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The Balance Sheet of Commercial Banks

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Presentation on theme: "The Balance Sheet of Commercial Banks"— Presentation transcript:

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


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