Posted: Apr 01, 2013 9:43 pm
Coppola wrote:The accounting entries for a new bank loan for £10,000 are as follows:
Customer loan account: £10,000 DR
Customer deposit account: £10,000 CR
It is not possible to distinguish in any meaningful way between a deposit created from a bank loan and a deposit made by the customer.
Coppola is massively oversimplifying here. The accounting entries for a customer loan are not as above. They are rather more complicated. For one thing he has omitted the funding legs of the transactions. But let's leave that and tackle his main point.
The sentence above makes no sense. If Coppola is trying to say that a bank can create a loan and deposit for a customer simultaneously, then of course it can. Big deal. A deposit account is money and if a bank created that money by lending it in the first place, then it's money. And his point is?
If he's claiming that banks can and do create loans and deposits at will without a customer in the equation, he's talking bollocks.