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Banking and The Management of Financial Institutions: All Rights Reserved
Banking and The Management of Financial Institutions: All Rights Reserved
74%of Discountloans
FedFunds,
Assets
CorporateLoans
have grownby
factorof10since
1960as%ofLiab
BankEquity=AssetsLiabilities,
listedasLiabbecauseBankowesthis
Flow of funds (tab down to commercial banks) toowners.AlsoincludesLoan
http://www.federalreserve.gov/releases/z1/current/z1r-4.pdf LossReserves
3. Liability management
4. Managing capital adequacy
2. Sell securities
Assets Liabilities
Reserves +9m $9 million Deposits $90 million
Loans $90 million Bank Capital $10 million
Securities 9m $1 million
17-15
Liquidity Management
3. Borrow from Fed
Assets Liabilities
Reserves +9m $9 million Deposits $90 million
Loans $90 million Discount Loans $9 million +9m
Copyright Prentice
2012 Pearson 2006 Pearson Addison-Wesley.
Hall. All rights reserved. All rights reserved. 17-16
17-16
Asset Management
Asset Management: the attempt to earn the
highest possible return on assets while
minimizing the risk.
1. Get borrowers with low default risk, paying
high interest rates
2. Buy securities with high return, low risk
3. Diversify
4. Manage liquidity
http://www2.fdic.gov/qbp/