Weakness Of Commercial Banks

Intermediation is a major weakness in financial self-regulation system. Commercial bank is the special corporation that manages currencies. It is the largest loaner and debtor as the agency of credit and payment and the organization that creates credit tools. Sometimes in live, many customer deposits their money into the bank. The deposit is the basis of the banking business. Commercial bank general have been heavily dependent on making loans to generate profit. For example, “Suppose ＄100 is deposited in the banking system. The bank retains ＄10 to ensure it can meet anticipated demands of depositors for cash, and makes (it hopes) profitable loans of＄90. The recipients of the loans typically deposit the＄90 back in the banking system. On the basis of the new

However, once interest rates began to rise and housing prices started to rapid drop.the borrowers were unable to refinance.” （Justin Lahart, 2007）Hence，commercial banks will face to many risks as chased profits. Those risks will cause an adverse impact on the financial system. In the financial system, Because producers can create more wealth. At the same time, they also need abundance fund to manage and develop their enterprise. Therefore, producers always be a mainstay. Howells. Bain said that “producers often dominate the regulatory process since the activities of regulators are much more important to each of the relatively small number of producers than to each of the much large number of the relatively small number of producers than to each of the much large number of consumers.”(Howells.Bain, p365, 2007) Agency would rather to pay attention to the profit from the producers. For customer, that lacks fairness. In especial for non-professional customer who has not experience in investment, so they deposit their money into the