The closest competitors of banks in recent years at least in terms of the

The closest competitors of banks in recent years at

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The closest competitors of banks in recent years (at least in terms of the similarity of their financial statements) are the thrift institutions. These include credit unions and savings associations. If we move a little further away from banks both in terms of what they do and the way their financial statements look, banks also compete with finance companies, life and property casualty insurance companies and security brokers and dealers. 5-14. How do the financial statements of major nonbank financial firms resemble or differ from bank financial statements? Why do these differences or similarities exist? Banks have very similar financial statements to credit union and savings associations. The only difference may be in the structure of their loan portfolio. Credit unions probably have more loans to individuals and savings associations may have more real estate loans as well as loans to individuals. More differences exist between banks and other major competitors. These differences exist because of each company’s unique function. Finance companies have loans but on their balance sheet they are called accounts receivables . In addition, they show heavy reliance on money market borrowings instead of deposits. Insurance companies are different in that loans they make to businesses show up on the balance sheet as bonds, stocks, mortgages and other securities. On the liability side, insurance companies receive the majority of their funds from insurance premiums paid by customers for insurance protection. Mutual funds hold primarily corporate stocks, bonds, asset-backed securities and money market instruments and their liabilities consist primarily of units of the mutual fund sold to the public.
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Security brokers and dealers tend to hold a similar range of securities funded by borrowings in the money and capital markets. 5-15. What major trends are changing the content of the financial statements prepared by financial firms? The content of the financial statements of financial firms is changing for several reasons. One trend that has affected the financial statements of financial firms is the call for those statements to reflect the true market value of the assets held by the financial firm. More accounts are being listed at the lower of historical or market value so that investors can get a better understanding of the true value of the firm. Another trend that is affecting financial firms is the increased use of off-balance sheet items. The notional amount of these items is sometimes surpassing the value of the items on the balance sheet, especially for larger financial institutions. This has led regulators to change their reporting requirements for financial firms and there are likely to be additional requirements in the future.
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  • Fall '16
  • Thu Trang
  • Debt, Financial services, Mortgage loan, Deposit account

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