a) Let us take a look at the manner in which the traditional bank adds value to the customer.
e) The bank's basic job is risk absorption- it takes money, which has a lot of attached risk, and provides the customer an assured rate of return.
d) Further, as only a small portion of the actual deposit base is retained with the bank in a liquid form, the very survival of the bank lies in building enough trust with its clientele so as to prevent the occurrence of a sizeable chunk of simultaneous customer withdrawal (a run on the bank).
b) The ability to retain deposits, in itself, is not enough to ensure long-term survival and growth.
c) The ability to deploy invested funds into productive economic activity at a higher rate of return, hence contributing to the prosperity of both the economy and the institution, is the other loop in the banking cycle.
