Banks do more than hold deposits. They connect savers with borrowers, process payments and evaluate credit risk. Their lending decisions can influence whether businesses expand, households buy homes and entrepreneurs launch new firms.
This makes banking both useful and fragile. A bank may be profitable when loans perform, but it can face stress when asset values fall or depositors demand cash quickly. Financial regulation exists partly because banking problems can spread beyond individual institutions.
A stable financial system therefore supports the real economy by allowing credit to continue flowing through periods of uncertainty.