Explain the core balance-sheet roles of loans, securities, deposits, borrowings, and capital in a bank.
The reframe: a bank balance sheet is a risk map, not a static accounting page. Assets earn and absorb risk Loans and securities sit on the asset side because they are expected to produce cash flows for the bank. They differ in liquidity, credit risk, interest-rate exposure, and accounting treatment. A commercial loan may earn a higher spread but cannot be sold quickly at par. A Treasury security may be liquid but can still carry market-value pressure when rates move. Liabilities are promises to funders Deposits, borrowings, and other liabilities are how the bank funds assets. Customer deposits are often…
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