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We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.
The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.
These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.
When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?
Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.
Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.
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Tuesday, August 05, 2008
Banque Centrale Populaire Consolidates Activity Abroad With New Trade Finance Solutions From Misys
Comtex
LONDON, August 5, 2008 /PRNewswire-FirstCall via COMTEX/ ----Banque Centrale Populaire (BCP), one of the largest banks in Morocco, has strengthened its trade finance offer to corporates with the new trade finance solutions from Misys, the global application software and services company.
The extension of the longstanding partnership with Misys has allowed Banque Centrale Populaire to introduce the latest version of Misys Trade Innovation and benefit from the front-office award-winning solution Misys Trade Portal. The integrated solution allows the Bank to expand its foreign trade financing operations effectively and provide better products and services to its customers.
Through the deal, BCP enriches its offer by giving businesses access to a new range of services through Misys Trade Portal. In implementing the solution online, the bank enables importers and exporters to connect seamlessly with its platform, by providing better control and better visibility on international commercial transactions. In addition, it will consolidate back-office operations with the improved version of Misys Trade Innovation.
Olivier Berthier, Head of Product Management, Misys Trade Services, adds, "We are delighted to be able to extend our relationship with BCP in Morocco, which is building up its trade finance business to cater for increased volumes and demands from its customers. With our support the bank will be able to maintain its position at the front of the regional trade finance industry and expand rapidly into new markets."
Misys Trade Services provides more than 190 customers with solutions for all their trade finance needs, making it the world's best-selling trade finance system provider.
About Misys plc
Misys plc (FTSE: MSY.L), provides integrated, comprehensive solutions that deliver significant results to organisations in the financial services and healthcare industries. We maximise value for our customers by combining our deep knowledge of their business with our commitment to their success.
In banking and treasury & capital markets, Misys is a market leader, with over 1,200 customers, including all of the world's top 50 banks. In healthcare, Misys is a market leader, serving more than 110,000 physicians in 18,000 practice locations and 600 home care providers. Misys employs around 4,500 people who serve customers in more than 120 countries.
We aspire to be the world's best application software and services company, delivering results for the most important industries in the world.
Misys: experience, solutions, results Contact us today, visit: http://www.misys.com For further information please contact Edward Taylor Global Head of Public Relations Misys Banking +44(0)20-3320-5530 edward.taylor@misys.com Sebastian Mathews Financial Dynamics +44(0)207-269-7158 sebastian.mathews@fd.com
SOURCE Misys plc
Copyright (C) 2008 PR Newswire. All rights reserved
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