All deposits whether or not they bear interest have associated costs. In the lower left corner of the table are the three ratios that must be kept above minimum values established by bank regulators. The capital ratio is the ratio of a bank s equity to a risk-weighted sum of the bank's assets. The leverage ratio is the ratio of a bank's equity to the unweighted sum of its total assets. While there is much more to learn about banks, this simplified model outlines the essential details for small banks.
Large banks are far more complex institutions.
For some of them, lending is a minor part of the business. The next article surveys the main activities of large banks. .