ABSTRACT
We have examined the major items on the liabilities side of the Scottish banker’s balance sheet and we must now look at his assets. The assets of a commercial bank are important from several points of view. To the bank itself they represent the employment of the resources which the public and its shareholders place at its disposal. The disposition of these assets must be made with more than one end in view: profitability is the general objective, but the ever-outstanding volume of short-term liabilities has traditionally forced banks to pay regard above all to the need for liquidity in their assets. For the economy at large the structure of the banking system’s assets is also of the greatest importance. The banks are the most important of the financial intermediaries; in spite of the great growth of other types of financial intermediaries in recent years, as a body they still dispose of a larger quantity of the country’s short-term capital than any comparable group of institutions. The asset structure of the banks is also of great importance for policy. The volume of bank advances at any time may be an explicit objective of policy and while it may be attacked directly, control is also exercised through the general level of deposits. But control over deposits brings in other assets, notably liquid assets. Some of the issues connected with the Scottish banks’ assets will have to be discussed in later sections of this book and we will say correspondingly less about them at this juncture. In this chapter the liquid assets of the banks will be described and examined; in the following chapter we shall take a look at the so-called ‘risk’ assets. In both chapters we shall be considering the various elements from the viewpoint of their position within the total structure of bank assets. This total structure is shown, statistically, in Table XVIII; and we must first say a word or two about the figures assembled there.
