Boise’s SYRINGA BANK is in trouble and faces a merger or takeover from state and federal regulators because it’s capital level is less than 10% of its assets.
Terms used to describe banks are somewhat reverse of what we normally think. When we DEPOSIT funds in a bank–savings, checking, or CDs–the institution shows that as a LIABILITY because it is ultimately owed back to the customer.
LOANS to customers who ultimately owe payments to the banks are shown on the books as ASSETS. It is confusing to most folks because it seems logical that money in hand (deposits) would be assets and money loaned out would be a liability. The problem with banks loaning more than is being repaid draws down their cash reserves known as CAPITAL.
When regulators talk about “seizing assets,” it is normally about taking over loan contracts and either the money being repaid or the collateral–usually a house–that is security for the loan.
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