Self liquidating paper theory

Back-up lines of credit (with other banks) [Pure liquidity: low or non-earning assets; try to minimize] 1. CIPC (Cash items in process of collection) - i.e., checks pending clearance 3. Non-deposit borrowing (fed funds, discount window, notes and debentures, etc) 5.This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

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Self liquidating (real bills doctrine) theory is a traditional and conservative banking theory.

A business might use a self-liquidating loan to purchase extra inventory in anticipation of the holiday shopping season.

The revenue generated from selling that inventory would be used to repay the loan.

Its investment policy, in turn, depends on the manner in which it manages its investment portfolio.

Thus “commercial bank investment policy emerges from a straight forward application of the theory of portfolio management to the particular circumstances of commercial bank.” Portfolio management refers to the prudent management of a bank’s assets and liabilities in order to seek some optimum combination of income or profit, liquidity, and safety.


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