00:01
Suppose that karen deposits $400 in a checkings account at the bank.
00:05
The reserve requirement for karen's bank is 17 % so she deposits $400.
00:13
The reserve requirement is 17 % and the bank does not want to hold any excess reserves of new deposits.
00:21
We'll use this information to complete the balance sheet to show how the bank's assets and liabilities change when carrying deposits to $400.
00:29
We're given a simple bank balance sheet and we're asked why are deposits considered liabilities for a bank.
00:42
Let's start with the first question.
00:44
We want to know the deposit.
00:47
The deposit is $400.
00:49
Out of $400, 17 % are kept as reserve because of requirements.
00:54
17 % of $400 is equal to $68.
01:01
$68 is kept as reserves and the bank can lend out the rest.
01:05
The loan lent given by the bank would be $400 minus $68 which is $332.
01:15
For the balance we can have it as the assets, the assets and then the liabilities and then the change in reserves would be $68 plus $68.
01:36
The change in loans would be plus $332 and then the change in deposits for liabilities would be plus $400.
01:50
So now for the second question, why are deposits considered liabilities for a bank? deposits are considered liabilities for a bank because they deposits can be withdrawn at any time...