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Summary Chapter 3: balance sheet
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Chapter 3, balance sheet
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Chapter 3: Balance sheet1. The bank balance sheet
• Where does a bank get its funding?
- Own capital
ABILITIES Retained earnings < making profit
Equity (stocks) < selling shares of the bank
- Borrowed capital
Deposits < customers deposit their savings
Loans < banks take general loans
Borrowings via the interbank
market (euribor, libor,…) < banks take interbank loans
Mezzanine capital < banks take subordinated loans (link)
- Borrowings via the central banking system
Open market transactions < banks take short-term loans (link)
Standing facilities
(marginal lending facility) < banks take ultra-short-term loans
(link, link)
• How does a bank use the money it has collected?
- Reserves < min x% of deposits (link)
ETS - Loans (that banks give)
Commercial and private loans < loans to customers
Interbank debt claims < loans to other banks
- Investments (bonds, securities, …)
- Standing facilities (ECB)
Standing facilities (deposit facility) < ultra-short-term deposits (link, link)
, - Other assets (buildings, machinery, car park,…)
See exercise on this on slide 7
Overdraft allowing an account balance to go below zero
REPO: repurchase agreement
2. Banks creating money
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