Hallycon Academy

Course 2 · Beginner

How banks work

What really happens to the money in your account, how banks create money, what central banks and interest rates do, who protects your savings, what went wrong in 2008, and what to ask before you sign.

  • 8 lessons
  • 56 min
  • Free
  • A certificate when you finish

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Who it is for

For anyone with a bank account who wants to know what really happens to the money in it, who protects it and what to ask before signing.

The lessons

Each lesson has a short video, a quiz and links to learn more. The full lessons open after a free sign-in.

  1. Lesson 1: What a bank really does with your money

    7 min

    A bank takes deposits, lends money and runs payments. Your deposit is, in law, a loan you make to the bank.

    Key points

    • Banks earn mostly on the gap between what borrowers pay and what savers get.
    • Your money is not in a vault with your name on it: the bank owes it to you.
    • That is why deposit guarantees and bank supervision exist.

  2. Lesson 2: How banks create money

    7 min

    When a bank grants a loan, it creates new money in the borrower's account. When the loan is repaid, that money disappears.

    Key points

    • A new loan creates a new deposit; most money today is made this way (Bank of England, 2014; Deutsche Bundesbank, 2017).
    • Banks can't create without limit: rules, profit and the central bank's rates hold them back.
    • Repaying loans destroys money, which is why credit booms and busts move the whole economy.

  3. Lesson 3: Central banks: the bank of banks

    7 min

    The ECB with the national central banks for the euro, the SNB for the franc. What they do, and why they are independent.

    Key points

    • Central banks issue cash, lend to banks and set the base interest rate.
    • The ECB aims for 2% inflation over the medium term; the SNB counts inflation below 2% a year as price stability.
    • They are independent so that governments can't print money before an election.

  4. Lesson 4: Interest rates: the price of money

    7 min

    The central bank's rate flows into savings, mortgages and loans. Why savers got almost nothing for years, and what changed in 2022.

    Key points

    • The policy rate sets the floor for what banks pay and charge.
    • The ECB's deposit rate was negative from 2014 to 2022 and reached 4% in 2023 (ECB, historical).
    • Banks don't pass on every change at once: compare your savings rate with the central bank's rate.

  5. Lesson 5: Is my money safe in the bank?

    7 min

    Deposit guarantees, investor protection and what happens if a bank fails, in your country.

    Key points

    • Deposits are guaranteed up to €100,000 per person per bank in the EU, and up to CHF 100,000 in Switzerland (esisuisse).
    • Shares and funds held through a bank are kept apart from the bank's own assets; EU investor compensation covers at least €20,000 if they go missing.
    • Spread large sums across banking groups, not just across brand names of one group.

  6. Lesson 6: Bank runs: when trust disappears

    7 min

    Banks lend out most of what they hold, so they can't repay everyone on the same day. What happened in 2007 and 2023, and why runs now happen on phones.

    Key points

    • A bank can be sound and still fail if everyone wants their money at once.
    • In 2007 savers queued outside a UK bank; in 2023 a US bank lost more than $40 billion of deposits in one day, mostly online (Federal Reserve, 2023).
    • Central banks lend in emergencies, and deposit guarantees exist to stop panics.

  7. Lesson 7: 2008: the crisis that changed banking

    7 min

    Bad US mortgages, too much borrowing and too little capital. How a housing problem became a world crisis, and the rules that came after.

    Key points

    • Banks had borrowed and lent far too much against US housing; when prices fell, banks stopped trusting each other.
    • Governments rescued banks across Europe, including in Belgium, the Netherlands, Germany and Switzerland.
    • Since then banks hold more capital, the ECB has supervised the biggest euro-area banks since 2014, and investors in a failing bank pay before taxpayers ("bail-in").

  8. Lesson 8: What your bank sells you, and what to ask

    7 min

    Banks also sell funds, insurance-based savings and loans. How to tell advice from a sale, and four questions to ask before you sign.

    Key points

    • A bank adviser may be paid partly through the products you buy.
    • EU rules (MiFID II) require a suitability check and a cost overview before investment advice; Swiss rules (FinSA) work in a similar way.
    • Ask: total cost per year, how the adviser is paid, how you get out, and the 1–7 risk score on the key information document.

What’s inside

  • Short videos: About two minutes for each lesson
  • Quizzes: Three questions after each lesson
  • Calculators: Inflation, compound interest, an emergency fund and fees
  • Certificate: For every course you complete

The full lessons, videos and quizzes open after a free sign-in: your name, email, mobile number and a PIN. No card, no obligation.

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General financial education. Hallycon Academy does not manage money, sell investment products or give personal advice. Examples in the lessons promise no return.

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