The following table compares the aggregated balance sheet fr US banks at the end
ID: 2773411 • Letter: T
Question
The following table compares the aggregated balance sheet fr US banks at the end of 2006 (before the sub-prime crisis) with 2014. What are the key take-home points?
end 2006
Assets $trn
"cash" 0.3
securities 2.2
credit loans & leases 6.1
Interbank loans 0.4
Other assets 0.8
Total: 9.7
Liabilities $trn
deposits 6.3
Borrowings 2.0
Other liabilities 0.7
"Net worth" 0.8
Total: 9.7
August 2014
Assets $trn
"Cash" [Reserves] 2.9
Securities 2.8
Credit loans & leases 7.7
Interbank loans 0.1
Other assets 1.2
TOTAL: 14.9
Liabilities $trn
Deposits 10.2
Borrowings 1.7
Other liabilities 1.3
"Net Worth" 1.6
TOTAL: 14.9
Explanation / Answer
1.
The cash held in 2014 is nearly ten times the cash held in 2006. Minimum cash should be held on hand and the remaining balance of the cash should be invested to earn more income otherwise the cash will get blocked with no use.
2.Investment in securities are increased it's a good sign of increase in investment.
3.Deposits are increased and it resembles that the company created the goodwill.
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