Let's take a look at a commercial bank's balance sheet to understand how it works, and a great place to start is to think about deposits. So corporations, retail investors, and governments will need somewhere to store money, and banks accept deposits and in return offer interest. The bank's aim of course is to lend this money out in the form of loans and charge interest to clients. A spread is charged and the bank undertakes risk management to ensure that the money is lent out prudently. No bank is gonna lend out money if they don't think they're gonna get that money back. However, there are some unforeseen events and so there has to be some headroom between the money lent and the deposits, which is gonna absorb losses if the loan base declines. The headroom is the equity of the investment bank and this is now regulated. A bank is a direct intermediary taking a spread between depositors and borrowers. The largest cost of this is the personnel who manage the risk down the middle of the diagram.