What prevents a bank from simply going into their computer system and adding some zeros to their bank account? This question has been bothering me for a long time and I’m hoping that someone here can help to answer it.

I will use Greece as an example, but my question could really be applied to any country or even a bank:

While a government in the Eurozone, the Greeks for example, might have an actual building in which Euro coins are minted and Euro banknotes printed, these are most likely tightly regulated, with lots of physical checks to ensure that the Greek government doesn’t just print more whenever they want to.

I understand that physical money typically makes up a small portion of the actual money supply, so I assume that “printing them selves out of debt” regardless of whether it would be legal, isn’t an actual option for them.

However, what prevents the Greek national bank from simply going into their computer system and adding some zeros to their bank account? What system prevents any bank anywhere from doing the same? Does the bank of international settlements in Basel keep some kind of record of the total global money supply? How is this kind of fraud prevented?

I’m very curious to hear the answer!
Double entry book keeping.

If we take the example given here, of the Greek Central Bank (bank nerd trivia - interestingly the GCB is a commercial bank, listed on the Greek Stock Exchange), arbitrarily adding 000's to its deposit account.

This cannot be done as stated. The double entry book keeping accounting system on which all banking is based, requires that two ledgers are simultaneously updated, one with a credit and one with a debit. So if the GCB credits its own deposit account (which in practice would be a liability income account of some kind), there has to be a matching debit on another ledger. Those are the rules.

Typically deposit accounts increase their value either by people depositing cash in them (see below), by direct transfer from another deposit account, or by receiving a loan.

For example, if the government prints physical cash then this can be deposited at the central bank:

[debit cash account, credit GCB bank deposit account]


and this is how the US TARP intervention was performed. The federal reserve then used the money to buy loans from the US Banks. Note that a debit to an asset account increases its value, and a credit reduces it, whilst on the liability (right hand side), a debit reduces the account, and a credit increases it.

If the European central bank makes the Greek Central bank a loan then on the Greek side, the book keeping is:

[debit cash, credit interbank loan]


The GCB has received cash, and now has a debt that it owes the ECB among its liabilities.

The one thing it can't do is just arbitrarily increase the value of a single account, one of the main reasons for double entry book keeping is in fact to prevent that. 

Bank fraud and the various forms of banking system abuse that do occur typically involve manipulations of banking operations within the framework of double entry book keeping. So while DEB. prevents accounts from having zero's tacked on the end, it doesn't prevent Mr. Smith the bank manager, lending his very good friend Mr. Brown a large sum of money that Mr. Brown has no intention of repaying.