When choosing a bank to make a deposit (or vice versa, in order to get a loan) you need to have certain knowledge in the financial sector. Today we consider one of the key concepts in the banking sector – the value of the net assets of the bank. It is quite often used to characterize a particular credit institution, as well as to compare and compile ratings.
So what is the net asset value?
Consider the official definition (given by the Central Bank of Russia):
Net assets are assets free from liabilities, which corresponds to the concept of equity (capital) as applied to a credit institution.
The Central Bank also issued a special instruction, according to which the NAV is calculated.
In a general sense, the technique is reduced to deducting from the amount of the bank’s assets (property) its liabilities – including liabilities to depositors.
Thus, the NAV is indeed a very important indicator: after all, it reflects the financial power of the organization in a “pure form”. It reflects the amount of funds that will remain in the ownership of the bank, even if all depositors and creditors withdraw their money.
Therefore, in relation to investors, net assets act as a reserve that insures and guarantees the payment of deposits.
Have a good investment!
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