Why do commercial banks need depositors to operate their business

Fed overnight window, interbank lending, asset sales, etc.

cheap capital. you give very very little interest or in most cases no interest. on top of that you can charge them fees.

Depositors are just creditors, businesses need financing.

shadow banking

Gains from wholesale banking (corporate banking, investment banking) & buyside trading can help reduce reliance on depositor financing.... though these days that's not as realistic.

LOL

D-Man:

What alternatives are there to commercial banks needing depositors to operate their business?

Mother of god...

facepalm

Bro. Bro. Bro. Brush up on your Mishkin. http://www.amazon.com/Economics-Banking-Financial-Markets-Update/dp/032…

Please ignore the stupidity of the question. I'm not an expert in the finance field, just help me out lol

Please ignore the stupidity of the question. I'm not an expert in the finance field, just help me out lol

Yeah dude, I agree with JS, Mishkin is a total D-bag

You're talking about investment banking activities then -- not commercial banks. Obviously advisory activities don't need depositors (e.g. GS, MS, any boutique)...but the question clearly wasn't about that. Moreover you added "buyside trading" and "corporate banking", both of which do heavily leverage the balance sheet.

Also, I spent two years in FIG banking so please don't tell me to do my homework. The simple answer is "fractional reserve banking"; I don't get why everyone on this site likes to show how smart they think they are and complicate things with special cases unrelated to the question.

During the financial crisis both GS and MS applied for their commercial bank status. JPM is already one. I slipped up when I said corporate banking, but there's no way one can argue that advisory activities can't help a commercial bank reduce its reliance on depositor financing.

I think the 2 years in FIG made you cranky, Basels not the most interesting read is it lol

They applied for commercial bank status, yes, though only to access the discount window -- they each have less than $50bn in deposits (I believe). JPM funds itself with a trillion dollars of deposits. Really not sure what point you're trying to make here. You might as well say that window washing businesses also reduce reliance on deposits....the question was: "Why do banks need deposits", not "What banking activities don't need deposits." Sure, we can make up all sorts of businesses that don't need depositor financing. The only financing alternatives were mentioned higher up -- fed borrowing, wholesale funding, repo, etc...