Table 1 contains a simplified balance sheet for a commercial financial institution.
| Assets | € billion | Liabilities & Equity | € billion |
|---|---|---|---|
| Cash & reserves | 15 | Customer Deposits | 590 |
| Balances at Central Bank | 55 | Short-term Borrowing | 60 |
| Government Securities | 120 | Other Liabilities | 120 |
| Loans to Customers | 610 | Shareholders' Equity | 80 |
| Other Assets | 50 | ||
| Total Assets | 850 | Total Liabilities & Equity | 850 |
From this balance sheet, it is most reasonable to conclude that this institution is
a threat to financial stability because it holds no equity capital.
an investment bank because the vast majority of its assets are held in cash.
highly liquid because over 70% of its assets are comprised of loans to customers.
most likely a commercial bank because its primary source of finance is customer deposits.
176 exam-style questions on AQA A Level Economics 2.4 Financial markets and monetary policy (A-level only), covering 2.4.1 The structure of financial markets and financial assets, 2.4.2 Commercial banks and investment banks, 2.4.3 Central banks and monetary policy, and 2.4.4 The regulation of the financial system. Each one has a worked solution and a mark scheme showing where the marks go.