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78 votes
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Why do banks “park” their money at the European Central Bank?

The money has to be parked somewhere The big issue here is that all money has to be parked somewhere. Contrary to the popular misconception, there's no possibility to store digital money in your own ...
Peteris's user avatar
  • 3,353
34 votes

Why do banks “park” their money at the European Central Bank?

Banks are obligated to keep cash in the central bank following reserve requirements. The reserve requirement (or cash reserve ratio) is a central bank regulation employed by most, but not all, of the ...
aaaaa says reinstate Monica's user avatar
11 votes

Depositing or cashing a $2 Million check

There's nothing particularly special about a two million dollar cheque. While they aren't commonplace, the bank certainly has experience with them. Many ATMs won't allow a deposit of that size but the ...
ChrisInEdmonton's user avatar
8 votes
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Do central banks really dispose of old currency the way it's shown in movies?

Yes. In the United States, the money is shredded at Federal Reserve banks: Currency Destruction The authorization to destroy currency was given to the Federal Reserve Banks by the Treasury Department ...
Michael A's user avatar
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7 votes

Depositing or cashing a $2 Million check

Careful, this could be a scam. But if not.... There is no feasible way to turn that into cash without a very good reason that will require your banker to know you, as a depositor, reasonably well. ...
Harper - Reinstate Monica's user avatar
5 votes

Why do banks park their money at the european central bank instead of buying stocks?

Regulatory restrictions? Yes. You should read more about fractional reserve banking. Banks lend away the money people have deposited into the bank to yield interest. However, sometimes many ...
juhist's user avatar
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5 votes
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Do personal loans interest rates change based on central bank's interest rates?

When the Central Bank raises it's interest rate, it becomes more expensive for banks to borrow money from the Central Bank. Thus, they must charge more when lending it out (to both individuals and ...
RonJohn's user avatar
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4 votes

Do central banks really dispose of old currency the way it's shown in movies?

Michael A's answer is great, but because the question asks about incineration, I wanted to add some historical information. Prior to the early 1980's, the Federal Reserve did, indeed, use incineration ...
Doug Deden's user avatar
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4 votes
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Are the corporate bonds' interest rates set by central banks?

There may be some country out there that has that control of the corporate economy, but in the developed world, corporate bond rates are NOT set by the government. They are set by the corporation when ...
D Stanley's user avatar
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4 votes
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How has the Fed been reducing its balance sheet?

The balance sheet slightly increased recently, but the general trend has been toward smaller. You can see the balance sheet (and other great data) on the website for the St. Louis Federal Reserve: ...
Charles Fox's user avatar
  • 2,779
4 votes

Do personal loans interest rates change based on central bank's interest rates?

Broadly speaking, the rate on a loan can be thought of as composed as two parts-- the risk-free rate and the rate the lender requires to deal with the risk of the loan. So loan rate = risk-free ...
Justin Cave's user avatar
  • 27.3k
4 votes

Why do banks park their money at the european central bank instead of buying stocks?

Because banking customers wouldn't be happy if their "safe" deposits lost value. Bank's aren't in the business of investing their money - they are in the business of providing a "safe" place for ...
D Stanley's user avatar
  • 137k
4 votes

In layman's terms, what happens to the average Joe, in a "bank bail-in"?

One thing that's clear from those documents is that a bank can't just decide by itself to do a bail-in. The regulators do it to the bank. Imagine a bank is going bankrupt. If that happens, the ...
Simon B's user avatar
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3 votes

Interest rates and what does "discount" mean?

Discounting is simply the opposite of applying interest. Whereas applying interest finds the future value (FV) of an amount, discounting finds the net present value (NPV) of a future amount. FV = $...
Chris Degnen's user avatar
  • 9,877
2 votes

How to measure a currencies valuation or devaluation in relevance to itself

The measure of change of value of a currency in relation to itself is inflation (or deflation).
quid's user avatar
  • 49k
2 votes

What happens when the bonds bought with QE default?

For the US: Quantitative easing was the monetary policy where the central bank purchased government bonds in order to increase the money supply and encourage lending and investment. It lowered the ...
Bob Baerker's user avatar
  • 76.7k
2 votes

Depositing or cashing a $2 Million check

Will 2 millions dollars check to be cash? Will a bank convert a check to cash? In my experience, no. Even for small checks. Unless you happen to have a VERY good relationship with your banker (...
davmp's user avatar
  • 2,283
2 votes
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Interest rates and what does "discount" mean?

As @Chris Degnen says - it is kind of the opposite of an iterest rate. Lets see if I can give you some more intuition on this. Risk-free rate and risk premium Imagine you are making an investmenet, ...
Duke Bouvier's user avatar
2 votes

Can an individual borrow directly from the Bank of England (or any central bank)?

The answer is "because of the policies of the national bank". The chief example here is the ECB, which does lend money to private companies, but only in the form of open-market transactions. The ECB ...
MSalters's user avatar
  • 2,745
2 votes

Why do banks park their money at the european central bank instead of buying stocks?

In the US, banks do invest in the stock market sometimes - just like they lend money to people sometimes. However, they can only invest or lend some of their money, and they have to be very careful ...
Joe's user avatar
  • 35.8k
2 votes

Why do banks park their money at the european central bank instead of buying stocks?

Because stocks are only safe over very long-term periods. The bank has to prepare for the market to potentially downturn - significantly. And it needs to guarantee it retains enough cash value in ...
Harper - Reinstate Monica's user avatar
2 votes
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How can I know the current interest rates for corporate bonds?

Is this correct? Yes, that is correct. But look at the price of that bond. It's currently trading at 102% of its par value, which means that you'll pay 102 MXN to get back 100 MXN when it matures, ...
D Stanley's user avatar
  • 137k
2 votes

Are the corporate bonds' interest rates set by central banks?

Bonds don't pay interest, they pay a "coupon". The value of the coupon of a corporate bond is set by the corporation which issues the bond. They are free to pick any value they want (including zero). ...
Philipp's user avatar
  • 24k
2 votes
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Trying to understand the U.S. yield curve and global inflation

Yields at the long end need to be higher than at the shorter end to compensate investors for the risk of fixing their investment for a long time. Long term bonds expose the invester to both inflation ...
Manziel's user avatar
  • 7,442
2 votes
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How does QE reduce long-term interest rates?

"Long-term securities" (i.e. bonds) work like this: You're a big company wanting to expand. You write a bunch of IOU notes that say "I'll pay you back $100 in 10 years". Then you ...
Quitting Due To Antisemitism's user avatar
1 vote

How are sovereign bond interest rates determined?

New bonds are almost always issued in auctions. So the coupon rate is determined by the lowest rate that enough investors will take in order to sell whatever amount of bonds the country wants to sell....
Justin Cave's user avatar
  • 27.3k
1 vote

Why are EU banks hesitant to open an account and take our money?

Why do EU banks lose money on every EUR customers deposit into their accounts, even if they don't pay interest to customers anymore? Obviously, it costs billions to run a huge retail organization ...
Fattie's user avatar
  • 13.8k
1 vote

How can I know the current interest rates for corporate bonds?

That sounds impossible to me given the covid-19 crisis and having all central banks smashing interest rates. In addition to the other answer which explains that "yield" is truly ~7%, the central ...
base64's user avatar
  • 10.5k
1 vote

How much percent of the total Euro Zone Euros was artificially added through systems like QE this century?

According to the European Central Bank, the money supply for Jan 2020 is 13,052 billion euros. https://www.ecb.europa.eu/stats/money_credit_banking/monetary_aggregates/html/index.en.html
Croves's user avatar
  • 159

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