Could not get in as previous
Could not get in as previous user Simondav, so created new account.This does not disprove the fact that banks collectively can create money when they lend. I am not sure if Metro Bank is a member of Real Time Gross Settlement (RTGS) yet. As of early 2012, 46 banks were members of this, and Metro bank may be using one of these existing members to process it's payments – in other words it might be like a peer to peer lender (for example Bank on Dave in Burnley) which do not create money. Metro Bank is probably part of the RTGS system, but it's deposits in the short term will have increased much more than other banks, because people have transferred money from the perceived "bad" banks like RBS and Barclays to a fresh, new bank with so called ethics. The above point by ALB only looks at one bank in isolation (Metro in this case), and the big banks that are in the RTGS system (have reserve accounts at the Bank of England which they use to settle immediate payments between themselves) created more than £1 trillion of new money in the ten years from 1997 by lending it into existence. I have described earlier how new lending creates new deposits elsewhere in the banking system, and a given bank needs only enough to meet immediate payments, which is very much less than it's deposits and loans. That is why it is called fractional reserve banking. Banks are now required to hold more capital as a buffer after the financial crisis, and new money (approx £350 billion) has also been created since 2008 by the Bank of England through the process known as quantitive easing, mainly to help repair the banking system after the excessive lending and debt build up in the boom years. If you wish to disagree with notable people like ex Bank of England governor Mervyn King then fine, but I would trust his insight into the workings of the system.