Creating an Opening Balance Sheet in 5 Steps

bank balance sheet example

Hold 40+ different currencies, and switch between them using the mid-market exchange rate — and up to 3x cheaper than an alternative like PayPal. Figure 1 illustrates a hypothetical and simplified balance sheet for the Safe and Secure Bank. Because of the two-column format of the balance sheet, with the T-shape formed by the vertical line down the middle and the horizontal line under “Assets” and “Liabilities,” it is sometimes called a T-account. The Great Recession has also underscored the fact that banks held many asset-backed securities as well.

  • Following is a sample balance sheet, which shows all the basic accounts classified under assets and liabilities so that both sides of the sheet are equal.
  • Transactions of the Reserve Bank must be recorded in the general ledger and reflected on the Balance Sheet; none of the principles or possible lack of specific instructions for any given transaction in this manual should be interpreted as allowing otherwise.
  • Leading banks have already started to take control of their balance sheets and capital management and revise their approach to managing balance-sheet efficiency and velocity.
  • But before digging deeper, let’s look at the liabilities side of the bank balance sheet — that’s where you’ll find aggregated information on the bank’s deposit base.
  • Banks may hold marketable securities or certain currencies for the purposes of trading.

Even if a bank expects a certain number of loan defaults, it will suffer if the number of loan defaults is much greater than expected, as can happen during a recession. For example, if the Safe and Secure Bank in Figure 1 experienced a wave of unexpected defaults, so that its loans declined in value from $5 million to $3 million, then the assets of the Safe and Secure Bank would decline so that the bank had a negative net worth. Say that a family takes out a 30-year mortgage loan to purchase a A Deep Dive into Law Firm Bookkeeping house, which means that the borrower will repay the loan over the next 30 years. This loan is clearly an asset from the bank’s perspective, because the borrower has a legal obligation to make payments to the bank over time. But in practical terms, how can the value of the mortgage loan that is being paid over 30 years be measured in the present? One way of measuring the value of something—whether a loan or anything else—is by estimating what another party in the market is willing to pay for it.

Understanding how central banks use their balance sheets: A critical categorisation

These term deposits are used by the Reserve Banks as a monetary policy tool to manage the aggregate quantity of depository institutions’ reserve balances. Because of the importance of producing accurate year-end financial statements, additional procedures, such as subsequent payments testing, should be used to identify and accrue expenses incurred but not paid at year-end. Depository institutions’ deposits represent balances maintained by depository institutions in accounts at Federal Reserve Banks. Depository institutions may hold balances in master accounts, excess balance accounts, and temporary transitional accounts.

For the Safe and Secure Bank shown in Figure 1, net worth is equal to $1 million; that is, $11 million in assets minus $10 million in liabilities. If a bank has negative net worth and depositors tried to withdraw their money, the bank would not be able to give all depositors their money. When a banks receives a check, it must present the check to the bank on which it is drawn for payment, and, previously, this has taken several days. Nowadays, checks are being processed electronically and many transfers of funds are being conducted electronically instead of using checks. So this category of cash is diminishing significantly, and will probably disappear when all financial transactions finally become electronic.

BBVA financial information

At the close of business each December 31, this account balance should include only the low-value and infrequent Markets related transactions. Title II of the Financial Services Regulatory Relief Act of 2006 granted the Federal Reserve authority to pay interest to depository institutions for balances held at Reserve Banks effective in 2011. Section 128 of the Emergency Economic Stabilization Act of 2008 accelerated this authority to October 9, 2008.

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  • This account represents the balances maintained by depository institutions in a joint account at a Reserve Bank.
  • Success with integrated balance-sheet and capital management requires alignment among all the relevant stakeholders, including the bank’s business units, risk, finance, and other central management functions.
  • The liability reflected should be an estimate of the actual amounts of claims incurred but not paid.
  • Clicking on “Deposits held in Domestic Offices” reveals an estimate of the bank’s federally insured deposits — 52.94% in M&T Bank’s case, which is roughly typical.
  • A Certificate of Deposit (CD) is a time deposit where the depositor agrees to keep the money in the account until the CD expires.
  • This account includes unearned discount on acceptances and, although rare, the discount on any loans under paragraph 3 of Section 13 of the Federal Reserve Act.

This account is used by the FRBNY to accommodate rare situations in which the Federal Reserve, at the direction of the Treasury under Section 15 of the Federal Reserve Act, must hold funds for certain non-Treasury entities in a “non-Treasury” deposit account. The law provides that any Reserve Bank which is requested to do so by such organizations should act as its depository or as its fiscal agent, and requires the Board of Governors to supervise and direct the carrying out of these functions. This account is used to record issued notes in transit to or from the Bank, such as new notes that have left the BEP facilities in Washington D.C. Worth, Texas, but have not been received by the Reserve Bank, or for notes that have been shipped from one Reserve Bank to another (Fed-to-Fed shipment), but have not been received. The cumulative net amount owed or due from other Federal Reserve Banks as a consequence of the InterFRB transaction settlement procedure is reported in this account. The settlement between Districts is conducted by the centralized accounting system, which captures the data needed to conduct settlement.


The balance reported on the FR 34 represents the total of items forwarded to and still in process of collection with other Districts, including cash letters, and automated clearinghouse (ACH) activity. On January 5, 2009, the RMBS purchase program began to purchase RMBS guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. On March 23, 2020, the CMBS purchase program began to purchase CMBS guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae.

bank balance sheet example

The accrual for the cost of sick pay benefits, however, should be limited to the vested amount. This account represents the liability for dividends accrued to date on Reserve Bank capital paid-in from member banks that have not been paid. Prior to April 2018, accrued service income (the estimated receivable) was recognized at the Reserve Bank (New York, Atlanta, and Chicago), which recognizes the service income. From April 2018, accrued service income is recorded at the host Bank for billing (Minneapolis) and the off-set is recognized as service income (revenue) at Boston, New York, Atlanta, and Chicago. Transactions related to the accrued service income (an asset) and recognized service income (revenue) are passed among the Reserve Banks using the Interdistrict Settlement account (paragraph 5.00). The costs of shared capitalized software projects (i.e., software developed by more than one Reserve Bank) should be transferred to the books of the Reserve Bank that owns the software.

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