RE: what is the definition of banking system in economics?
Banking system is the structure, organization and regulation of money supply and interest rates.
The U.S. banking system consist of 12 Federal Reserve Banks that regulate the activities of affiliated banks in their own districts
The US, the banking system is rather complex, yet highly effective. The first part of the US banking system is the treasury. The treasury prints, mints, and stores currency. The next part of the US banking system is the Fed. The Fed buys and sells government bonds, changes the federal funds interest rate, and changes the reserve requirements. The Fed has the greatest control over the money supply. The next part of the US banking system is the Federal Reserve Banks. These are banks’ banks where banks make deposits, withdrawals, and loans. In return, the Federal Reserve Banks check the reserve requirements of the other banks and allow the Fed to implement changes to the money supply through the federal funds interest rate. The final part of the US banking system comprises all of the other non-government banks, savings and loans, and credit unions. These are the banks that the public uses. The interdependent hierarchy that is established through the central banking system in the US allo ws the money supply and inflation to be carefully controlled, as well as the fiat money to maintain value over time.