1. The Balance Sheet of Commercial Banks
Liabilities: Sources of Funds
Checkable Deposits
Non-transactions Deposits
Borrowings
discount loans
federal funds market.
Assets: Uses of Funds
Cash Items
reserves
cash items in process of collection
vault cash
Securities
secondary reserves
Loans

4. Web Page – Board of Governors

6. Bank Capital and Profitability
ROA = Net profit after taxes/Total bank assets
ROE= Net profit after taxes/Bank capital
Bank Risks
Liquidity Risk
the risk of a sudden demand for liquid funds
Credit Risk
a bank’s loans will not be repaid
Interest-Rate Risk
Banks have short-term liabilities & long-term assets
mismatch between the maturities of the two sides of the balance sheet creates interest-rate risk.

8. Bank Risks, continued Trading Risk Buy HIGH – Sell low
Foreign exchange risk
Banks hold assets denominated in one currency and liabilities denominated in another
Sovereign risk
Some foreign borrowers may not repay their loans because their government prohibits them from doing so.
Operational risk