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    Commercial Bank Operations

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    LAMOUCHI RIM
    This document outlines the key sources and uses of funds for commercial banks. It discusses the main sources of funds as transaction deposits like checking and savings accounts, time deposits like CDs, money market accounts, eurodollar borrowings, and bonds/stock issued by the bank. The main uses of funds are cash, loans to customers, investment in securities, lending in the federal funds market, and eurodollar loans. The document also covers reserve requirements that banks must meet, borrowing from the federal reserve or other banks, and off-balance sheet activities like loan commitments that generate fee income.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Commercial Bank Operations

    Uploaded by

    LAMOUCHI RIM
    31 views8 pages
    This document outlines the key sources and uses of funds for commercial banks. It discusses the main sources of funds as transaction deposits like checking and savings accounts, time deposits like CDs, money market accounts, eurodollar borrowings, and bonds/stock issued by the bank. The main uses of funds are cash, loans to customers, investment in securities, lending in the federal funds market, and eurodollar loans. The document also covers reserve requirements that banks must meet, borrowing from the federal reserve or other banks, and off-balance sheet activities like loan commitments that generate fee income.

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    1538334

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    This document outlines the key sources and uses of funds for commercial banks. It discusses the main sources of funds as transaction deposits like checking and savings accounts, time deposits like CDs, money market accounts, eurodollar borrowings, and bonds/stock issued by the bank. The main uses of funds are cash, loans to customers, investment in securities, lending in the federal funds market, and eurodollar loans. The document also covers reserve requirements that banks must meet, borrowing from the federal reserve or other banks, and off-balance sheet activities like loan commitments that generate fee income.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    31 views8 pages

    Commercial Bank Operations

    Uploaded by

    LAMOUCHI RIM
    This document outlines the key sources and uses of funds for commercial banks. It discusses the main sources of funds as transaction deposits like checking and savings accounts, time deposits like CDs, money market accounts, eurodollar borrowings, and bonds/stock issued by the bank. The main uses of funds are cash, loans to customers, investment in securities, lending in the federal funds market, and eurodollar loans. The document also covers reserve requirements that banks must meet, borrowing from the federal reserve or other banks, and off-balance sheet activities like loan commitments that generate fee income.

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    COMMERCIAL BANK

    OPERATIONS

    CHAPTER 17
    BANK SOURCES OF FUNDS
    A. Transaction Deposits; checking accounts
    1. Commercial accounts non-interest bearing
    2. Interest bearing checking accounts
    B. Savings Deposits; pass-book savings
    C. Time Deposits; short-term CDs
    1. Managing Term risk
    2. Penalties for early withdrawal

    Dr. David P. Echevarria ALL RIGHTS RESERVED 2


    BANK SOURCES OF FUNDS
    D. Money Market Deposit Accounts; providing
    higher yields via T-bills, S-T securities
    1. Provide better returns to customers with large
    balances
    2. Provide roll-up services for commercial clients
    E. Eurodollar Borrowings; more by businesses
    F. Bonds/Stock Issued by the Bank; raising
    long-term capital

    Dr. David P. Echevarria ALL RIGHTS RESERVED 3


    BANK USES OF FUNDS
    A. Cash; transaction needs
    B. Bank Loans; to create assets (loans to bank
    customers)
    1. Working Capital Loans; important source of S-T
    liquidity for firms
    2. Bridge loans for LBO, interim financing, etc
    3. Lines of Credit
    4. Importance of Prime rate

    Dr. David P. Echevarria ALL RIGHTS RESERVED 4


    BANK USES OF FUNDS
    C. Investment Securities; purchase of
    government and corporate bonds
    D. Lending in Federal Funds Market; lending
    excess reserves
    E. Eurodollar Loans; correspondent bank
    relationships or foreign branches

    Dr. David P. Echevarria ALL RIGHTS RESERVED 5


    MEETING RESERVE
    REQUIREMENTS
    A. Federal Funds: borrowing from other banks
    (over-night)
    B. Borrowing from the Federal Reserve Banks;
    capital / reserve requirements
    1. Cheapest source of lendable funds or to make up
    short-falls in reserves
    2. Increasingly a bank of last resort

    Dr. David P. Echevarria ALL RIGHTS RESERVED 6


    OFF BALANCE SHEET
    ACTIVITIES*
    A. Loan Commitments (for LBO)
    B. Standby Letters of Credit (especially for
    Import/Export financing)
    C. Swap Contracts (Interest rate and Currency)

    * Generate fee income

    Dr. David P. Echevarria ALL RIGHTS RESERVED 7


    HOMEWORK QUESTIONS
    A. What are the principal sources of funds for banks?
    B. What are the principal uses of funds for banks?
    C. In what ways can a bank use the Federal Funds
    market?
    D. How does a bank create profit via the fractional
    reserve system?
    E. How does the Electronic Funds Transfer (EFT)
    benefit the banking system?

    Dr. David P. Echevarria ALL RIGHTS RESERVED 8

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