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FIN 430 > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

Saving Institutions= which 2 depository institutions

A
  1. Savings Association

2. Savings Banks

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2
Q

Regulatory Forbearance

A

The FSLIC policy under which it chose not to close capital-depleted, economically insolvent savings institutions

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3
Q

Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989.

A

Abolished the FSLIC and replaced the Fed Home Loan Bank Board with the Office of Thrift Supervision

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4
Q

Largest Asset on BS of Savings Institutions

A

1-4 family residential mortgages

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5
Q

Second most important source of funds on the liability side of savings institutions BS is

A

Funds borrowed from FHLB’s

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6
Q

Credit Unions

A
  1. non profit organizations
  2. owned by depositors
  3. members united by common bond
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7
Q

QTL test mandated by FIRREA

A

Savings institutions most hold a min of 65% of asset in mortgage- related assets

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8
Q

Main Source of funds on liability side of savings institutions BS

A

Total Deposits

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9
Q

How many savings institutions were lost in financial crisis

A

5

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10
Q

Advantages of Finance Companies over commercial banks in field of business lending

A
  1. Lower overhead hence lower operating costs
  2. Industry experience and product expertise
  3. less regualtions
  4. Willing to accept risky customers
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11
Q

Finance Company sources of funding

A
  1. Bank Loans
  2. ST Commercial Paper
  3. LT Notes and Bonds
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12
Q

Finance Companies signal of safety and solvency to investors

A

Holding a higher level of equity capital than banks

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13
Q

Deposit insurance for credit unions is provided by

A

The National Credit Union Share Insurance Fund

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14
Q

Regulator of Federally Chartered Credit Unions

A

the National Credit Union Administation

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15
Q

What percent of all credit unions are fed chartered

A

62.5%

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16
Q

2 common features of Savings Banks in Europe

A
  1. Very regional or local focus

2. Focus on savings and savings mobilization

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17
Q

Europe savings institutions were created

A

to channel savers funds to the commercial industry

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18
Q

Loan Shark

A

a finance company that preys upon desperate customers, charging them exorbitant rate for loans

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19
Q

Key Regulators for Commercial Banking

A
  1. FDI
  2. OCC
  3. Fed Reserve
  4. State bank regulators
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20
Q

Federal Savings and Loan Insurance Corporation (FSLIC)

A

Insured deposits of savings institutions from 1934- 1989

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21
Q

Unit Bank

A

bank with single office

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22
Q

De novo

A

when a bank grows by establishing a new branch rather then acquiring a branch from existing bank

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23
Q

The 1944 act of congress that made full interstate banking a reality in the US was …

A

The Riegle-Neal Interstate Banking and Branching Efficiency Act

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24
Q

3 exemptions to the separation between commercial and investment banking defined by Glass-Steagall Act

A
  1. banks were allowed to continue to underwrite new issues of T-Bills, notes and bonds
  2. banks were allowed to continue underwriting municipal general obligation bonds
  3. Banks were allowed to continue engaging in private placements of all types of bonds and equity
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25
Q

USA Patriots Act

A

amended the Bank Secrecy Act in establishing standards for screening customers who open accounts at financial institutions

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26
Q

Foreign Bank Supervision Enhancement Act of 1991

A

act of congress passed in response to a variety of scandals and illegal behavior by foreign banks

27
Q

Purpose of FDIC Improvement Act of 1991

A
  1. enforce minimum capital requirements

2. Limit Forbearance

28
Q

Regulation D

A

commercial bank will needs to maintain minimum reserves of 10% of net transactions account

29
Q

Net Regulatory Burden

A

The difference between the benefits received by a bank due to regulation and the cost of adhering to that regulation

30
Q

The Financial services modernization act of 1999 repealed..

A

the Glass Steagall Act

31
Q

Volcker Rule

A

Prohibited depository institutions from engaging in proprietary trading activities

32
Q

McFadden Act

A

Until 1944 restricted banks from expanding across state lines

33
Q

Another name for the Wall Street Reform and Consumer Protection Act is

A

Dodd-Frank Act

34
Q

Vault Cash

A

The currency and coin on hand needed to meet customer withdrawals

35
Q

Repo Agreement is a

A

collateralized fed fund loan

36
Q

Name 2 LT securities that are default free

A
  1. US Treasury

2. Ginnie Mae Bonds

37
Q

Limitations on Checkable MMDAs

A
  1. the number of automatic transfers per month is limited
  2. min balance required
  3. number of checks written per month and min check denomination is restricted
38
Q

Commercial Letter of Credit

A

A formal guarantee by a bank that payment for goods or services sold or shipped will be forthcoming

39
Q

2 things not taxable to the bank

A
  1. Municipal Securities

2. tax exempt income from direct lease financing

40
Q

Largest interest income producing category on commercial bank income statement

A

Interest and fee income on loans and leases

41
Q

Commercial Banks net income is directly related to

A
  1. Interest-Earning Assets
  2. Interest-Paying Liabilities
  3. Interest rate
42
Q

Banks equity capital consists of

A

Retained Earnings
Preferred Stock
Common Stock

43
Q

Second largest group of trust managed by banks trust department

A

Pension Funds

44
Q

Bank cash management service includes

A

the provision of lockbox services

45
Q

2nd major category on income statement

A

Interest expense

46
Q

Interest income formula

A

interest income/ total assets

47
Q

Net interest Margin formula

A

Net interest income/ earning assets

48
Q

Average Cost of Interest-Bearing Liabilities Ratio

A

Interest Exp/ Int-Bearing Liabilities

49
Q

For most banks overhead efficiency ratio is

A

rarely larger than 1

50
Q

Max tax-deductible amount is set by

A

IRS

51
Q

ROE formula

A

Net Income/ Total Equity

52
Q

AU formula

A

Total Rev/ Total Assets

53
Q

The banks spread is equal to

A

its average yield on earning assets MINUS average cost of interest bearing liabilities

54
Q

Tax Ratio

A

Income taxes/ total op income

55
Q

Major Categories of bank time deposits

A
  1. Retail CD

2. Wholesale CD

56
Q

Investment Securities provide what for banks

A
  1. interest income

2. Liquidity

57
Q

4 risk faced by commercial Banks

A
  1. Credit Risk
  2. Liquidity Risk
  3. Interest Rate Risk
  4. Insolvency Risk
58
Q

Larger bank use more …. and less…

A

more purchased funds

less core deposits

59
Q

Transaction accounts are checkable deposits that are either

A

demand deposits or NOW accounts

60
Q

Commercial banks compete with who for small time deposits

A

Money Market Mutual Funds

61
Q

Small Time deposits include

A
  1. passbook savings account

2. retail time deposits

62
Q

Reigle-Neal Act of 1994

A

allowed banks to open branches across state lines

63
Q

Oldest US bank regulatory agency

A

Office of the Comptroller of the currency

FIN 430 (4 decks)

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