Similar In Structure Of Traditional Banks But Serves Different Institutions

Similar In Structure Of Traditional Banks But Serves Different Institutions

Money Center Banks in Brief

These banks are structured in the same manner as the traditional banks are, but the only change is that borrowing and loaning tasks are done with the following institutes:

  • Normal banks
  • Governments
  • Large firms

Money center banks that are financial organization and branches that are a delegate of such organizations usually will not loan money to customers and neither will they borrow from them.

Let us understand in depth

The major economic centers like Hong Kong, London, Tokyo and New York is the place where generally the money center banks are situated. Such banks are associated with a financial system that is national and international with the huge balance sheets they have. Cryptocurrency can be traded nationally and internationally using Crypto CFD Trader.

Let us understand with an example

Let us list a couple of banks that have huge money center banks in the United States

  • Citi
  • Wells Fargo
  • Bank of America
  • JP Morgan

Above-mentioned are just a few among many banks. All these banks had to struggle financially when there was a financial crisis in the year 2008, but the U.S. Federal Reserve entered during this crisis which was able to bring mortgages back with the help of three stages of quantitative easing.

The United States’ homeownership spiked to 70% in the year 2004 and in the last quarter of 2005 homeownership price started falling. This fall in the price led the U.S. Home Construction Index to reduce to 40% in the year 2006. During this time it was difficult to resist this high rate of interest by the people who were subprime borrowers, furthermore, they started to fail to pay their loans. By the time it was 2007 a lot of subprime loaner started filing for bankruptcy. All this led to rippling effect on either financial industry of the United States and this obviously hit several money center banks forcefully.

During the phase of quantitative easing, there was a stable stream of money to all such financial institutes. With the help of this, they were able to derive new loans and mortgages which supported universal economic retrieval.

However, when the ceasing of QE plan happened, a lot of them had a concern that the growth of money center banks will happen organically if it doesn’t have any support. They thought so because the charges applied on loan and mortgage interest rate were the main source of income of these banks.