ECON 330: Money and Banking
Section 1: Tuesday and Thursday, 11:30AM-12:45PM, SMU 104
Section 2: Tuesday and Thursday, 5:00PM-6:15PM, SRO B
Prof. J. Santos
South Dakota State University
Student Learning Objectives: Chapter 9: Banking and the
Management of Financial Institutions
 De&ne, in the context of banking, the term liabilities.
 Identify, distinguish between, and provide examples of bank liabilities.
 De&ne, in the context of a bank±s balance sheet, the term bank capital.
 De&ne, in the context of banking, the term assets.
 Identify, distinguish between, and provide examples of bank assets.
 Identify, in general terms, how a typical bank earns pro&t.
 Use a standard T-account approach to determine how basic bank
transactions - withdrawals, deposits, loan initiations and write-o/s, etc. - are
re²ected on a bank±s balance sheet.
 Identify the four primary areas of bank management - liquidity, asset,
liability, and capital.
 Analyze each management area in terms of management±s objectives and
 Specify the equation for return on assets (ROA), a basic measure of bank
pro&tability that provides information on how e¢ ciently a bank is run.
 Specify the equation for return on equity (ROE), a basic measure of bank
pro&tability that provides information on how well owners are doing on their
investment in the bank.
 Explain the economic signi&cance of the so-called equity multiplier (EM),
the amount of assets per dollar of equity capital.
 Explain why banks screen and monitor their customers, establish
long-term customer relationships, extend loan commitments, require collateral
and compensating balances, and ration credit.