The Banking System

What is the banking system?

A banking system is a group of institutions that provide financial services such as accepting deposits from people, approving loans to borrowers, offering checking and savings accounts and providing credit and debit card services to their customers.

So how does the banking system work?

Banks use the money that people deposit into their accounts to make out loans to other people or businesses. When they lend out money the banks charge an interest on those loans from borrowers. This is the way that banks make money from the borrowers.