Capital Management

Lets consider two banks: Bank A and Bank B

Bank A

Assets Liabilities (unit in million)

Reserves $10 Checkable deposits $100

Securities 30

Loans 80 Bank capital/Net Worth 20

Bank B

Assets Liabilities (unit in million)

Reserves $10 Checkable deposits $85

Securities 30

Loans 80 Bank capital/Net Worth 35

a) What is definition of Net Worth?

List two sources of bank capital

b) Please calculate the capital-to-asset ratio for Bank A and Bank B.