Balance Sheet, Net Worth, and Impact on Yes Bank

ECONOMICS

Answer – 1
2
(a) Yes Bank
Extract of Balance Sheet
Particulars
Amount (£
mn)
Assets
Loans
- To corporations
15
0
- To households 75 225
Investments
- YesBank's holdings of shares and bonds, etc
10
0
- Reserve deposits with Bank of England 25 125
Cash in vaults 25 25
Tangible assets and property 50 50
Total Assets 425
Liabilities
Deposits
- Retail current account deposits
25
0
- Commercial current account deposits
10
0 350
Borrowings
- Borrowing by YesBank in money market 45 45
Total Liabilities 395

b. Net worth of Yes bank is 30
It will be shown under the heading "Equity & Reserves" on the liabilities side, as the accounting
equation is Assets = Liabilities + Equity
c. The definition of bank money is money held by bank as a part of money supply. The following
balance sheet items would be covered under the standard definition of bank money.
(i) Retail current account deposits
(ii) Commercial current account deposits
d. Impact on Yes bank
Making a loan is the business of the Yes bank and it creates the asset for Yes bank
Money Supply
Giving out loan increases the money supply by £5000
Net worth
No impact on the date of loan given. After that every single day, net worth will keep on increasing
due to interest rate charged.
Impact on Mr. A's net worth
No impact on the date of loan taken. After that every single day, net worth will keep on reducing due
to interest rate charge. Further, spending the amount will further decrease the net worth.
e. Impact on Yes bank balance sheet
(i) Cash in vault (asset side) will be decreased.
(ii) Retail current account deposits (liabilities side) will be decreased
3