Nigeria, July 24 -- Narrow banking is a concept first proposed by the Chicago School economists and was brought up again during the savings and loan crisis. It advocates for the separation of main banking functions, encompassing two primary categories of institutions:

Narrow Banks: These financial institutions offer fully guaranteed deposits with premium liquid assets, such as Treasury Bills or Central Bank Reserves. Functionally similar to money market funds, they are primarily designed for payment purposes.

Merchant Banks: These entities engage in lending through equity or long-term bonds, thereby insulating themselves from the risks associated with bank runs.

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