Unformatted text preview: Assets Change Liabilities Change Tot Reserves 10 Deposits 95 Required 10 W/D 5 Excess Loans 95-5 Borrowed Funds 30 Securities 40 0 Bank Capital 20 Total 145 Total 145 Sell loans of 5 or sell securities of 5 If securities are discounted 50%, Then sell 10 to raise 5 to meet W/D. That means bank capital is reduced by 5 Issue: Write down of Assets viewed as non performing. If 10% of loans are nonperforming or default? Reduces assets by 10 so bank capital is reduced by 10 Problem if loans have become suspect or securities are viewed as Toxic...
View Full Document
This note was uploaded on 02/22/2012 for the course MANEC 453 taught by Professor Jerrynelson during the Winter '10 term at BYU.
- Winter '10