Minimum capital requirement

The monetary board shall require the minimUm ratio which the net worth of a bank must bear to its total risk assets which include contingent reports. for purpose of this section the monetary board may require that such ratio be determined on the basis of net worth and risk asset of the bank and its subsidiaries.

 In case the bank does not comply with the prescribed minimum ratio, the monetary board may limit the distribution of net profits by such bank and may require that part or all of the net profit be used to increase that capital accounts of the bank until the minimum requirement has been met.

Bank earnings and expenses

Of great importance to a bank. And for that matter to all other business is the profit and loss statement, although this is seldom published it is nevertheless important in the appraisal of a banks financial condition.

Criticism on published statements

1. published statements are too abbreviated. 2. the ordinary layman is not conversant with banking function or perhaps with the bank. 3. the assets and liabilities are so combined as to make it impossible to look through or to discover the real picture of a bank.

ASSUMIG THAT THE BANK CHARTER REPRESENTS THE ISSUE OF 50000 SHARES AT PAR VALUE OF 1000.00
ASSETS
CASH P5,000,000 TOTAL ASSETS P5,000,000

LIABILITIES
STOCK HOLDERS EQUITY P5,000,000 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY P5,000,000

THEN OUT OF THE CASH RECEIVED, THE MANAGEMENT BUYS A BUILDING WORTH P1,000,00 AND EQUIPMENT WORTH P500,000
ASSETS CASH 3,5000,00 BANK BUILDING 1,000,000 EQUIPEMENT 500,000 LIABILITIES STOCKHOLDERS EQUITY 5,000,000

TOTAL ASSETS 5,000,000

TOTAL LIABILITIES AND STOCKHOLDRES EQUITY 5,000,000

THE BANK RECEIVES DEMAND DEPOSITS TO THE TUNE OF 1,000,000

ASSETS CASH 4,500,00 BANK BUILDING 1,000,000 EQIPEMRNT 5000,000 TOTAL ASSETS 6,000,000
LIABILITIES

DEMAND DEPOSITS 1,000,000

STOCKHOLDERS EQUITY 5,000,000 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 6,000,000

LEGAL RESERVE 10%

ASSETS CASH 4,400,00 BANK BUILDING 1,000,000 DUE FROM BANK 100,000 EQUIPEMENT 5000,000 TOTAL ASSETS 6,000,000
LIABILITIES

DEMAND DEPOSITS 1,000,000

STOCKHOLDERS EQUITY 5,000,000 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 6,000,000

THE BANK RECEIVES BANK APPLICATION AND APPROVES THE LOAN FOR 2000,000 IN CASH.
ASSETS
LIABILITIES

CASH 4,200,000 BANK BUILDING 1,000,000 DUE FROM BANK 100,000 LOANS & DISCOUNTS 200,00 EQUIPEMENT 5000,000
TOTAL ASSETS 6,000,000

DEMAND DEPOSITS 1,000,000

STOCKHOLDERS EQUITY 5,000,000 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 6,000,000

THE BORROWER REQUEST FOR AN OVERDRAFT LINE OF 40,000

ASSETS

LIABILITIES

CASH 4,196,000 BANK BUILDING 1,000,000 DUE FROM BANK 100,000 LOANS & DISCOUNTS 200,000 OVERDRAFT 40,00 EQIPEMRNT 5000,000
TOTAL ASSETS 6,040,000

DEMAND DEPOSITS 1,040,000

STOCKHOLDERS EQUITY 5,000,000 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 6,040,000

CLASSIFICATION OF BANK ACCOUNTS

ASSETS ARE GENERALLY OF A CURRENT OR FIXED NATURE, HOWEVER, SOME ARE MORE LIQUID THAN OTHERS AND THEREFORE IN ANALYSING BANK STATEMENTS IT MIGHT BE NOTICED THAT THEIR SEQUENCE REFLECTS THE CLASSIFIACATION. THE SSAME IS TRUE WITH LIABILITIES.