How is the current banking system working?

I'm trying to get more information about how the current banking system is working.

The cash cycle is somewhat easy to figure out. Merchants bring huge quantities of cash to their bank so their are credited on their account. Banks put that cash in their ATM so when you retrieve money, it is charged on your account.

The only remaining question is what if a bank has too much cash and the other not enough. Is there a market for cash? Or is everything regulated by the central bank?

But now about the bank themselves. The money on your account is only a virtual value in some computer. When you pay someone from the same bank, nothing really happens except an addition and a soustraction in an internal database. In theory, if 10 people have an account with 1000€ in a bank, this bank has 10,000€ (we will ignore loans and debts for now).

Now, what does happen when you send money to an account which is not in the same bank?

It looks like an ACH is used. From what I understand, an ACH is mainly a bank for bank. So each bank should have an account to an ACH.

Is that right?

Who is controlling the ACH?

How can a transfer between two ACH happens?

How could it be controlled that the bank have well the money they pretend to have?

I'm a complete n00b in that field and I'm really interested to know the answers.

 

 

---

Orignal From: How is the current banking system working?