A Theoretical Analysis on Efficiency of a Narrow Bank System

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The purpose of this research is to analyze the efficiency of the marrow bank system rigorously by constructing a theoretical model.The curried banking system which is based on a partial reserve system has intrinsic inside instability dread abad match of liquidity between the asset side and liability side of the balance sheet of banks. Recently instability of the whole banking system has been argued frequently as banks are constricting a net work system based on advanced information technology.The public nature of banks is usually pointed out when banks are in trouble. Especially, the network of banks works as a payment system of the economy and the failure of one bank affects other banks instantly, which in turn affects the whole payment system. This mechanism validates the intervention of authorities into the banking system. However, we do not have any consensus on the suitable form of intervention. This kind of issue awaiting solution initigates this research.One of the results obtained is that the narrow bank system is suitable regarding the efficiency of resource allocation contrary to usual understanding. This research also suggests the desirable form of banking regulation.