I will probably add in some reading references for my book. What I described here is pretty much bank accounting 101, with some added market commentary. I think the Bank of International Settlements has some introductory texts.
This article is somewhat out of date, but it covers the basics:
I think the key point to make about bank capital is that it is purchased with bank liabilities (deposits). Since loans create deposits, an increased loan book increases the amount of bank deposits that can be wooed and exchanged for bank capital.
(Much as they can be wooed and exchanged for MBS - which has the added advantage of shrinking the balance sheet).
Some book suggestion where studying this theories? Thanks
I will probably add in some reading references for my book. What I described here is pretty much bank accounting 101, with some added market commentary. I think the Bank of International Settlements has some introductory texts.
This article is somewhat out of date, but it covers the basics:
https://www.frbsf.org/education/publications/doctor-econ/2001/september/bank-capital/
I think the key point to make about bank capital is that it is purchased with bank liabilities (deposits). Since loans create deposits, an increased loan book increases the amount of bank deposits that can be wooed and exchanged for bank capital.
(Much as they can be wooed and exchanged for MBS - which has the added advantage of shrinking the balance sheet).
As ever it's about the price, not the quantity.