Self-Funding the Bank Balance Sheet

Self-Funding the Bank Balance Sheet

Moorad Choudhry

25 years: Treasury & ALM

The basic business of banking involves advancing loans to customers and accepting deposits from customers. Moorad covers the basic concept of bank self-funding, which is underpinned by the fundamental premise that a bank must actually fund itself, not print money, in order to lend.

The basic business of banking involves advancing loans to customers and accepting deposits from customers. Moorad covers the basic concept of bank self-funding, which is underpinned by the fundamental premise that a bank must actually fund itself, not print money, in order to lend.

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Self-Funding the Bank Balance Sheet

3 mins 26 secs

Overview

A bank cannot simply print or create its own money in order to lend money. It must actually fund itself in order to lend. Funding the balance sheet requires that a bank has in place a source for obtaining the funds. This can come through three sources; its own funds, its customers deposits or the wholesale market.

Key learning objectives:

  • How does the bank ensure the balance sheet balances?

  • What are the three sources banks can use to raise funds?

  • What happens if a bank cannot raise funds from these sources?

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