Commercial Banks Essay

Lecture questions Commercial Banks. Please explain the structure of banking balance sheet. Checkable deposits %. Nontransaction deposits 74 %. Borrowings 12 %. Bank capital %. Other liabilities take %.Provide an explanation of banking income statement and point to connections with banking balance sheet. What are negotiable orders of withdrawal NOW accounts. Please explain term macroprudential regulation. What are the consequences of financial crisis on banks and financial markets. Explain the role and functions of FDIC? Provide an example of “ FDIC ” in your own country. Name some of the banking business models and point to their key characteristics. Retail funded commercial bank. Wholesale funded commercial bank. Capital markets oriented bank.

A balance sheet consists of assets and liabilities. Total assets have to be equal for total liabilities plus capital, this is meant in order to reach the balance. Banks balance sheet provides the sources of bank funds and uses for which the bank uses their funds.

Liability side is used for acquiring funds by issuing or selling liabilities, such as deposits, these funds are used to buy assets in the future. Liabilities consists of checkable deposits 4% (it is a bank account that allows the owner to issue a check for a third party, checkable deposit is an asset for the depositor, it is a part of their wealth), nontransaction deposits 74% (it is the main source of banks incoming funds, interest rate is higher than on the checkable deposits. Examples are saving accounts - you can extract and input money whenever you want, and time deposits  early withdrawal is punished with penalties), borrowings 12% (banks can obtain funds from Federal Reserve system - discount loans (advances), other bank or corporations), bank capital 6% - it is the net worth of the bank, it’s the difference between assets and liabilities.