Under the two-tiered system, a central bank exclusively supplies the public with central bank money consisting of cash and central bank deposits, and private banks provide deposits through credit creation based on the central bank money.
After the reform, when the present crisis is stabilised, the commercial banks that have been nationalised can be denationalised, and can compete freely in the profit-making market for borrowing and lending already existing money.
This was due to(1) the weak demand for funds to be used in economic activities against the background of the significant decrease in business fixed investment; and(2) the active utilization of the credit guarantee system by private banks, although they were basically maintaining their cautious lending stance.
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