How banks make money - UK retail banking ft. Sarah Kocianski

5min watch

In this video, our Head of Research, Sarah Kocianski, unpacks exactly how banks make money - with the handy edition of a super cool lightboard!

Fractional-reserve banking, the most common form of banking practiced by commercial banks, involves banks accepting deposits from customers and making loans to other borrowers - while holding in reserve a fraction of the bank's deposit liabilities. The vast majority of interest made on loans is kept by the bank, and then a small amount of savings rate interest is given back to the customer for keeping their deposit with the bank.