[haberman]

Call me crazy but I thought the idea is that banks would use deposits to fund loans and kick some of the profit back to the account holder in the form of reasonable interest rates.

That seems capital efficient to me, but it's apparently a quaint relic of the past now that eternal 0% interest rates are the norm.

I'm reminded of the scene from It's a Wonderful Life where George Bailey explains to all his account holders why they can't all withdraw their money at once, because it's being put to productive use by their fellow townspeople: https://youtu.be/iPkJH6BT7dM?t=49

[spiralx]

Banks don't use deposits to make loans though, that's a widespread misconception which is perpetuated by concepts such as 'fractional reserve banking'. In the modern economy bank lending is simply adding a number to someone's account and adding an equal number to the bank's loan sheet.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

Simply put a bank with zero deposits could still lend money, the only constraints are risk and regulation.

[dleslie]

The banks still do this; they leverage deposits to back the loans they provide.

However, they have little to no impetus to provide a reasonable interest rate on savings accounts; they'd much rather pay the absolute possible minimum the market (and regulation) will allow, and pocket the rest as profit.