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FIN 430 > Exam 2 > Flashcards

Exam 2 Flashcards

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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
USA Patriots Act
amended the Bank Secrecy Act in establishing standards for screening customers who open accounts at financial institutions
26
Foreign Bank Supervision Enhancement Act of 1991
act of congress passed in response to a variety of scandals and illegal behavior by foreign banks
27
Purpose of FDIC Improvement Act of 1991
1. enforce minimum capital requirements | 2. Limit Forbearance
28
Regulation D
commercial bank will needs to maintain minimum reserves of 10% of net transactions account
29
Net Regulatory Burden
The difference between the benefits received by a bank due to regulation and the cost of adhering to that regulation
30
The Financial services modernization act of 1999 repealed..
the Glass Steagall Act
31
Volcker Rule
Prohibited depository institutions from engaging in proprietary trading activities
32
McFadden Act
Until 1944 restricted banks from expanding across state lines
33
Another name for the Wall Street Reform and Consumer Protection Act is
Dodd-Frank Act
34
Vault Cash
The currency and coin on hand needed to meet customer withdrawals
35
Repo Agreement is a
collateralized fed fund loan
36
Name 2 LT securities that are default free
1. US Treasury | 2. Ginnie Mae Bonds
37
Limitations on Checkable MMDAs
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
Commercial Letter of Credit
A formal guarantee by a bank that payment for goods or services sold or shipped will be forthcoming
39
2 things not taxable to the bank
1. Municipal Securities | 2. tax exempt income from direct lease financing
40
Largest interest income producing category on commercial bank income statement
Interest and fee income on loans and leases
41
Commercial Banks net income is directly related to
1. Interest-Earning Assets 2. Interest-Paying Liabilities 3. Interest rate
42
Banks equity capital consists of
Retained Earnings Preferred Stock Common Stock
43
Second largest group of trust managed by banks trust department
Pension Funds
44
Bank cash management service includes
the provision of lockbox services
45
2nd major category on income statement
Interest expense
46
Interest income formula
interest income/ total assets
47
Net interest Margin formula
Net interest income/ earning assets
48
Average Cost of Interest-Bearing Liabilities Ratio
Interest Exp/ Int-Bearing Liabilities
49
For most banks overhead efficiency ratio is
rarely larger than 1
50
Max tax-deductible amount is set by
IRS
51
ROE formula
Net Income/ Total Equity
52
AU formula
Total Rev/ Total Assets
53
The banks spread is equal to
its average yield on earning assets MINUS average cost of interest bearing liabilities
54
Tax Ratio
Income taxes/ total op income
55
Major Categories of bank time deposits
1. Retail CD | 2. Wholesale CD
56
Investment Securities provide what for banks
1. interest income | 2. Liquidity
57
4 risk faced by commercial Banks
1. Credit Risk 2. Liquidity Risk 3. Interest Rate Risk 4. Insolvency Risk
58
Larger bank use more .... and less...
more purchased funds | less core deposits
59
Transaction accounts are checkable deposits that are either
demand deposits or NOW accounts
60
Commercial banks compete with who for small time deposits
Money Market Mutual Funds
61
Small Time deposits include
1. passbook savings account | 2. retail time deposits
62
Reigle-Neal Act of 1994
allowed banks to open branches across state lines
63
Oldest US bank regulatory agency
Office of the Comptroller of the currency

FIN 430 (4 decks)

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