The Balance Sheet of Commercial Banks

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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

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Web Page Board of Governors
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• 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 banks 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.

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• 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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