Mostly original content that examines financial surreality in equity markets in general, and the Japanese Stock Market in particular.
A deposit in a bank is not equity on the balance sheet.
An unlevered deposit in a savings account, checking account, time-deposit, etc. is certainly NOT, as you suggest, neither equity nor even like bank equity. However, the moment that you pledge your deposit (or your securities) as collateral for a loan against that deposit or securities, it becomes very much like equity from the risk-viewpoint of the bank and its investors. NOT because the bank can counts it as tier-one equity so it can shoot the moon, but rather because the terms of its loan against the securities collateral purchased with the deposit and extended financing is economically identical to equity, where the customer must further maintain a minimum equity (call it a buffer against loss) indemnifying the bank against loss up to the amount of equity it holds before becoming a general creditor to the entity in the event of a catastrophe. So when looking at risk if you really want to know the risk position of the bank, Tier-one to assets is dumb for a large securities financing operation who holds loadsa customer faux-equity (ignored) while assets on the balance balloon. Get it?
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