Bank liabilities

Bank liabilities are everything that is required for a financial institution. Bank liabilities will be shown in a bank’s balance sheet liabilities .

Banks look for different ways to get money. The funds of third parties that they obtain to finance themselves will be called bank liabilities. As they are liabilities, they will be obligations. A clear example of bank liabilities are current accounts, as it is money that they must return to customers.

Characteristics of bank liabilities

  1. They are essential in the activity of financial institutions.
  2. The entity must pay a remuneration (interest) to the saver.
  3. They are collected in a private document.
  4. They are commercial.
  5. They are reflected in accounting. Liabilitiesappear on the banks balance sheet.
  6. They are guaranteed by a financial institution and by a Deposit Guarantee Fund.

Types of bank liabilities

  • Current accounts: It is a deposit contract with immediate availability. The financial institution must return the sums to the client and will offer a series of services associated with the account.
  • Savings account: It is very similar to the current account. It is a deposit that is immediately available in which a savings book is used. Unlike the current account, they do not allow account overdrafts. The account cannot be disposed of by presenting checks and promissory notes.
  • Home savings account: It is a type of savings account . Its purpose is to save money for the purchase of a first home or home renovations.
  • Fixed-term deposits: These are deposits made with a financial institution with a specific maturity. Money cannot be withdrawn until the due date is reached. Sometimes the withdrawal of funds is allowed in exchange for paying a penalty. They generate higher interest than current accounts and savings accounts.
  • Mortgage securitiess : longterm securities are fixed incomeissued by banks that are secured loans and mortgages.
  • Bank promissory notes: Short-term fixed-income securities issued by financial institutions.
  • Preferredshares: They are issued by banks, they do not become shares because they do not have political rights. There will only be compensation for the client when the entity has benefits.
  • Obligations and bonds: Long-term fixed income securities issued by banks. The client will lend an amount to the bank and in return, he will periodically receive interest. Once the term of the title ends, the bank will return the amount that the client has lent him

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