The financial crisis compelled banks to reduce their leverage sharply. Consider the following two views of the

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The financial crisis compelled banks to reduce their leverage sharply. Consider the following two views of the balance sheet of a bank before and after the financial crisis. Which balance sheet view is more likely to be that of the bank after the financial crisis? Support your choice with calculations. 

Bank Balance Sheet – View 1 (in millions) Liabilities Assets $800 Reserves $30 Deposits $150 Other Borrowed Funds $90

Bank Balance Sheet View 2 (în millions) Assets Liabilities Reserves $30 Deposits $800 Securities $150 Other Borrowed Fu


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Money Banking and Financial Markets

ISBN: 978-1259746741

5th edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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