This may result in extra reserves, which commercial banks cannot use to extend their credit lines.

Credit quotas imposed early this year have left Chinese commercial banks with 2 3 of extra reserves.

Commercial banks could hold them without setting aside any capital reserves, and the European Central Bank (ECB) accepted them on equal terms at its discount window.

Commercial banks have to be bailed out by governments then governments have to be bailed out by commercial banks.

When the Fed buys Treasury bonds or other assets like mortgage backed securities, it creates reserves for the commercial banks, which the banks deposit at the Fed itself.

The difference, which banks offset through transactions in the inter bank currency market, has a significant impact on China s foreign exchange reserves, but is not equivalent to the net change in foreign exchange reserves during the same period.

Instead, banks have hoarded the increase in the monetary base in the form of idle excess reserves.

In the end, both have to be bailed out by central banks.

It may pile up in bank reserves or savings accounts, or it may produce asset bubbles.

Indeed, the credit channel is frozen and velocity has collapsed, with banks hoarding increases in base money in the form of excess reserves.

And, in Europe, the sovereigns must address firmly their financing problems through credible fiscal consolidation. In addition, to support growth, banks must have sufficient capital buffers.

Bank capital is not cash reserves that must be set aside it is unborrowed money that can be used to make loans.

At the end of 2012, China s commercial banks held 6.4 trillion in core capital and 1.5 trillion in non performing loan provisions, for a risk cushion of roughly 8 trillion.

They note that the enormous expansion of commercial banks reserves has not led to a comparable increase in the supply of money and credit.

Amar Bhide suggested that commercial banks return to narrow banking.

Nevertheless, financial investors are increasingly worried that inflation will eventually begin to rise, owing to the large expansion of commercial bank reserves engineered by the United States Federal Reserve and the European Central Bank (ECB).

Commercial banks and other financial institutions were encouraged to contribute to the fund.

India reported that it has reserves of 221 billion tonnes of coal and indicated that coal would be the mainstay for commercial energy for the foreseeable future.

Commercial banks loaded with weaker countries government bonds became potentially insolvent.

Critics point out that plain old bad lending by the commercial banks accounted for 90 of banks losses.

Banks on the list must keep higher reserves, and maintain more liquidity, reflecting their status as systemically important institutions.

The reason is simple while base money is soaring, the velocity of money has collapsed, with banks hoarding the liquidity in the form of excess reserves.

The commercial banks main losses were incurred in the residential and commercial housing market.

Those increased deposits at commercial banks were, by definition, an increase in the relevant stock of money.

The next challenge will be to push for a restoration of bank capital, so that commercial banks can once again lend for longer term investments.

To protect commercial banks from risking their own solvency (and the whole country s solvency besides) once again, Richard Robb suggested that a small tax on banks short term debts be imposed in order to deter banks from over borrowing.

Third, commercial banks also lost heavily in these dealings, wiping out much of their capital.

The credit channel also is not working properly, as banks have hoarded most of the extra liquidity from QE, creating excess reserves rather than increasing lending.

Commercial banks must deposit with the central bank 21.5 of deposits as reserves.

But financial repression s winners commercial banks and SOEs will face new challenges.

At the same time, finance takes on quasi fiscal functions by excluding government fiscal deposits government deposits in the national treasury, commercial banks fiscal savings, and central treasury cash managed through commercial bank deposits from the money supply.

As a result, Chinese commercial banks can operate longer with a higher RRR than their counterparts elsewhere.

Elimination of Glass Steagall then allowed commercial banks to encroach on the investment banks other traditional preserves.

They will make loans on the basis of commercial criteria rather than relations with big state owned companies.

It created so called Central Bank Bills, which commercial banks are supposed to buy voluntarily.

The link between bond purchases and the money stock depends on the role of commercial banks excess reserves.

Central banks held only an estimated 46 of their foreign exchange reserves in dollars in 1992, but that share rebounded to almost 70 by 2000.

Conglomerates allow financial institutions to diversify their business, and combining with commercial banks allows investment banks to fund their operations using relatively stable deposits instead of fickle money markets.

The family sector has found difficulties of access to credits, due to lack of earnings and the conditions needed or required by Commercial Banks.

Commercial banks, flush with central banks money, advanced credit for many unsound investment projects, with the explosion of financial innovation (particularly of derivative instruments) fueling the lending frenzy.

At the same time, the IMF s data indicate that the vaunted renminbi is not yet among the top seven currencies in terms of central bank reserve holdings.

Governments brought commercial banks under prudential regulation in exchange for public provision of deposit insurance and lender of last resort functions.

These strategies typically involve far more risk and sophistication than the activities of traditional commercial banks.

By extending well beyond their comfort zone, today s central banks face unusual brand management risks.

In a forthcoming paper, Patrick Bolton extends this view to look at bankers and at the Glass Steagall Act, which forbade commercial banks from engaging in a wide variety of activities classified as investment banking.