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Banking > Week 4 > Flashcards

Week 4 Flashcards

1
Q

What is the difference between retail and wholesale banking?

A

Retail = high volume, low value
Wholesale = low volume, high value

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2
Q

What is contained within retail banking?

A
  • Personal banking (households)
  • SMEs
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3
Q

What is contained within wholesale banking?

A
  1. Corporate banking
  2. Investment banking
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4
Q

What is private banking a subset of?

A

Investment banking

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5
Q

What is private banking?

A

Like personal, but very high value

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6
Q

What institutions fall under retail banking?

A
  1. Commercial banks
  2. Savings banks
  3. Cooperative banks
  4. Building societies
  5. Credit unions
  6. Finance companies / houses
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7
Q

What are commercial banks?

A
  • Historically focused on commercial loans
  • Now universal banks
  • Largest banks in most countries e.g. HSBC, Barclays
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8
Q

What are savings banks?

A
  • Mutual orgs, owned by depositors
  • Many have demutualised
  • Serve social & economic development of region
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9
Q

What is an advantage of demututalisation?

A

Cheaper external financing from equity

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10
Q

What are cooperative banks?

A
  • Mutual, like savings banks
  • Less likely to be government owned
  • Small & localised
  • Important in parts of Europe
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11
Q

What are building societies?

A
  • Similar to savings/co-op banks
  • Not actually banks
  • Limited funding from money markets – rely on deposits
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12
Q

What are credit unions?

A
  • Mutually owned by depositors
  • Limited to particular people e.g. employees, residents
  • Non-profits (exempt from corporate income tax)
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13
Q

What are finance companies / houses?

A
  • Issue unsecured consumer loans
  • Sometimes commercial loans
  • Often subsidiaries of retail firms
  • Funded by money & capital market securities (no deposits)
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14
Q

What is corporate banking?

A

Services to companies, including other FIs

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15
Q

What is included in corporate banking?

A
  1. Cash management & transaction services
  2. Credit & debt financing
  3. Commitments & guarantees for imports/exports
  4. FX & interest rate-related transactions
  5. Securities underwriting & fund management services, e.g. pensions
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16
Q

What is the core activity of corporate banking?

A

Providing debt financing (largest source in Europe & Asia – even in market-oriented US, banking lending is still 31%)

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17
Q

What is investment banking?

A

Services for large companies & other FIs only

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18
Q

True or false: investment banking involves no asset transformation

A

True

19
Q

What does investment banking involve?

A

Brokerage – bringing together buyers & sellers of securities

20
Q

What do investment banks specialise in?

A

Design & issuance of financial contracts

21
Q

What is the difference between wealth management & private banking?

A

wealth management = $100k+
private banking = $1million+

22
Q

What are money market securities?

A

Commercial paper (short-term, fixed-interest debt)

23
Q

In what areas does traditional banking differ from universal banking?

A
  1. Products & services
  2. Income sources
  3. Competitive environment
  4. Strategic focus
  5. Customer focus
24
Q

Name a piece of universal banking legislation

A

EU’s Second Banking Directive (1992) defined banking business to include:
- securities
- insurance
- pensions

25
Q

Where & when did reforms allow for universal banking?

A

Europe, US & Japan in the 90s

26
Q

What do investment banks do?

A
  1. Help companies raise funds in capital market by issuing debt & equity
  2. Advise on mergers & acquisitions
  3. Wholesale asset management
27
Q

True or false: investment banks are forbidden from proprietary trading

A

False

28
Q

What is a BHC?

A

Bank-holding company – many investment banks converted to BHCs after ‘08

29
Q

What does is mean for an investment bank to become a BHC?

A
  • Government assistance
  • Greater capital regulation
  • Greater disclosure
  • Greater risk regulation
30
Q

What is an example of savings banks?

A

‘Sparkassen’ in Germany

31
Q

What kind of services do banks provide to small firms?

A
  1. Payment services
  2. Debt finance
  3. Equity finance
  4. Special financing
32
Q

What is included in payment services?

A
  1. Cash & cheque deposit facilities
  2. Cheque writing facilities
  3. Access to CCCL
  4. Access to Pay.UK
  5. Access to CHAPS
33
Q

What is CCCL?

A

Cheque & Credit Clearing Company Ltd.

34
Q

What is Pay.UK?

A

UK’s retail payments system

35
Q

What is CHAPS?

A

High-value payment system run by BoE

36
Q

What are the main sources of external funding for small firms?

A

Bank loans & overdrafts

37
Q

What kind of services do banks provide to mid-market and multinational firms?

A
  1. Cash management & transaction services
  2. Credit & other debt financing
  3. Commitments & guarantees
  4. FX & interest-rate-related transactions
  5. Securities underwriting & fund management
38
Q

What is a credit line?

A

Company pays a fee to a bank in order to borrow & repay funds at will

39
Q

What is a syndicated loan?

A

Multiple banks contribute to loan

40
Q

What are FX & interest-rate-related transactions for?

A

Managing FX & interest rate risk using derivatives

41
Q

What are examples of FX & interest-rate-related transactions?

A
  1. FX forwards
  2. Currency futures/options
  3. Interest rate options, caps & collars
  4. Interest rate & currency swaps
42
Q

What is equity/bond underwriting?

A

Agreeing to buy all or a set % at a pre-agreed price

43
Q

What is included under Barclays UK?

A
  1. UK retail banking
  2. Consumer credit cards
  3. Domestic wealth services
  4. SME corporate banking
44
Q

What is included under Barclays Corporate & International?

A
  1. Corporate banking
  2. Investment banking
  3. Cards business (US & international)
  4. International wealth services
  5. Payments

Banking (10 decks)

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