AP, IB, and College Microeconomic and Macroeconomic Principles 

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Bank Balance Sheets; what you need to know

Bank Balance Sheets

Updated 5/24/2016 Jacob Reed 
   Banks balance sheets are where banking transactions are documented and tracked. On one side, you find all of the bank’s assets. Those are the things of value the bank owns. They include required reserves (a percentage of demand deposits set by the Fed that cannot be loaned out), the excess reserves (available to be loaned out),  loans (IOU’s from customers), securities (bonds), and physical assets (the building, computers, desks, etc).  On the other side of the balance sheet the liabilities are found. These are the things the bank owes. They included demand deposits (checkable deposits owed to customers), other deposits (savings accounts, etc owed to customers), other liabilities (debts, etc. owed by the bank), and owner equity (profit owed to the entrepreneurs or share holders who own the bank)

Bank Balance Sheet

On a bank balance sheet, assets always equal liabilities (they balance). If there is an increase in liabilities, there will also be a decrease in liabilities, an increase in assets, or some combination of both. Figuring out what categories increase or decrease can be tricky, but the most common mistake occurs when students forget required reserves are a percentage of demand deposits only. Changes in other deposits, loans, or securities, do not affect the required reserves. 

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Review Game: Bank Balance Sheet Review Activity
Content Review Page: Money Market Graph