And depositors often prefer variable interest rates. On the other hand, depositors want easy (short-term) access. Borrowers want long-term loans, usually at fixed interest rates. So capital + debt = assets.īanks make money by lending at higher interest rates than they pay to borrow. Suppose the bank collected all the money owed by the borrowers. The other main item on the liabilities side is capital. All of these are liabilities debts the bank owes to someone else. And the bank may borrow from investors insurance companies, pension funds, even other banks. It may also borrow from companies that place cash on deposit. It can borrow from you and me through the savings we deposit. Most of the money a bank lends to customers comes from money that the bank itself borrows. Now let's talk about the other side of the balance sheet the liabilities. Loans are assets because they are money owed to the bank. A bank's assets are mainly loans made to individuals, businesses, even governments.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |