The only liability of the bank is deposits that households keep at the bank. The only two assets of the bank are the loans it makes out and the reserves it keeps. Banks are profit maximizers and keep only the required reserves (i. e. excess reserve = 0)  When loans are made, households will redeposit this loan in their checking accounts and use checks. The reserve ratio is 20%.

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Sullivan Hurley

Business

26 February, 04:47

The only liability of the bank is deposits that households keep at the bank. The only two assets of the bank are the loans it makes out and the reserves it keeps. Banks are profit maximizers and keep only the required reserves (i. e. excess reserve = 0)  When loans are made, households will redeposit this loan in their checking accounts and use checks. The reserve ratio is 20%.

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Luciano Leblanc · Answer 1

The banking industry is one of the fast growing industry globally.

The major liability of the bank is the total deposit made by various individual, household, and firms.

The basic assets of a bank is the loan it lend out to its customers and the reserve it keeps with the the central bank. For instance, in Nigeria, all commercial banks are expected to be #25 billion naira with the central bank of Nigeria.

Banks are profit maximize, each banks constitutes its management with well-trained finance practitioners who specializes in wealth maximization. The bank keeps minimum reserve for profit maximization.