1 Financial Intermediaries - Financial Intermediation REFERENCES Greenbaum S.I Thakor A.V and Boot A.W.A 2016 Contemporary Financial Intermediation(3rd

1 Financial Intermediaries - Financial Intermediation...

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Financial Intermediation REFERENCES Greenbaum, S.I., Thakor, A.V., and Boot, A.W.A., 2016. Contemporary Financial Intermediation. (3 rd ed). London Academic Press. Chapters 1, 2, 3. Lange, H. et al., 2013. Financial Institutions (3 rd Management. ed). Sydney: McGraw Hill, Chapters 2, Appendix 2A, 4. 1.0 Bank Financial Statements 1.1 Balance Sheet * Assets show how funds are used * Liabilities and shareholder’s equity show sources of funds - Liabilities are non-owner claims - Equity or capital is assets less liabilities, which represents the residual claim of shareholders Example - Bank’s Balance Sheet: Hogan et al (2004:59) and Lange et al (2013:43-52) *
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Source: Hogan et al, 2004, p59
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1.1.1 Asset Accounts - Cash and due from other institutions - Non-interest bearing, therefore minimised - Trading and investment securities - Debt securities including government, semi- government and corporate debt - Trading securities are generally short-term - Investment securities are generally longer term - Loans - Commercial Loans - Short- or intermediate-term loans to businesses Consumer Loans - Loans to individuals including car loans, credit card loans and margin loans Housing Loans - - - Traditionally variable-rate loans, but increasing proportion of fixed-rate loans - Leases - Assets owned indirectly by ADI - Effectively similar to term loan 2
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- Provisions for doubtful debts - Contra-asset account to cover expected loan losses General provision for potential future losses Specific provision for identified problem loans - - - Deposits with regulatory bodies - Such as exchange settlement account - Property plant and equipment - Include all premises and facilities - Non-earning assets as they don’t directly create revenue - All other assets 1.1.2 Liabilities Accounts - Current accounts - Savings Accounts - Investment savings accounts - Fixed deposits - Certificates of deposit -
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