What do banks do with the money you deposit in a current or savings account? Even though the money is yours, the bank is not going to keep it in a safe and do nothing. It's going to make your money work! Banks are intermediaries who help people to save or lend money on a long-term (to buy a house, set up a business) or short-term basis. Banks use the money deposited by the savers to lend to the borrowers. What happens if all the savers want to withdraw their money? Then the bank is in trouble because it won't have enough cash to give back to the savers. This might happen when the savers don't trust their bank any longer. To try to avoid this situation, governments and an international banking committee called the Basel Committee have established rules to prevent banks from taking too many risks and to protect savers. The Hong Kong Monetary Authority has defined three types of banks. They are banks, restricted licence banks and deposit-taking companies. The authorities make sure banks have enough cash to meet the requirements of customers who want to withdraw their savings. This is called the liquidity ratio. In Hong Kong, banks should keep 25 per cent of cash or similar liquid assets (assets that can be easily turned into cash) to back their loans. A bank is also required to have enough capital (its own money) compared to its assets. This calculation takes into account the various risks a bank's assets may imply. Finally, banks must report their financial results to the authorities who can examine them and detect risks and frauds.