Crying depositors begging for banks to release their money have recently become commonplace in the Philippines.An average of 1 bank, can declare a "holiday" per week. Now, that's staggering!
Fortunately, the big banks, those that have branches all over the country, have remained afloat. It is the small banks, usually the so called “rural banks” that have gone “enveloped” --one at a time.
This situation is made worse by the local media. If one TV station would start a little news thread today, about a small bank that encounters some accounting glitch, then you'll expect the depositors of that small bank to flock tomorrow and demand a total withdrawal of their money. Now, this would surely prompt the bank to declare a holiday. You don't need an economic buff to know or predict that.
The banking principle is pretty simple: Depositor A makes a deposit, which the bank lends to depositor B. The bank earns the interest on it and will share a portion of it to depositor A, a very small portion. This means that there is literally no money in a bank. All they have are accounting books – keeping records on their customers deposits and listing the people to whom they lent it to. Of course each bank have to maintain say at least 10% of its total deposits for those depositors who may wish to withdraw anytime.
For more information on the banking principle visit these sites: The facts on the banks ability to create money and more debt may stun you...
1. http://www.informationclearinghouse.info/article18205.htm
2. http://www.youtube.com/watch?v=vVkFb26u9g8
3. http://www.whale.to/m/greaves1.html
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