What it is
Total liabilities is the sum of every debt line. For a bank, customer deposits make up most of it.
Subtract it from total assets and you get equity, the shareholders' part. That is why a bank is said to be 'highly leveraged': it runs mostly on other people's money.
This is normal for banks and is exactly why regulators demand a minimum capital cushion.
How it is calculated
Due to BFIs + deposits from customers + borrowings + debt securities issued + other liabilities (+ any other liability lines). Total assets − total liabilities = total equity.
Worked on Nabil Bank Limited, FY 2082/83 Q4
NABIL's total liabilities were Rs 66,282.51 crore at the end of FY 2082/83 Q4. Total assets of Rs 73,473.16 crore minus that leaves equity of Rs 7,190.66 crore.
What good looks like
Look at the ratio of equity to total assets, not liabilities alone. A bank funded mostly by stable customer deposits is sturdier than one leaning on interbank money and borrowings.
Watch out
- High liabilities are normal for a bank; the question is what kind and how stable.
- Liabilities and equity together always equal assets; neither side is 'good' or 'bad' alone.
In Nepal
NRB does not set a limit on total liabilities directly. It controls leverage through the capital fund to risk-weighted assets ratio and the credit-to-deposit ratio.
Questions
It is how banks work. Safety is judged by capital adequacy, which weighs equity against the risk in assets, not by the raw ratio.
Customer savings and current deposits, and long-dated debentures. Interbank balances and short borrowings are the least stable.