Banking theory

Banking theory explores how banks operate within the economy. Banks act as financial intermediaries, collecting deposits from customers and lending money to individuals and businesses. They manage risks, such as defaulting on loans, and help facilitate payments and economic stability. Central banks, part of the broader system, influence the economy by controlling money supply and interest rates. Overall, banking theory examines how banks create credit, maintain financial stability, and support economic growth while managing risks inherent in financial intermediation.