How much in excess reserves does first national hold

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Case Study

Read the following case study and write a 1 page summary based on the following:

Bob Jones is the President of First National Bank. The Board is concerned about the outlook of the business economy, and has tasked Bob to focus on reducing the banks risk for bad loans. Bob is very serious about compliance to the law, as well as diligently working to make his bank competitive for the value of the shareholders. In this scenario you will assume the following:

Suppose that the T-account for First National Bank is as follows:

Assets

Liabilities

Reserves

$100,000

Deposits

$500,000

Loans

$400,000

 

 

For this assignment, assume that the Fed requires banks to hold 5 percent of deposits as reserves:

• How much in excess reserves does First National hold?

• How does Bob balance the requirements put on him from the regulators, his boss (the Board of Directors), his customers and the shareholders of the bank? Be sure to consider all aspects of his situation.

• Provide alternatives that Bob can consider.

• Provide your conclusion on the case study.

Reference no: EM131359552

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