How banks make money. In a traditional commercial bank, the bank's deposits, which are cash from customers, are a liability and that the bank is responsible to return the cash on demand. That liability creates a funding source, a pile of cash that the bank now needs to invest to generate a return. Return must be great enough to cover the interest it is paying on the deposit. But banks are also corporations that have expenses and overhead and investors who want a return on capital. Banks will therefore put that capital to use in order to generate a return to satisfy shareholders and generate profits to stay in business. Those uses, which in this case are loans, have varying degrees of risk. Banks are also heavily regulated, so there are many rules to follow. Interest income is generated from the loans made and interest expenses paid to depositors. Fee income might also come from added on fees to the loan process or other areas of banking, such as treasury management or advisory. Lastly, as banks are no longer the static, old-fashioned lend-and-hold institutions of old, they now have active loan trading desks, which are moving paper around and generating income as well.