By the end of this chapter, students should be able to:
- Explain what a balance sheet and a T-account are.
- Explain what banks do in five words and also at length.
- Describe how bankers manage their banks’ balance sheets.
- Explain why regulators mandate minimum reserve and capital ratios.
- Describe how bankers manage credit risk.
- Describe how bankers manage interest rate risk.
- Describe off-balance sheet activities and explain their importance.