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Page 9<br />
ASSETS<br />
A bank uses its capital and<br />
liabilities to make loans to<br />
households, businesses and<br />
other banks.<br />
These loans are recorded on the<br />
balance sheet as a bank’s assets.<br />
Any money not lent out by a bank<br />
is held as liquid assets like cash.<br />
LIQUID ASSETS<br />
A bank’s liquid assets include the<br />
cash in its tills, its deposits at the<br />
Bank of England and holdings of<br />
safe assets like government bonds<br />
that it can sell quickly for cash.<br />
A bank holds liquid assets to<br />
meet withdrawals by depositors<br />
and investors.<br />
A BANK<br />
BALANCE SHEET<br />
LIABILITIES<br />
ASSETS<br />
CAPITAL<br />
– SHAREHOLDERS’ MONEY<br />
– RESERVES FROM PAST PROFITS<br />
DEPOSITS<br />
– MONEY IN CURRENT ACCOUNTS<br />
– MONEY IN SAVINGS ACCOUNTS<br />
LOANS<br />
– TO HOUSEHOLDS<br />
– TO BUSINESSES<br />
– TO OTHER BANKS<br />
A bank or insurer<br />
that doesn’t hold<br />
enough capital or<br />
liquid assets can<br />
get into financial<br />
difficulty.<br />
That means it<br />
may not be able<br />
to provide crucial<br />
payment services,<br />
loans or insurance.<br />
BONDS<br />
– MONEY FROM BOND SALES<br />
TO INVESTORS<br />
LIQUID ASSETS<br />
– CASH<br />
– DEPOSITS AT BANK OF ENGLAND<br />
– GOVERNMENT BONDS
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