4 ms·
Why are customer deposited considered “assets” ? Is the money in my checking account included in the assets for my bank?
by indigodaddy 4y ago
Why are customer deposited considered “assets” ? Is the money in my checking account included in the assets for my bank?
- unmole 4y agoCash that you deposit in a bank becomes the bank's asset. The money in your checking account is included in the bank's liabilities.
- boring_twenties 4y agoYes it is
- michael1999 4y agoYes. That is the heart of banking regulation.
- perfecthjrjth 4y agoCustomer deposits are liabilities for the bank.
- ShivShankaran 4y ago[dead]
- c7b 4y agoCustomer deposits are liabilities, but if the exchange acts as one would expect, each $ of liabilities has a corresponding $ of assets (ideally, in a segregated account, so that they're not considered the company's asset in the case of a default). But one may always doubt whether things are as they should, afaik Binance has never had a full audit report (not just proof-of-reserves or similar). Banks work a bit differently, btw, they should also have more $ assets than liabilities, but there's generally no direct 1:1 link as described above.
- complex_exp 4y ago> Banks work a bit differently, btw, they should also have more $ assets than liabilities, but there's generally no direct 1:1 link as described above. The total difference between assets and liabilities is the common stock (equity). This also shows why it's a very bad thing when the stock of a bank goes to zero, it means some liability will not be covered and thus the bank can be considered bankrupt. I'm simplifying here. From this point we can take a history tour to the 2008 meltdown, when we had this situation everywhere: bank A would short the common stock bank B because bank A had a lot of assets in bank B (which show up in bank B as liabilities). Bank B did the same thing to bank A for the same reasons. This is not as stupid as it sounds, because banks are not the only players in capital markets, using those shorts they essentially spread the default risk all over the equity markets. While this whole clusterfuck of nobody-trusts-nobody is going on the SEC comes out all of a sudden and bans the short sale of bank stocks, because shorting is evil or something. Imagine how much that made things worse after the only way to hedge entire banks going under was suddenly removed.
- c7b 4y agoI think you're confusing market capitalization and (accounting) equity here. What the stock price does does not directly affect the balance sheet (where you see the equity).
- complex_exp 4y agoI'm not confusing (the market cap and the book value), but rather simplifying things on purpose.
- jimjimjim 4y agowell, from the old double entry bookkeeping days: A deposit received by a company is recorded as both an asset and a liability of the same value. The assets are then used to create revenue and anything that has to be paid to the depositor are expenses. When the deposit is withdrawn, the asset and the liability both decrease.
- irjustin 4y agoI wouldn't look at Ripue and expect them to use the strictly correct accounting term. The full term is Assets Under Management so it's semi-understandable, but yes definitely not correct.
- ashwagary 4y agoIs it AUM if Binance doesn't "manage" anything for the vast majority of its customers? It's just a custodial wallet solution until a position is opened by the customer and even then Binance doesnt trade anything on their behalf.
- dragonwriter 4y ago> Is the money in my checking account included in the assets for my bank? The money in their vault is an asset, the balance in your account is a liability. When you deposit money, it creates both, though the asset by design doesn’t sit there for long in that form.
- cheriot 4y agoFunny how the replies are full of people explaining how bank deposits work. An exchange is not a bank. They're a custodian that holds something on the customer's behalf and facilitates trades. That crypto "exchanges" act like banks, but without any of the banking regulation we spent the last 100 years learning the hard way is why they keep failing. My stock broker and the NYSE can't secretly sell my shares and loan out the proceeds. They just hold the stock. That Crypto "exchanges" think of deposits as assets makes it clear they're more like a hedge fund than a bank or exchange.
- dragonwriter 4y ago> An exchange is not a bank. The hard distinctions between different types of financial institutions and their services, and most particularly the thing that makes every thing that holds money or other valuables on your behalf not effectively, like a (very sketchy) bank, are mostly a product of regulation.
- cheriot 4y agoYes, otherwise customers are just handing assets to someone and hoping for the best. That lack of assurance sets the stage for bank runs...
- mrep 4y ago> My stock broker and the NYSE can't secretly sell my shares and loan out the proceeds. They just hold the stock. Not in the business so I could be wrong but I believe they can loan shares to short sellers to sell and pocket the interest but they are also regulated which turns out is important.
- cheriot 4y agoThey need consent, but to your point it might be buried in some document. Some will provide compensation for it: https://www.interactivebrokers.com/en/pricing/stock-yield-enhancement-program.php https://www.interactivebrokers.com/en/pricing/stock-yield-en...
- xiphias2 4y agoIn your checking account yes. If you deposit money to safety deposit boxes, it's still in your posession, and the bank just stores it for you.
- 1vuio0pswjnm7 4y agoToo many question, lol. https://finance.yahoo.com/news/binance-doesn-t-headquarters-because-164521105.html https://finance.yahoo.com/news/binance-doesn-t-headquarters-...