Summary Commercial Banks: Balance Sheet Activities

• BEO2000 Financial Institutions & Monetary Theory

• Lecture 7: Commercial Banks: Balance Sheet Activities

• Primary Source:

• Kidwell et al. 2014, Ch. 14, pp. 533-562.

• Learning Outcomes

• With respect to learning outcomes, you should be able to:

• a. Evaluate the functions and activities of commercial banks;

• b. Discuss commercial banks’ main sources of balance sheet funds;

• c. Discuss commercial banks’ main uses of balance sheet funds.

• Main Activities of Commercial Banking

• Large proportion of commercial bank activities involve:

• Taking deposits from customers.

• Making loans to their customers.

• Commercial bank activities are broadly divided into:

• Balance sheet activities (assets, liabilities and equity).

• OBS activities (contingent assets and liabilities)

i. OBS activities are discussed in lecture 8.

• Banks and Asset Transformation

• Commercial bank balance sheet

• Main Bank Sources of Funds

Deposit accounts:

• Transaction account (demand deposit)

• Savings account

• Term deposits

• Negotiable certificates of deposit

Borrowed funds:

• Wholesale funding

Capital accounts:

• Equity (e.g. share capital; retained profits)

• Main Bank Source of Funds: Deposit Accounts

• Transaction account (demand deposits)