Chapter 7DepositoryInstitutions:Banks and BankManagementMcGraw-Hil/rwinCopyright 2006byTheMcGraw-Hill Companies,Inc.All rights reserved
McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 7 Depository Institutions: Banks and Bank Management
CONTENSa7.1BankBalance Sheet7.2BankRisk12-2
12-2 CONTENS •7.1 Bank Balance Sheet 7.2 Bank Risk
7.1 The Balance Sheet ofOCommercial Banks1. Balance Sheet IdentityTotal Bank Assets = Total Bank Liabilities +BankCapital12-3
12-3 7.1 The Balance Sheet of Commercial Banks • 1. Balance Sheet Identity • Total Bank Assets = Total Bank Liabilities + Bank Capital
Table12.1BalanceSheetofU.S.CommercialBanks,August20O4CAssets inbillionsofdollars(numbersinparenthesesarepercentageoftotalassets)321.6Cashitems (including reserves)(4.1)1.893.5（23.9)Securities1.170.7(14.8)U.S.Governmentandagency722.8(9.1)Stateand localgovernmentandother5.044.6(63.7)Loans887.1Commercial and industrial(11.2)2.411.6Real estate (includingmortgage)(30.5)672.3(8.5)Consumer364.7Interbank(4.6)Other708.9(9.0)OtherAssets655.1(8.3)7,914.8TotalCommercialBankAssetsLiabilities in billions ofdollars (numbers in parentheses arepercentage of total liabilities)Checkabledeposits645.0(8.9)4.487.7(62.3)Nontransactiondeposits3.340.9(46.3)Savingsdepositsandtimedeposits1,146.8（15.9)Large,negotiabletimedeposits1,589.0(22.0)BorrowingsFrombanksinU.S.459.1(6.4)FromnonbanksinU.S.1,129.9(15.7)487.4(6.8)OtherliabilitiesTotalCommercial Bank Liabilities7,209.1705.7Bank Assets-Bank Liabilities=Bank Capital12-4WebPage-BoardofGovernors
Web Page 12 - 4 – Board of Governors
The Balance Sheet ofC8Commercial Banks2. Assets: Uses of Funds.CashItemsreservescashitemsinprocessofcollectionvaultcashSecuritiessecondary reservesLoans12-5
12-5 The Balance Sheet of Commercial Banks • 2. Assets: Uses of Funds • Cash Items • reserves • cash items in process of collection • vault cash • Securities • secondary reserves • Loans
TheSheet ofBalanceaCommercialBanksFigure12.1 U.S.Commercial Bank Assets,1947-2004%807060e5040302010O1953195919651971197719831989199520011947C&ILoansSecuritiesMortgagesConsumer Loans12-6
12-6 The Balance Sheet of Commercial Banks
The Balance Sheet of8CommercialBanks3. Liabilities: Sources of Funds·Checkable DepositsNon-transactions Deposits·Borrowingsdiscount loansfederal fundsmarket.12-7
12-7 The Balance Sheet of Commercial Banks • 3. Liabilities: Sources of Funds • Checkable Deposits • Non-transactions Deposits • Borrowings • discount loans • federal funds market
TheSheet ofBalanceaCommercialBanksFigure12.2SourcesofU.S.CommercialBankLiabilities.1973-2004706050%40302010019821985199119731976197919881994199720002003Nontransactions Dep.BorrowingTransactions Dep.12-8
12-8 The Balance Sheet of Commercial Banks
20Figure12.3 Mechanicsof anOvernight Repurchase AgreementDayOneBank sells U.S.Treasury bill to pension fund in exchangefor cashU.S.Treasury bill to pension fundBankPensionfundCashto bankDayTwoBankrepurchases U.S.Treasurybill fromthepension fundin exchange for cash plus interestU.S.Treasurybill returned tobankBankPensionfundCash +interestpaidtopension fund12-9
12-9
The Balance Sheet ofC8Commercial Banks4. Bank Capital and Profitability? bank capitalROA =Net profit after taxesTotal bank assetsROE=Net profit after taxesBank capital12-10
12-10 The Balance Sheet of Commercial Banks • 4. Bank Capital and Profitability • bank capital • ROA = Net profit after taxes Total bank assets • ROE= Net profit after taxes Bank capital