A good way to understand how banks can be considered a bank. The first thing to do in some of their money. You win, AOT has received a banking license if their capital at risk.
Start-up
The fact that the Prime Minister has accepted $ 6,000,000 in cash to increase with the help of other investors. This will be the chief administrative justice of the bank, the owner, the percentage of administrators. Then get a card, a rental building, offers all the necessary equipment, hiring and training of staff, and opens its doors for business.
You will need to submit the first part of participation Äôll the Federal Reserve. These funds will go to clear checks of their depositors. If money all enough in time, the demand for withdrawals by their depositors to keep later. Suppose that the initial cost of $ 1,200,000. This leaves $ 4,800,000 $ 2,000,000 available to guarantee the sum of 2.8 million in cash and the Central Bank.
Loans and other investments
How your company, customers have put their money to open accounts. Others are investing in savings accounts and certificates of deposit (loan) should be a competitive advantage for the interest rate payable. And still others resort to bank loans. To check whether potential borrowers good credit risks and are able, the cost of capital and interest on such payment date.
Accounting Needs
When managing the bank will identify a set of accounts, and their decisions, the bank, the administrative and operational profitability. The most important element is balance. This shows, at some point, the bank assets of the director (like you), Thanks for the debt (for what else) and equity (which is one of the owners). The fairness or justice, equal to assets minus liabilities. This chapter should remain positive and more preferably. If time is very small compared to total assets, including the Governor of the Bank.
Balance sheet and profit forecasts
If the bank goes well, the new balance of assets and liabilities will be expanded. Fairness should also be increased, provided that some of the profits for the bank rather than paying the dividends they receive to all owners. It began with an initial capital of $ 6,000,000. The fact that the PM look at the budget when the economy for some time. Indicated by the forecasts for the next year.
The projection is based on expected additional revenue rate of the Bank, the faculty of administrative officials and the cost of borrowing. Also shown is the projected cost of the work, or fixed costs include the cost of rent, insurance, utilities, salaries, etc. The numbers in blue are items that you try to change or to see how we can influence the performance measurement more significant return on capital. Sure, we need to cultivate relationships minimum required by regulators.
Development Management
Note that the capital has increased from 6.0 to 1 USD $ 10,500,000 due to retained earnings. You have a lot of savings, the review of current accounts pay no interest. Others have reported at market rates. All deposits paid account with additional costs.
With additional resources in the reservoirs of its assets in what hope for the future revision Revenue: $ 5.0 million to reserve $ 7,700,000 bonds, $ 1,100,000 loan to other banks 110,000 in loans and $ 0000. Your concept of net income after taxes for next year $ 1,510,000. This would be a return on equity of 14.38% and return on investment of 1.21%, which should work fine.
The ratio of work required
Bottom left of the table for three reasons you should stay above the thresholds of the Committee on Banking Supervision. The capital is the ratio of the bank, the reputation of managers to total risk weighted assets of the bank. Rates for bookings of 0, 0 for government bonds, loans to banks by 0.2 and 1.0 for conventional loans. A minimum capital adequacy ratio of 8% is needed.
Leverage is the ratio of bank capital to the weighted sum of assets. The minimum requirement is 3%. The reserve is the ratio of reserves a bank (deposits at the Fed and the money safely) in which your application, deposits of checks. The minimum value of 10% for large banks, but only 3% for the first $ 45.4 million of deposits, which are the cause of small banks.
What is the impact trade indices running
When a bank loan on a regular business (A) and liabilities (increase L) as well. Your Reservations (R) remains unchanged, leading to a reduction in the reserve ratio (R / L). The capital, namely capital (C = NR) remains unchanged, resulting in a decline of participation (C / A).
When the borrower spends the money, end up going to another bank, C, D, L and also decreased. Since D is usually a fraction of L, the reserve ratio is reduced by an amount equal to about the relative variation of R. Since C is generally a small fraction of A, the ratio of capital increase for an amount approximately equal to the relative variation of C.
If the borrower pays interest on the loan from a bank will not change L and R. This leads to an increase in the ratio of solvency and reserves. If the borrower pays interest from an external source, A and R, while the increase of L does not change. This leads to an increase in the solvency ratio and reserves.
If the borrower has repaid the loan to deposit, R remains unchanged, while A and L are the same. This leads to an increase in the solvency ratio and reserves. If the borrower to repay the loan from an external source, R increases, while A and L remain unchanged. This leads to higher rates, but no change in the share capital.
When a bank buys something for himself by issuing a check. If the beneficiary of the project with the same bank deposits, advances received increasing L, A and C do not change. If deposited in another bank, D, E, L, during the fall remains unchanged. In both cases, the relationship between capital and the rate of bank reserves fell editor .
Although there is still much to learn about the banks, this simplified model, the data for small banks. But banks are much more complex arrangements. Some loans are a small part of society. The following article summarizes the main activities of large banks.
