Commercial Bank Credit Creation Simulator
Commercial Bank Credit Creation Simulator
Watch how a commercial bank creates a new bank deposit when it issues a loan. The key point is not that physical cash appears, but that a new bank deposit balance is created on the bank’s books at the same time a matching loan asset is recorded.
This simulator is showing the creation of bank deposit money (spendable account balances), not the printing of paper cash. The borrower receives a newly created deposit liability of the bank.
Loan Controls
Credit directed toward existing assets may bid up asset prices without directly increasing the production of goods and services.
Loan Creation Theater
The visual sequence below is the heart of the lesson: the borrower’s promise becomes a bank asset, and a matching deposit is created at the same time.
The borrower promises to repay the bank according to the loan terms.
Assets
Liabilities
The borrower now has a spendable bank deposit on the liability side of the bank’s books.
Source Check
This section shows what did and did not happen when the bank issued the loan.
Step-by-Step Accounting
The loan begins with a signed repayment obligation.
The promissory note becomes a loan receivable on the bank’s balance sheet.
The bank creates an equal customer deposit.
The borrower can now spend newly created bank money.
What Just Happened?
Simulator Ready
Click Create Commercial Loan to watch the accounting process unfold.
Focus on the two key simultaneous entries: a new loan asset for the bank and a matching new deposit liability.
Credit Allocation Effects
Awaiting Loan Creation
The destination of credit influences whether new bank-created purchasing power tends to flow toward existing asset markets or productive activity.