The bank’s main liabilities are its capital (including cash reserves and, often, subordinated debt) and deposits. The latter may be from domestic or foreign sources (corporations and firms, private individuals, other banks, and even governments).


Assets represent the valuable resources controlled by the company, while liabilities represent its obligations. Both liabilities and shareholders’ equity represent how the assets of a company are financed.

Frequently Asked Questions

What is the definition of bank liabilities?

Liabilities are what the bank owes to others. Specifically, the bank owes any deposits made in the bank to those who have made them. The net worth, or equity, of the bank is the total assets minus total liabilities. Net worth is included on the liabilities side to have the T account balance to zero.

What is composition of central bank?

Central banks’ counterparties are usually banks, although some accept nonbank counterparties as described in yesterday’s post. In normal times, central banks hold mainly government bonds, foreign exchange reserves, and loans to banks as assets.

What are the different components of a bank’s balance sheet?

There are three main parts to a balance sheet: Assets, Liabilities and Equity. The ‘Balance’ in balance sheet refers to the fact that Assets must always equal the sum of liabilities and Equity. For most banks, loans to customers are the most common type of asset on their balance sheet.

What are example of liabilities?

Liabilities are any debts your company has, whether it’s bank loans, mortgages, unpaid bills, IOUs, or any other sum of money that you owe someone else. If you’ve promised to pay someone a sum of money in the future and haven’t paid them yet, that’s a liability.

How are bank debts liabilities?

Bank debt is a long-term liability a business takes on by borrowing money from its bank. It appears under liabilities on the balance sheet as part of all the money the company owes its creditors.

What are the two types of liabilities?

Businesses sort their liabilities into two categories: current and long-term. Current liabilities are debts payable within one year, while long-term liabilities are debts payable over a longer period. For example, if a business takes out a mortgage payable over a 15-year period, that is a long-term liability.

Are deposits liabilities for banks?

The deposit itself is a liability owed by the bank to the depositor. Bank deposits refer to this liability rather than to the actual funds that have been deposited.

Which of the following is considered a liability in a bank balance sheet?

The assets are items that the bank owns. This includes loans, securities, and reserves. Liabilities are items that the bank owes to someone else, including deposits and bank borrowing from other institutions. Capital is sometimes referred to as “net worth”, “equity capital”, or “bank equity”.

Which of the following is an example of a liability on bank as balance sheet?

Accounts payable, short term debt, notes payable, dividends payable, etc., are considered as current liabilities. Analysing the current liabilities is considered important.

Is bank balance an asset or liability?

Bank overdraft is the amount payable by the bank since the amount drawn is more than the balance held. Bank balance is the amount owned by the firm that is lying deposited in the bank, thus, it is an asset.

What are contingent liabilities?

Description: A contingent liability is a liability or a potential loss that may occur in the future depending on the outcome of a specific event. Potential lawsuits, product warranties, and pending investigation are some examples of contingent liability.

Are bank loans current liabilities?

The most common current liabilities found on the balance sheet include accounts payable, short-term debt such as bank loans or commercial paper issued to fund operations, dividends payable.

What are the main assets and liabilities of a commercial bank?

The table shows (a) that banks raise the bulk of their funds by selling deposits—their dominant liability, and (b) that they hold their assets largely in the form of (i) loans and advances and bills discounted and purchased, together constituting bank credit, (ii) investment, and (iii) cash.

What are 5 examples of liabilities?

  • Bank debt.
  • Mortgage debt.
  • Money owed to suppliers (accounts payable)
  • Wages owed.
  • Taxes owed.

How are liabilities generally classified?

Liabilities are categorized into three types: Long-term liabilities, also known as non-current liabilities; short-term liabilities, also known as current liabilities; and contingent liabilities.