).

The bank then creates new assets by keeping a fraction of the money deposited and then loaning out the rest of the money at a high interest rate (fractional reserve banking). Fractional reserve banking helps increase the total money supply without actually increasing the amount of physical cash in supply. For example, Person A deposits $1000 into Bank 1. Bank 1 then keeps $100 of the $1000 and loans out the other $900 to Person B. Person B deposits that $900 into Bank 2. Bank 2 then keeps $90 and loans out the remaining $810 to Person C, etc. That original $1000 has now turned into $2710.

The total amount of money that can be created is (amount deposited)x(1 / percentage kept in reserve). For example, if $100,000 is deposited and 10% is kept in reserve each time, a total amount of roughly $1M can be created.]]> 2022-11-17 17:16:47 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388676209 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388676349 I chose this video because it gives more insight into fractional reserve banking and also talks about total monetary creation.]]> 2022-11-17 17:16:53 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388676349 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388676647 Banks who issue credit cards profit off of credit cards in many ways:

Credit Interest Charges
Calculated by (annual percentage rate / 365)*(amount due) per day. Also usually compounds per day, which makes credit card interest very profitable for banks.

Credit Fees
Payment late fees, cash advancement fees, foreign exchange fees, balance transfer fees, etc.

Merchant Fees / Payment Processing Fee
A portion of this fee goes to the credit card company (e.g. Visa); a portion goes to the bank which issues the card; a portion goes to the credit card processor; a portion goes to the merchant account provider; and a portion is sometimes paid to the payment gateway (e.g. Apple Pay).

]]> 2022-11-17 17:17:05 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388676647 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388676778 I chose this video because it talks about how banks make money off of credit cards instead of talking about fractional reserve banking. The video explains all about the different ways banks make money off of credit cards, as well as how some of those fees get split up.]]> 2022-11-17 17:17:11 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388676778 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388677041 https://cba.ca/bank-revenues-and-earnings-profits]]> 2022-11-17 17:17:23 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388677041 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388677264 The income of Canada's six largest banks was over $46B in 2019, and they paid $12.7B in taxes to the government.

A bank making profit equals a stable bank. Profits expand a bank's capital base, which in turn allows the system to maintain stable and ensure the security and safety of deposits. 

The selling of products, services, and loans generate revenue. Net income is left after funds for expenses, taxes, and credit losses has been set aside.

Bank revenue can be sorted into two categories: net interest income and non-interest income. Net interest income is the difference between the interest a bank earns on loans and the interest paid to depositors. Net interest income accounts for approximately 52% of bank revenue. Non-interest income accounts for approximately 43% of bank revenue and comes from services such as trading, assisting in issuing new equity financing. and commissions on wealth management. Personal service fees account for the remaining 5%.]]> 2022-11-17 17:17:33 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388677264 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388677410 I chose this website because it gives figures for bank income and taxes paid. The article also gives insight into revenue vs net income and talks about the two categorizations of a bank's income and the approximate percentage of income from each.]]> 2022-11-17 17:17:39 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388677410 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388677714 The majority of a bank's income comes from fees (maintenance, credit card, ATM, foreign transactions, overdraft, interchange, etc.) and interest (mortgages, student loans, credit card debt, payday loans, etc.).

Income also comes from capital market services such as investment management and asset management. Capital markets services are diverse but inconsistent, hence why banks rely more on profit from interest and fees.

Banks offer two major types of services - investment services and commercial services. Commercial banking includes deposit accounts and loans; while investment banking includes finance and wealth advice and management for high-profile clients such as governments and large-corporations.]]> 2022-11-17 17:17:50 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388677714 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388677863 I chose this website because it explains the difference between commercial and investment banks. The website also lists out the different types of fees and loans.]]> 2022-11-17 17:17:55 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388677863 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388678025 https://cannect.ca/2018-canadian-banking-profits/

]]> 2022-11-17 17:18:01 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388678025 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388678210 Canadian banks make more than $3.2K profit per household in Canada. High net interest margins results in more profit (net interest margin is the difference between interest paid to savings accounts and the interest earned on loans).

Banks have been decreasing the interest rate on savings accounts while also increasing interest rates charged on loans, resulting in an increased spread / margin.

For example, TD reported a net interest margin of 1.68% over 2017-2018 and credited their earnings growth partially to an increase in spread. 

In 2018, Canada's six biggest banks made $45.5B, up 7.4% from the year before.]]> 2022-11-17 17:18:07 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388678210 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388678370 I chose this website because it mentioned the profit per household in Canada, which I thought was an interesting figure. The website also mentioned the term 'net interest margin' and explained what it is. Lastly, the website also mentioned the annual revenue for Canada's six biggest banks in 2018. the previous website I chose disclosed the revenue for 2019 and it was $500M more than the website four's figure for 2018.]]> 2022-11-17 17:18:13 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388678370 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388678471 I chose this website because it reiterates the different ways banks make money, and it also mentions investments and commissions.]]> 2022-11-17 17:18:18 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388678471 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388678717 Traditional banks make money from a variety of different sources depending on the type of bank and its target customers. Banks primarily make money on interest earned on loans lent to residents and businesses. The money lent out comes from depositor funds held in different accounts, such as savings accounts.

Large banks may also have different divisions, such as a commercial banking division, a retail banking division, and an investment banking division.

As stated in other summaries, banks mainly make money off of fees and interest. Banks also make money off of advisory services, commissions (partnerships that pay a commission if the bank refers customers), and investments.]]> 2022-11-17 17:18:29 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388678717 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388679325 2022-11-17 17:18:55 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388679325 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388679635 I chose this picture because it organizes sources of income (loans, credit card interest, product fees, other products/services) and sources of outcome (interest paid to savings account, interest paid on money they borrow) in a very blunt and simple way.]]> 2022-11-17 17:19:07 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2388679635 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2399181913 https://www.youtube.com/watch?v=7D5LUWS9agE]]> 2022-11-27 17:06:34 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2399181913 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2399198081 https://www.moneyunder30.com/how-banks-make-money]]> 2022-11-27 17:30:40 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2399198081 davidclark81 https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2399266491 https://www.creditkarma.com/money/i/how-do-banks-make-money]]> 2022-11-27 19:36:34 UTC https://padlet.com/davidclark81/l1m74u2xp6dz4xfu/wish/2399266491