When you transfer money from one bank to another, are they just moving virtual bits around? Is anything backing those transfers? What prevents banks from just fudging the bits and “creating” money?

Question

When you transfer money from one bank to another, are they just moving virtual bits around? Is anything backing those transfers? What prevents banks from just fudging the bits and “creating” money?

In: 1559

Answer 1

I would assume these banks collect proof of transaction and settle them by a certain date every year or such

Most banks are settled under a central bank, bank 1 and bank 2 settle transactions under the faith of central bank. They probably don’t actually transfer cash because of the system continuity.