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CTP - 7th Edition > Chapter 3 - Banks and FInancial Institutions > Flashcards

Chapter 3 - Banks and FInancial Institutions Flashcards

(44 cards)

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1
Q

Four General Types of Banks

A

Commercial Banks
Investment Banks
Universal Banks
Central Banks

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2
Q

Dual Mandate for the US Federal Reserve

A
  1. Inflation (Pricing)
  2. Unemployment Rate (Employment)
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3
Q

US Banking Regulatory Authorities

A

OCC
Board of the Federal Reserve
FDIC
State Regulators

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4
Q

Basel III - Key Ratios

  1. Liquidity Coverage Ratio
  2. Net Stable Funding Ratio

(how long are time frames associated with each of these?)

A

Liquidity Coverage Ratio (30 Days Liquidity)
Short-term

Net Stable Funding Ratio (1 Year)
Medium / Long-Term
Third Party funds that will be available

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5
Q

Largest Shadow Banks

A

Pensions Funds

Insurance Companies

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6
Q

NBFI

A

Non-Bank Financial Institution

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7
Q

Primary Role of Financial Institutions in a Market

A

Intermediation of funds to allow for availability of capital

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8
Q

Depository Institutions Core Feature

A

Accepts deposits and provisions loans

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9
Q

Investment Bank Services

A
  1. Underwriting securities
  2. Providing custodial services
  3. Facilitating mergers, acquisitions, etc.
  4. Acting as a broker or financial advisor
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10
Q

Two Types of Short-Term Business Loans

A
  1. Term Loan / Term Note
  2. Revolving Line of Credit
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11
Q

What role will financial institutions take when it comes to commercial paper?

A

Typically act as agents to place commercial paper with investors

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12
Q

Industrial Banks

A

Limited scope of services

Locally chartered

Sell certificates called investment shares

Can accept deposits

Do not offer DDAs

Automobile manufacturers may use these

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13
Q

Three Ways of Managing Monetary Policy for US Federal Reserve

A
  1. Interest Rates
  2. Reserve Requirements
  3. Open market operations
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14
Q

Seigniorage

A

Income derived from providing currency to the FIs through the sale of government bonds

Difference between the value of the money and the cost to produce it

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15
Q

Fractional Reserve Banking

A

Process of recycling deposits through the reserve requirement

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16
Q

Export Credit Bank / Export Credit Agency

A

Helps facilitate exporting goods, especially to emerging markets

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17
Q

Two Stages in Bank Supervisory Regime

A
  1. Initial chartering
  2. Ongoing supervision and surveillance
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18
Q

Dual Banking System

Study These Flashcards
A

Bank can be federally or state chartered

(US as an example)

19
Q

Two Bank Monitoring Requirements

Study These Flashcards
A

Capital and liquidity

Minimum asset quality

20
Q

Impairment of Capital Rules

Study These Flashcards
A

Regulators restrict the ability for financial institutions to loan out to certain sectors or companies

21
Q

Three Pillars of Basel II

Study These Flashcards
A

Minimum capital requirements

Supervisory review (dealing with and evaluating risk)

Market discipline (disclosure requirements for risk)

22
Q

Basel III Two Reform Targets

Study These Flashcards
A

Bank-level regulation

System-wide risks

23
Q

Four Requirements from Basel III

Study These Flashcards
A

Minimum capital levels
Leverage Ratio
Liquidity coverage ratio
Net Stable funding ratio

24
Q

Regulation D

Study These Flashcards
A

Reserve requirement provision of the Federal Reserve Act of 1913

25
Regulation Q | (List Acts that have impacted this Regulation and Current Focus)
Previously restricted interest amounts on certain accounts Glass-Steagall Act of 1933 -> DIDMCA of 1980 -> Dodd-Frank of 2010 Current version implements the Basel III minimum capital requirements and capital adequacy standards
26
Regulation Y
Covers acquisition of banks and bank holding companies Defines and regulates non-banking activities bank holding companies and foreign banking organizations can do
27
Regulation BB
Requires banks to meet the credit needs of the entire community where they do business
28
Regulation VV
Volcker rule
29
Regulation WW
Minimum liquidity requirement on large and internationally active banking organizations Based on liquidity coverage ratio
30
Volcker Rule
Generally prohibits banking entities from engaging in proprietary trading Prohibiting investing in or sponsoring hedge funds or private equity funds Limit exposures to hedge funds and private equity funds Recently amended in 2019/2020 to reduce restrictions on investments in venture capital funds
31
Two areas of concern learned from the 2007-09 financial crisis related to shadow banking
Role of asset managers and the risk of contagion in the event of a collapse of a fund The growth in the use of all forms of financial derivatives beyond the oversight of central banks and other regulators
32
What does it mean when securities are held by broker-dealers in a “street name”?
held in the broker’s name on behalf of the broker’s customer eliminates having to re-register securities
33
Two Types of Brokerage Firms
Discount – make trades at reduced prices, but little to no advice Full Service – need to make sure group providing advice is independent
34
Prime Brokerage Services
Offer a range of asset management services
35
Captive Finance Companies
Subsidiary of a large industrial corporation that finances purchases solely on the corporation’s products Auto manufacturers typically have one of these
36
Asset-Based Lenders
Loans are secured by collateral that is pledged by the borrower
37
"Advance Rate" used by Asset-Based Lenders
percentage of eligible collateral to determine total amount that can be borrowed
38
Insurance companies can provide what types of services outside of typical insurance arrangements?
Mortgage funding Leasing services Guaranteed investment contracts (GIC)
39
Insurance Company Summary
Risk Management Partner Institutional Investors
40
Transfer Agent (Fiduciary)
Keeping records of each purchase and sale of stock and bonds
41
Registrar (Fiduciary)
Compiling and maintain lists of current stockholders and bondholders for dividend and interest payments
42
Issuing Agent
Distributing securities to investors on behalf of issuer
43
Issuing and Paying Agent
Combined issuing and paying agents
44
Corporate Trustee
Serves as intermediary between the issuer and the investors Provides a variety of services related to these securities including Monitoring compliance Payment administration Recordkeeping

CTP - 7th Edition (26 decks)

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