> If the bank doesn't take over the deposit in the source bank, then their customer doesn't get paid. At which point they will close their account and move to the source bank. That's a deposit outflow they won't want to have.
The destination bank can demand to withdraw that balance. And they typically do that with the net flows at the end of the settlement period.
(And they don't withdraw physical currency these days. The 'withdrawal' comes in the form of a transfer of electronic central bank reserves.)
> Reserves don't exist in aggregate. Central banking is a collateral optimisation of correspondent banking.
No? This is easiest to see in a gold standard system: your physical gold are your reserves.
In typical modern fiat system, the reserves are account entries at the central bank (and vault cash, but that's a small-ish amount).
Private commercial banks can create 'money' via their normal commercial operations. But they can't create central bank reserves that way, nor are they allowed to print central bank notes.
> There was no such thing as reserves in the UK banking system for three hundred years, for example.
Citation needed. And also an explanation of exactly what you mean by reserves.
(Btw, talking about the 'UK banking system' over the last three hundred years already makes me very suspicious of your argument. During most of that time, Scottish banking differs remarkably from English banking. So there are not many blanket statement about the 'UK banking system' that are true.)
The destination bank can demand to withdraw that balance. And they typically do that with the net flows at the end of the settlement period.
(And they don't withdraw physical currency these days. The 'withdrawal' comes in the form of a transfer of electronic central bank reserves.)
> Reserves don't exist in aggregate. Central banking is a collateral optimisation of correspondent banking.
No? This is easiest to see in a gold standard system: your physical gold are your reserves.
In typical modern fiat system, the reserves are account entries at the central bank (and vault cash, but that's a small-ish amount).
Private commercial banks can create 'money' via their normal commercial operations. But they can't create central bank reserves that way, nor are they allowed to print central bank notes.
> There was no such thing as reserves in the UK banking system for three hundred years, for example.
Citation needed. And also an explanation of exactly what you mean by reserves.
(Btw, talking about the 'UK banking system' over the last three hundred years already makes me very suspicious of your argument. During most of that time, Scottish banking differs remarkably from English banking. So there are not many blanket statement about the 'UK banking system' that are true.)