Even with the most cursory examination, lending can be seen as mostly a no-risk, ‘asset-secured’ business, in its simplest form seeing borrowers liable only for the original loan, which is secured against the borrower’s assets, plus interest.
When the loan is payed back, the bank profits in the accepted perception of what a bank does for a living – it gives low interest to depositors and takes a slightly higher interest from borrowers, their profit being the difference in interest rates. Continue reading “A Short, Sharp, Close Look at Ordinary Commercial Banking Profits”