The table shows (a) that banking institutions improve the majority of their funds by attempting to sell deposits—their principal liability, and (b) they hold their assets mainly in the form of (i) loans and improvements and bills reduced and bought, together constituting bank credit, (ii) investment, and (iii) money.
A brief description for the primary components of liabilities and assets is offered below:
Liabilities of Banking institutions:
1. Capital and Reserves:
Together they constitute owned funds of banking institutions. Capital represents paid-up money, i.e., the total amount of share money really added by owners (investors) banks. Reserves are retained profits or undistributed earnings of banking institutions accumulated over their working life. What the law states requires that such reserves are developed and that only a few the profits that are earned distributed one of the investors.
The banking institutions additionally think it is wise to build up reserves to-improve their capital place, in order to fulfill better unexpected liabilities or losses that are unexpected. Reserves must be distinguished from ‘provisions’ made for redeeming known liabilities and impacting understood reductions into the value of particular assets. (more…)