Funding Sources and Other Liabilities
- Topics:
- Strategic Planning and Analysis
- Tags:
- ALM Professional,
- Bank,
- Finance,
- Financial Services,
- Investment,
- Liquidity
- Source:
- ALM Professional
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Overview: Any assessment of bank capital must, by necessity, include deposit structure and liquidity considerations. Proper structuring of earning assets is also incomplete and ineffective without consideration of deposit and other funding sources, inasmuch as the cost of funds comprises the most significant portion of a bank's total expenses and therefore has a profound effect on bank earnings. Deposits also represent an important element of both liquidity and funds management and must be reviewed in concert with that area. In summary, analysis of a bank's capital adequacy, earnings capacity, liquidity position and management's skill at administering or adjusting these elements and their interrelationships is incomplete without an evaluation of the impact of the structure and characteristics of the institution's funding sources on these factors. This section of the Manual discusses the major items with which examiners need to be familiar in order to perform an adequate assessment of a bank's deposit accounts and other funding sources and determine their influence on the safe and sound operation of the institution.
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