Economics of banking full summary: Book, Lectures, Tutorials 2023

balance sheet - -list of the bank's assets and liabilities at a given point in time -assets - -what others owe to you -liabilities - -what you owe to others -asset transformation - -when banks sell liabilities with one set of characteristics and sue the proceeds to buy assets with another set of characteristics -These are the source of funds for banks, used to purchase income-earning asets - -liabilities -checkable deposits - -bank accounts that allow the owner of the account to write checks to third parties -non-interest bearing checking accounts, interest bearing accounts (negotiable order of withdrawal & money market deposit accounts) - -Included as checkable deposits -Non-Transaction Deposits - -owners can't write checks on these and the interest rates are usually higher than those on checkable deposits -savings accounts, time deposits, and serves as the primary source of bank funds - -Included as non-transaction deposits -4 Liabilities for a bank: - -Checkable Deposits, Non-transaction deposits, Borrowings, Bank capital -Borrowings for a bank; - -the fed, other US banks, bank holding companies, loan arrangements with corporation, eurodollars -Discount loans - -Loans the Fed gives to commercial banks -Federal Funds - -Loans other US banks give to commercial banks -Bank Capital - -the difference between bank assets and the other categories of bank liabilities -retained net earnings, issued stock, subordinated debt, loan-loss reserves - -Included in definition of bank capital -Tier 1 Capital - -retained net earnings, issued stock -Tier 2/Supplementary Capital - -subordinated debt, loan-loss reserves