The focus by accounting researchers on the role of
accounting and FVA during the global financial crisis and
not on a role before the crisis, as well as the claim that
accounting is only a messenger are two factors that motivate
the need for the development of the model described
in this paper, that links FVA, bank regulatory capital,
money supply, remuneration, dividends and economic
activity. The requirement to incorporate global financial
crisis characteristics (such as feedback effects, systemic
risk and the primacy of banks in the crisis) into that model
rationalised the use of a stock-flow consistent accounting
type model of the economy rather than standard economic
models. In contrast to the usual stock-flow consistent
accounting model of the economy, the model developed
in this paper reverses the causality between credit demand
and credit supply; in other words, the starting point is
credit supply, not credit demand, which gives banks the
centre stage in the account.