Learn how banks really work

Banks are simple in principle — borrow short, lend long, keep enough capital and cash to survive being wrong — and fiendishly subtle in practice. These free lessons explain the real mechanics in plain English, with examples from history and from SejrBank, the banking simulator where you can try every idea yourself.

💰

How do banks make money?Net interest margin, fees, costs and credit losses — the four lines that decide a bank's profit.

🏛

What is the CET1 ratio?Bank capital explained simply: risk-weighted assets, buffers and why thin capital kills.

🚨

How bank runs happenFrom Northern Rock's queues to SVB's app-speed run, and what actually stops one.

📉

The inverted yield curveWhy short rates above long rates forecast recessions — and squeeze bank margins.

💀

Why banks failThe six classic killers, from property booms to rogue traders.

🌍

What is a G-SIB?“Too big to fail”: how global systemically important banks are chosen and regulated.

⏳

Interest-rate risk & durationWhy rising rates can sink a bank that never made a bad loan.

📐

Basel III explainedCapital, leverage and liquidity rules after 2008, in one page.

Banking glossary

Term	What it means
Balance sheet	What a bank owns (assets: loans, bonds, cash) and how it is funded (liabilities: deposits, borrowing — plus equity). Assets always equal liabilities plus equity.
Net interest margin (NIM)	Interest earned minus interest paid, as a share of interest-earning assets. The core of most banks' income.
CET1 ratio	Common Equity Tier 1 capital divided by risk-weighted assets — the headline measure of a bank's solvency.
Risk-weighted assets (RWA)	Assets scaled by how risky regulators judge them: riskier loans need more capital behind them.
Leverage ratio	Tier 1 capital divided by total exposure, with no risk weights — a simple backstop to the CET1 ratio.
Liquidity Coverage Ratio (LCR)	High-quality liquid assets divided by the cash a bank could lose in 30 days of stress. Must be at least 100%.
Duration	How sensitive a bond's price is to interest rates. A duration of 7 means roughly a 7% price fall for a 1 percentage-point rise in rates.
Non-performing loan (NPL)	A loan that has stopped paying (typically 90+ days overdue) or is unlikely to be repaid in full.
Provision / ECL	Money set aside for expected credit losses before they happen (IFRS 9 “expected credit loss”).
Cost/income ratio	Operating costs divided by revenue. Under 60% is lean; above 75% means costs are eating the bank.
G-SIB	Global Systemically Important Bank — one of roughly 30 banks whose failure would threaten the world economy, and which must hold extra capital.
Yield curve	Interest rates across maturities. Normally long rates are above short rates; when short rates are higher, the curve is “inverted”.

Try it in SejrBank: every term above is a live number on the CEO desktop — CoreBank shows your balance sheet and ratios, RiskWatch your curve and limits, TreasuryStation your liquidity. Play free.