tailieunhanh - Lecture Money, banking, and financial markets: Chapter 12 - Stephen G. Cecchetti, Kermit L. Schoenholtz

Chapter 12 - Depository institutions: Banks and bank management. In this chapter we will: Examine the business of banking, see where depository institutions get their funds and what they do with them, study the sources of banks’ liabilities and learn how they manage their assets, and examine the sources of risk that bankers face, as well as how those risks can be managed. | Chapter Twelve 12- Introduction Most people use the word bank to describe a depository institution. There are depository and non-depository institutions that differ by their primary source of funds - the liability side of their balance sheet. Depository institutions include Commercial banks, savings and loans, and credit unions. 12- Introduction Banking is a combination of businesses designed to deliver the services discussed in Chapter 11. The intent of which is to profit from each of these lines of business. Remember that financial and economic development go hand-in-hand. An economy needs financial institutions to effectively channel resources from savers to investors. 12- Introduction In this chapter we will: Examine the business of banking, See where depository institutions get their funds and what they do with them, Study the sources of banks’ liabilities and learn how they manage their assets, and Examine the sources of risk that bankers face, as well as how | Chapter Twelve 12- Introduction Most people use the word bank to describe a depository institution. There are depository and non-depository institutions that differ by their primary source of funds - the liability side of their balance sheet. Depository institutions include Commercial banks, savings and loans, and credit unions. 12- Introduction Banking is a combination of businesses designed to deliver the services discussed in Chapter 11. The intent of which is to profit from each of these lines of business. Remember that financial and economic development go hand-in-hand. An economy needs financial institutions to effectively channel resources from savers to investors. 12- Introduction In this chapter we will: Examine the business of banking, See where depository institutions get their funds and what they do with them, Study the sources of banks’ liabilities and learn how they manage their assets, and Examine the sources of risk that bankers face, as well as how those risks can be managed. 12- The Balance Sheet of Commercial Banks Commercials banks are institutions established to provide banking services to businesses, allowing them to deposit funds safely and to borrow them when necessary. Total bank assets equal total bank liabilities plus bank capital. Banks obtain funds from individual depositors and businesses, as well as by borrowing from other financial institutions in financial markets. 12- The Balance Sheet of Commercial Banks The difference between a bank’s assets and liabilities is the bank’s capital, or net worth. Net worth is the value of the bank to its owners. A bank’s profits come from both service fees and from the difference between what it pays for its liabilities and the return it receives on its assets. Table shows a consolidated balance sheet for all the commercial banks in the . in January 2010. 12- 12- The asset side of the balance sheet shows what banks do with the funds they .