Bank Assets & Liabilities: Definitions & Examples

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  • 0:03 What Are Assets & Liabilities?
  • 0:56 Bank Assets
  • 2:00 Bank Liabilities
  • 2:56 Rate-Sensitive Assets…
  • 3:44 Lesson Summary
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Lesson Transcript
Instructor: Elisa Brooks

Dr. Brooks has a PhD in Organizational Leadership, and has taught on the collegiate and high school level. Most of her educational experience is in the fields of Accounting and Business. She also has written curriculum for various colleges, and teaches Personal Financial Management to military soldiers as part of their Basic Training graduation requirement.

In this lesson, you'll learn about the different types of bank assets and liabilities. We'll look at examples of bank assets and liabilities including a discussion of rate sensitive assets and liabilities.

What Are Assets & Liabilities?

All businesses have assets and liabilities. Even you, as an individual, have your own assets and liabilities. Individual assets are anything you may own outright, such as a car, a house, or cash in a bank account. Individual liabilities are considered to be anything that you make payments on, such as rent, a mortgage, a car payment, or utilities.

Business assets and liabilities are somewhat the same as individual assets and liabilities. Business assets are considered anything that the business owns, whereas business liabilities are anything that the business owes to someone else. So, assets are any property that is owned by a person or a business. Liabilities are a debt or financial obligation owed to another person or business.

Bank Assets

Banks have general assets and liabilities just like individuals. There are asset accounts that make money for the bank. For example, cash, government securities, and interest-earning loan accounts are all a part of a bank's assets.

A bank can have different types of assets, including physical assets, such as equipment and land; loans, including interest from consumer and business loans; reserves, or holdings of deposits of the central bank and vault cash; and investments, or securities.

Physical assets include the building and land (if the bank owns it), furniture, and equipment. Loans, such as mortgages, are an important asset for banks because they generate revenue from the interest that the customer pays on the loan. Examples of interest loans include consumer loans, such as home loans, personal loans, automobile loans, and credit card loans, and examples of business loans include real estate development loans and capital investment loans.

Bank Liabilities

Examples of liabilities for a bank include mortgage payments for the building, distribution payments to customers from stock, and interest paid to customers for savings and certificates of deposit. When considering the bank's capital, loan-loss reserves and any other debts owed by the bank are a part of its liabilities.

If a bank owns the building it operates in, the building is considered an asset because it can be sold for cash value. If the bank doesn't own the building it operates in, it's considered a liability because the bank must make payments to a creditor.

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