The fundamental activities banks carry out are borrowing and lending money. Banks release financial statements at least once a year. At the heart of these highly detailed financial statements lie two key disclosures: the income statement and the balance sheet. The golden rule of balance sheets is they must balance at all times. The principal balancing components are assets and liabilities.
Key learning objectives:
Define assets and liabilities and the golden rule of balance sheets
What sits on a bank balance sheet?
What is equity and what is its purpose?
Why do investors invest in bank equity?
How do banks boost returns on equity?
What are the differences between equity and liabilities?
How do banks maintain balance-sheet balance when customers withdraw deposits?
Define asset liquidity and its link to maturity transformation