Unit 4 - Creating a Bank

March 6, 2015

Transaction 

• Depositing reserves in a federal reserve bank
• Required Reservers
• Reserver Ratio (Commercial Bank's)
• Excess Reserves
• (Actual Reserves - Required Reserves)
• Required Reserves
• (Checkable deposits x Reserve Ratio)

How Banks Work

• Assets
• Reserves: Required Reserves (RR) %. Required by Fed to keep on hand to meet demand.
• Excess Reserve (ER) %. Reserves over and above the amount needed to satisfy the minimum reserve ratio set by Fed.
• Loans to firms, consumers, and other banks (earn interest)
• Loans to government = Treasury securities
• Bank property (if bank fails, you could liquidate the building/property)
• Liabilities (equity)
• Demand deposits ($ put into bank)
• Timed deposits (CD's)
• Loans from federal reserve & other banks
• Shareholders equity: To set up a bank you must invest your own money in it, to make a stake in the banks success or failure)