Reserve Ratio = commercial Bank req. Reserves / Commercial banks
Excess reserves = actual reserves / required reserves
Required reserves = checkable deposits x Reserve ratio
Assets:
- Reserves: RR - % required by Fed. to keep on hand to meet demand.
- Excess Reserves - % reserves over and above the amount needed to satisfy minimum reserve ratio set by FED.
- Loans to firms, consumers, and other banks.
- Loans to govt = treasury securities
- Bank property : if bank fails, you can liquidate the property.
Liabilities:
- Demand Deposits : money put into the banks.
- Timed deposits : CDs
- Loans from: federal reserves and other banks.
- Shareholders equity : to set up a bank, you must invest your own money in it to have a stake in the banks success or failure.
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