These extracts bring out,

These extracts bring out, once again, the matter-of-fact assumption by practical bankers (as opposed to armchair banking theorists) that banks need 'funding' to make loans and don't just conjure up out of thin air the money they lend..Banks get the money to fund their  lending from two main sources: deposits (retail) and short-term borrowing from the money market (wholesale). The loan-to-deposit ratio shows how much lending is funded by deposits compared with borrowing. It is not a measure of how much a bank can lend out of thin air over and above its deposits, as currency cranks misunderstand.The higher this ratio is the more a bank is relying on borrowing. For it to be too high is considered bad practice because funding from borrowing is more risky than from deposits. The risk is that the rate of interest a bank has to pay for this will rise unexpectedly (as happened after the crash of 2008) and squeeze the margin between that rate and the rate of interest on the loans the bank itself makes, the source of a bank's income as a bank. This is what happened to Northern Rock and, apparently, to HBOS too, putting them in dire financial difficulty.It does seem rather unfair for the authorities to single out some bank executives for doing what they were all doing before the crash, taking advantage of the boom conditions to make as much profits for their shareholders as they could. It will happen again in the next boom whatever the regulations now being put in place after the horse has bolted. Making as much profits as you can while the sun shines is in the nature of capitalism.