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54 Cards in this Set
- Front
- Back
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What is a bank?
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Financial institution for personal financial needs such as loans, safekeeping of money, depository and other transactional services, mortgages. A bank is also a financial intermediary that takes money from investors, pools that money, and then invests the pooled funds in other way. So the bank is an intermediary between the depositor and the investor.
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What makes a bank different from a savings and loan association?
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A savings and loan association has stockholders but can do most things that a bank does.
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What makes a bank different from a credit union?
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A credit union is a mutual and to sell a mutual you have to convert it to stock, then sell it. Credit unions take money from the depositors(all mutuals) and the deposit equals % of ownership. Credit unions do not pay taxes.
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What is the CAMELS system?
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CAMELS system is the system in which banks are examined by bank regulators. It stands for capital adequacy, asset quality, management, earnings,liquidity, and sensitivty to market risk. CAMELS is shorthand for what component ratings are individually rated in a bank examination.
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What is capital and how do new banks get it?
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Capital is how much a bank's assets outweigh liabilities. It is also money the bank needs to get started. For an existing bank it is the amount their assets exceed liabilities.
For a new bank organizers have to invest at least 10% of the bank's capital. Shares are offered to the public usually at around $10/share to raise capital. Directors of banks do not have to own stock unless it is a national bank. |
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Where does the public go to find out information about a bank?
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FDIC website; call reports
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Are regulatory agencies' examination reports public information?
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No they are confidential.
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What is Regulation O?
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Regulation adopted by FDIC and state banking authorities that governs how much credit may be extended by a member bank to an executive officer,director or principal shareholder of the member bank or a bank holding company in which the member bank is a subsidiary or any other subsidiary of the bank holding company.
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What is Regulation W?
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The regulations imposes quantitative and qualitative limits on the ability of a bank to extend credit to, or engage in certain
other transactions with, an affiliate. Certain transactions that generally do not expose a bank to undue risk or abuse the safety net((such as lower cost insured deposits, the payment system, and the discount window)are exempted from coverage under Regulation W. |
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What is the National Bank Act?
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Established national banks and was enacted because of problems created when Second Bank was disenfranchised. State banks were supposed to convert to national banks and when they did not Congress passed a tax on state bank issued notes.
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What is the Sarbanes-Oxely Act and why was it passed?
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It was established to regulate public accounting firms that audit publicly traded companies. The act was passed in response to companies such as Enron. It requires that insiders may no longer trade their company's securities during pension fund blackout periods.
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What is the Gramm-Leach-Bliley Act of 1999?
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This act did away with restrictions between banking and commerce. Consumers have the option to opt out of what personal information is shared with other companies.
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What is the duty of bank directors?
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Duty of care and loyalty - they cannot be careless, must hold management responsible, and must put the bank's interest first. They have responsibilities including supervisory powers/management, direction, strategic planning and review past performance.
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What is the FACT act?
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Fair and Accurate Credit Transactions Act: contains extensive amendments to the Fair Credit Reporting Act and is designed to improve the accuracy and transparancy of the national credit reporting system,prevent identify theft and assist victim.
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What is the Federal Deposit Insurance Act?
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This act consolidated all FDIC legislation into one act. This act embodies the basic authority for the FDIC.
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What is the Bank Holding Company Act of 1956?
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This act regulates the activities of bank holding companies and has been amended to allow bank holding companies to own banks in other states.
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What is meant by the phrase "dual banking system"?
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Refers to the parallel banking system of state and federal banks that co-exist in the U.S. The federal system is based on a federal bank charter,
powers defined under federal law, operation under federal standards, and oversight by a federal supervisor. The state system is characterized by state chartering, bank powers established under state law, and operation under state standards, including oversight by state supervisors. |
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Why does the dual banking system exist?
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The ability of banks to choose their regulator has fostered both the continued competitiveness of the industry and vitality of the economic activity it finances.
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Who does the OCC (Comptroller of the Currency) regulate?
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National banks and banks in the District of Columbia
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What are the duties of the Federal Reserve System?
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Oversees a system of federal reserve banks. There are 12 reserve banks. It has supervisory powers over member banks, financial holding companies, and bank holding companies. State banks can also be regulated by the Reserve.
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What is the FDIC?
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Insurer of deposits for banks and savings associations. It has supervisory authority over the institution. If state banks are not member of the Reserve they are regulated by FDIC as well as state regulator.
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What is the Office of Thrift Supervision?
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This office regulates federal and state savings associations as well as savings and loan companies.
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What is the National Credit Union Administration?
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This office regulates federal and state chartered credit unions. It grants the charters and insures the institutions.
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What department is the state regulator of banks in TN?
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Tennessee Department of Financial Institution.
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What are the three purposes of regulation?
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To avoid conflicts of interest, insure capital adequacy, and avoid concentration of credit
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What is the Federal Reserve Act of 1913?
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Established the Federal Reserve System as the central banking system in the U.S. This was an effort to stabilize the financial markets.
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What is the McFadden Act of 1927?
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This act allowed national banks to branch within their own city and was passed to level the competition between national and state banks.
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What did the Banking Act of 1935 do?
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Established FDIC as a permanent agency
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What did the FIRICA act do?
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Established limits and reporting requirements for bank insider transactions. It established the Federal Financial Institutions Examination Council.
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What did the Depository Institutions Deregulation and Monetary Control Act of 1980 do?
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Raised the deposit insurance ceiling to $100000 and began the phase-out of interest rate ceilings on deposits.
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What did the Depository Institutions Act of 1982 do?
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Expanded FDIC powers to assit troubled banks.
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What is the Competitive Equality Banking Act of 1987?
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Part of the recaptilazation efford of FSLIC. It created a way for some banks to stay open during the failures of the 80s.
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What did the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 abolish and what was created to replace it?
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The Federal Home Loan Bank Board. It was replaced by The Federal Housing Finance Board and Office of Thrift Supervision.
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What is the Crime Control Act of 1990?
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It increased penalities and prison time for those convicted of bank crimes, increased powers of FDIC to take enforements against banks, and gave regulators new procedural powers to recover assets improperly diverted from an institution.
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What is the Federal Deposit Insurance Corporation Improvement Act of 1991?
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Created new supervisory and regulatory examination standards and put forth new capital requirements for banks.
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What did the Housing and Community Development Act of 1992?
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Established regulatory structure for government-sponsored enterprises and combated money laundering.
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What is the RTC Completion Act?
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Required the RTC to adopt a series of management reforms and implement provisions to improve the agency's record in providing opportunities to women and minorities.
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What is the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994?
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Companion act to the RTC Completion Act. It extended the SOL to permit the FDIC and RTC to revive lawsuits that had expired. It also opened up boundaries for interstate branching based on concentrations of credit and the state laws.
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What is the Economic Growth and Regulatory Paperwork Reduction Act of 1996?
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Created additions to consumer protection laws but did not do away with paperwork for banks like it intended.
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What is the Int'l Money Laundering Abatement and Financial Anti-Terroism Act of 2001?
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Designed to prevent terrorists from using the U.S. financial system to move funds for illegal activity.
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What did the Fair and Accurate Credit Transactions Act of 2003 do?
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Amended the Fair Credit Reporting Act and was designed to improve the accuracy and transparency of the national credit reporting system.
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What is the definition of a bank holding company?
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A corporation that owns or controls one or more banks. The rule of thumb is that if you own 25% of a bank you are a bank holding company.
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What can't a bank holding company do?
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They cannot engage in activity that is not closely related to banking. To do so it has to be approved by the FDIC.
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What is the Federal Reserve Act Section 23A?
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A bank can loan money to a subsidiary under it without restrictions but cannot lend to an affiliate. A bank can lend up and down the ladder but not across.
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What does Section 23B of the Federal Reserve Act govern?
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Governs payment of money or furnishings of services to an affiliate and any transactions in which the affiliate acts as a broker.
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Where can national banks branch?
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Across state lines if the states have reciprocity with each other.
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Where can state banks branch?
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A state bank can branch into any state that has reciprocity with it. They can also buy a bank in another state and merge the two banks or make the new bank a branch of the existing bank in TN.
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What is the rationale for not limiting a bank's ability to branch?
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It would limit the customer's options in choosing banks and limits the expansion of the economy if the consumer cannot afford the interest rate one bank may be offering.
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Are thrifts limited in branching?
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No as long as they have approval from the Office of Thrift Supervision.
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What are the two sources of bank examinations?
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(1) Call reports that the banks file each quarter and (2) on-site bank examinations
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What are the three administrative actions an examiner can take?
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(1)Board Resolution: a less stringent agreement that the examiners have with the bank to fix problems.
(2)MOU memorandume of understanding: Contract/agreement that bank signs with the examiners to commit to fix problems (3) Cease and desist order: This is public information and the order stays on the bank until it has complied with all the provisions of the FDIC. |
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What is an 8E action?
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Director or affiliate of the bank found guilty of conduct detrimental to the bank. That person cannot participate in any of the bank's affairs.
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What is the Glass-Steagall Act(Banking Act of 1933)
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Established the FDIC as a temporary agency and separated commercial and investment banking.
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Why does a bank need adequate liquidity?
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Liquidity is the bank’s ability to meet its obligations; it’s ability to convert assets to cash.
Proper management of liquidity keeps banks from incurring unacceptable losses. |
