Banking and the Management of Financial Institutions - Assets: uses of funds
3 important questions on Banking and the Management of Financial Institutions - Assets: uses of funds
Once banks have funds, what do they do with it?
- They need to hold reserves (deposits)+ currency)
- Cash in process of recollection
- Deposits at other banks
- Securities (federal/local government)
- Loans (assets)
- Other asset (buildings,..)
What two kinds of reserves are there?
- Required reserves: regulation that for every dollar in deposits, a certain fraction must be kept in reserves: 10% (required reserve ratio)
- Excess reserves: additional reserves a bank holds to meet its obligations when funds are withdrawn
Why does the bank earn higher interest rates on loans?
Because of lack of liquidity and higher default risk
Try our study magic for free
a PDF, study it super fast
- No sign up, email or credit card needed!
- AI makes unlimited flashcards
- Get unlimited quizzes and tests
- Ask AI anything
Create a notebook
- No sign up, email or credit card needed!
- Have and keep perfect overview
- Make flashcards, notes and mind maps
- Review, test and score!
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
Remember faster, study better. Scientifically proven.
