Risk / Call Report Flashcards
This is a demand deposit balance designed to compensate for the lender’s expenses inservicing the line of credit.
compensating balance
This is a short‐term money market obligation with maturity ranging from 1 day to 270 days. It is an unsecured obligation of the parent company, is not insured by the FDIC and must be marketed in such a way that there is no misunderstanding or confusion as to who the obligor is. This type of instrument may also be rated by a rating agency such as Moody’s or Standard & Poors or a rating can be bought from a large HC or insurance co which will guarantee the paper
Commercial Paper
FBO Supervision
- Strength fo Support Assessment (SOSA) - evaluates the willingness and ability of the parent FBO to provide support to US Operations. 2. ROCA Risk Management (mkt, liquidity, credit, reputational, legal, operational), Operational Controls, Compliance, Asset Quality
Debits (DR) and Credits (Cr)
To increase: Assets (Dr), Liabilities (Cr), Capital (Cr), Income (Cr), Expenses (Dr) *(natural balances indicated)
Above vs. below water
Above water = investment portfolios mkt value > book value. Below Water = portfolios mkt value is
Six Key Risks of Risk-Based Supervision
Credit; Market; Liquidity; Operational; Reputational; Legal
Repo
Repo Agreements: Securities purchased under agreemt to resell, bank temporarily lends to another bank by buying the securities of the other bank/ liquidity source/involves some credit risk, low liquidity and mkt risk/ normally has a ST duration
Consolidated earning & capital of a BHC is rated when consolidated assets have a value…
> = $150MM
Section 29 sets forth 3 tiers of civil money penalties
1st Tier: $5M (any violation) 2nd Tier: $25M (has caused loss to institution or gain to person) 3rd Tier: $1,000M (participation in unsafe/unsound practice, causes substantial loss to bank or gain to person)
Section 23 FR Act Reg F - Interbank Liability
Prudential Standards - develop and adopt internal policies and procedures to evaluate and control all types of exposures to correspondents with which they do business. Credit Exposure - bank’s internal limit on interday credit exposure to an individual correspondent may not be more than 25% of the exposed bank’s total capital, unless the bank can demonstrate that its correspondent is at least ‘‘adequately capitalized,’’ as defined in section 206.5(a) of the rule.
Banks that are ineligible for alternate year exams
Banks in excess of $10 billion in assets and are rated a composite 3 or worse and bank that undergoes a change in control must be examined by the FRB within 12 months of the change in control
Reg O Lending Limit
Limited to 15% of capital and surplus if not fully secured and 25% if fully secured by marketable collateral. A bank w/total deposits less than $100MM may elect by annual resolution to adopt legal limit not to exceed 2 times bank’s captial and surplus.
3 financial stmts necessary to prepare a cash flow stmt
- income statement (current) 2. balance sheet (beginning of period) 3. balance sheet (end of period)
When are earning and capital evaluated on a consolidated basis
for a large bank with assets worth > or = $150 MM
AT cost of borrowing
(I - tax rate) x (stated interest rate)
Reg O stipulations on lending to affiliates
$25M or 5% of capital and surplus; aggregate loans $500M
2 primary purposes of a bank’s investment portfolio
- liquidity 2. income
US Non-Bank subs of US BHC are required to file what?
FR Y-11 for each nonbank sub over $250M FR Y - 11S for each nonbank sub $50MM - $250MM
Impact - Risk management factors include?
Strategic considerations, operational considerations, legal and reputational considerations, and concentration considerations
Contingent Liabilities = off balance sheet items
Type 1 - converts to Assets (lines of credit) Type 2 - converts to Expense (can not estimate)
Section 23 FR Act Reg F - Interbank Liability
Prudential Standards - develop and adopt internal policies and procedures to evaluate and control all types of exposures to correspondents with which they do business.
Credit Exposure - bank’s internal limit on interday credit exposure to an individual correspondent may not be more than 25% of the exposed bank’s total capital, unless the bank can demonstrate that its correspondent is at least ‘‘adequately capitalized,’’ as defined in section 206.5(a) of the rule.
Reg O Lending Limit
Limited to 15% of capital and surplus if not fully secured and 25% if fully secured by marketable collateral. A bank w/total deposits less than $100MM may elect by annual resolution to adopt legal limit not to exceed 2 times bank’s capital and surplus.
Banks can move from a 12 month exam cycle to 18 month if?
Total assets of
Banks can move from a 12 month exam cycle to 18 month if?
TA of
