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CFMP - Certified Financial Markets Professional > Chapter 5: Banking & Financial Institution > Flashcards

Chapter 5: Banking & Financial Institution Flashcards

1
Q

is a company engaged in the business of dealing with
financial and monetary transactions such as deposits,
loans, investments, and currency exchange.

A

Financial institutions

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2
Q

encompass a broad range of business operations
within the financial services sector including banks, trust companies, insurance companies, brokerage firms, and investment dealers.

A

Financial institutions

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3
Q

serve most people in some way, as financial operations are a critical part of any economy, with individuals and companies relying on financial institutions for transactions and investing.

A

Financial institutions

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4
Q

True or False

Governments do not consider it imperative to oversee and regulate banks and financial institutions because they do play such an integral part in the economy.

A

False

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5
Q

True or False

Historically, bankruptcies of financial institutions can create panic.

A

True

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6
Q

WHAT ARE THE 10 MAJOR TYPES OF FINANCIAL INSTITUTIONS?

A
  1. Central Banks
  2. Retail Banks
  3. Commercial Banks
  4. Internet Banks
  5. Credit Unions
  6. Savings Association
  7. Loan Association
  8. Investment Banks
  9. Brokerage Firms
  10. Insurance Companies
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7
Q

are the financial institutions responsible for the oversight and management of all other banks.

A

Central Banks

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8
Q

offered products to individual consumers

A

Retail Banks

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9
Q

worked directly with businesses

A

Commercial Banks

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10
Q

Products offered at ______________________include checking and savings accounts, certificates of deposit (CDs), personal and mortgage loans, credit cards, and business banking accounts.

A

retail and commercial banks

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11
Q

A newer entrant to the financial institution market is _______________, which work similarly to retail banks.

A

internet banks

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12
Q

________________ offer the same products and services as conventional banks, but they do so through online platforms instead of brick-and-mortar locations.

A

Internet banks

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13
Q

Under internet banks, there are two categories:

A
  1. Digital banks
  2. Neo-banks
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14
Q

are online-only platforms affiliated with traditional banks.

A

Digital banks

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15
Q

are pure digital native banks with no affiliation to any bank but themselves.

A

neobanks

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16
Q

is a type of financial institution providing traditional banking services and is created, owned, and operated by its members.

A

Credit unions

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17
Q

usually serve a specific demographic per their field of membership, such as teachers or members of the military. Some also open their membership to the general public.

A

Credit unions

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18
Q

Financial institutions that are mutually owned by their customers and provide no more than 20% of total lending to businesses

A

savings and loan associations

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19
Q

They provide individual consumers with checking and savings accounts, personal loans, and home mortgages.

A

savings and loan associations

20
Q

are financial institutions that provide services and act as an intermediary in complex transactions, for instance, when a startup is preparing for an initial public offering (IPO), or in merges.

A

Investment banks

21
Q

They can also act as a broker or financial adviser for large institutional clients such as pension funds.

A

Investment banks

22
Q

assist individuals and institutions in buying and selling securities among available investors.

A

Brokerage firms

23
Q

Customers of ______________ can place trades of stocks, bonds, mutual funds, exchange-traded funds (ETFs), and some alternative investments.

A

brokerage firms

24
Q

Financial institutions that help individuals transfer the risk of loss are known as __________________.

A

insurance companies

25
Q

Individuals and businesses use _____________ to protect against financial loss due to death, disability, accidents, property damage, and other misfortunes.

A

insurance companies

26
Q

Financial institutions specialized in originating or funding mortgage loans are ____________.

A

mortgage companies

27
Q

While most _______________ serve the individual consumer market, some specialize in lending options for commercial real estate only.

A

mortgage companies

28
Q

is a financial institution that is licensed to accept checking and savings deposits and make loans.

A

Banks

29
Q

_________ also provide related services such as individual retirement accounts (IRAs), certificates of deposit (CDs), currency exchange, and safe deposit boxes.

A

Banks

30
Q

banks are regulated by the _______________________.

A

national government or central bank

31
Q

are deposits used by consumers and businesses to pay their bills and make cash withdrawals.

A

Checking accounts

32
Q

They pay little or no interest and typically come with monthly fees, usage fees, or both.

A

Checking accounts

33
Q

pay interest to the depositor

A

Savings Accounts

34
Q

True or false

The CDs can earn interest for as little as a few months or as long as five years or more.

A

True

35
Q

True or False

The cash that is deposited by their customers is lent out to other customers at a higher rate of interest than the depositor is paid.

A

True

36
Q

are a form of government regulation that subjects banks to certain requirements, restrictions, and guidelines.

A

banking regulations

37
Q

In general, ____________ seek to uphold the soundness and integrity of the financial system.

A

banking regulations

38
Q

True or False

Banks came under intense scrutiny after a few financial crises. The regulatory environment for banks was tightened considerably as a result.

A

True

39
Q

Most common regulation objectives are:

A
  1. Prudential
  2. Systematic risk reduction
  3. Avoid the misuse of banks
  4. To protect banking confidentiality
  5. Credit allocation
40
Q

______________ to reduce the level of risk bank creditors are exposed to (i.e. to protect depositors)

A

Prudential

41
Q

_______________ to reduce the risk of disruption resulting from adverse trading conditions for banks causing multiple or major bank failures

A

Systemic risk reduction

42
Q

___________________ to reduce the risk of banks being used for criminal purposes (e.g. laundering the proceeds of crime)

A

Avoid the misuse of banks

43
Q

_____________ to direct credit to favored sectors

A

Credit allocation

44
Q

True or False

Banks offer various ways to stash your cash and various ways to borrow money.

A

True

45
Q

True or False

People deposit their money in banks;
the bank lends the money out in car loans, credit cards, mortgages, and business loans.

A

True

CFMP - Certified Financial Markets Professional (15 decks)

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