Chapter 13 - Commercial bank operations. This chapter lays the foundation for how commercial banks operate. We begin the chapter by providing an overview of the banking industry. We continue by examining the principal business activities of banks as summarized on their balance sheets. | Power Point Slides for: Financial Institutions, Markets, and Money, 9th Edition Authors: Kidwell, Blackwell, Whidbee & Peterson Prepared by: Babu G. Baradwaj, Towson University And Lanny R. Martindale, Texas A&M University CHAPTER 13 COMMERCIAL BANK OPERATIONS Overview of the Banking Industry Fewer banks, more branches Many small banks, a few very large banks Holding companies predominate Fewer banks, more branches Less than 8,000 banks: Number of banks has declined significantly as industry has consolidated. Nearly 75,000 banking offices: Number of branches has increased as geographical restrictions on banking have relaxed. Many small banks, a few very large banks 82% of . banks hold only 8% of total banking industry assets. The largest 83 banks (about 1% of . banks) control 73% of total assets. Holding companies predominate A “bank holding company” is a company owning an interest in at least 1 bank. As of 2003, some 5,152 holding companies controlled 6,298 banks with about 96% of . commercial bank assets. The Balance Sheet for a Commercial Bank Uses Sources of = of Funds Funds (Assets) (Liabilities + Capital) Cash Assets Deposit Liabilites Investments Non-deposit liabilities Loans & Leases Capital Accounts Other Assets Sources of Funds: Liabilities + Capital Deposit Liabilities: Transaction Deposits; Savings Deposits; Time Deposits Non-deposit Liabilities: Fed Funds Purchased; Repurchase Agreements; Other Capital Accounts: Capital stock; Undivided Profits; Special Reserve Accounts Deposit Liabilities: Transaction Deposits: Demand Deposits; NOW Accounts Demand Deposits, also known as checking accounts. NOW (Negotiable Order of Withdrawal) Accounts— pay interest; are just for individuals, governments, and nonprofits Savings Deposits: Savings Accounts; MMDAs Savings Accounts comprise about 15% of all deposits MMDAs (Money Market Deposit Accounts) comprise about 39% of all deposits; available to any customer; interest plus | Power Point Slides for: Financial Institutions, Markets, and Money, 9th Edition Authors: Kidwell, Blackwell, Whidbee & Peterson Prepared by: Babu G. Baradwaj, Towson University And Lanny R. Martindale, Texas A&M University CHAPTER 13 COMMERCIAL BANK OPERATIONS Overview of the Banking Industry Fewer banks, more branches Many small banks, a few very large banks Holding companies predominate Fewer banks, more branches Less than 8,000 banks: Number of banks has declined significantly as industry has consolidated. Nearly 75,000 banking offices: Number of branches has increased as geographical restrictions on banking have relaxed. Many small banks, a few very large banks 82% of . banks hold only 8% of total banking industry assets. The largest 83 banks (about 1% of . banks) control 73% of total assets. Holding companies predominate A “bank holding company” is a company owning an interest in at least 1 bank. As of 2003, some 5,152 holding companies controlled .
