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50 Cards in this Set
- Front
- Back
- 3rd side (hint)
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RISK
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the likelihood or probability that outcomes will deviate significantly from expectations
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GLASS-STEAGALL ACT 1933
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separated commercial from investment banking
(Formation of One-Bank Holding Companies) |
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AMENDMENT to the BANK HOLDING COMPANY ACT in 1970
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Brought under the Federal Reserve’s jurisdiction
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FINANCIAL SERVICES MODERNIZATION ACT of 1999
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removed the last of the Glass-Steagall restrictions
established Financial Holding Companies |
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GRAMM-LEACH-BLILEY ACT
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removed the last of the Glass-Steagall restrictions
established Financial Holding Companies |
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LIQUIDITY
RISK |
The risk that a sudden and unexpected increase in liability withdrawals may require an FI to liquidate assets in a very short period of time and at low prices.
*Often arises when liability holders demand immediate cash in exchange for their deposits |
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MARKET RISK
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The risk incurred in trading assets and liabilities due to changes in interest rates, exchange rates, and other asset prices.
*Market risk arises from changes in: --Interest rates --Foreign exchange rates --Equity, commodity and security prices |
Ch. 19
Types of Risks Incurred by Financial Institutions |
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CREDIT RISK
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The risk that the promised cash flows from loans and securities held by FIs may not be paid in full.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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FIRM-SPECIFIC CREDIT RISK
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The risk of default for the borrowing firm associated with the specific types of project risk taken by that firm.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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SYSTEMATIC CREDIT RISK
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The risk of default associated with general economy-wide or macro-conditions affecting all borrowers.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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INTEREST RATE RISK
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The risk incurred by an FI when the maturities of its assets and liabilities are mismatched and interest rates are volatile.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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REFINANCING RISK
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The risk that the cost of rolling over or re-borrowing funds will rise above the returns being earned on asset investments.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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REINVESTMENT RISK
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The risk that the returns on funds to be reinvested will fall below the cost of funds.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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OFF-BALANCE-SHEET RISK
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The risk incurred by an FI as the result of activities related to contingent assets and liabilities.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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LETTER of CREDIT
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A credit guarantee issued by an FI for a fee on which payment is contingent on some future event occurring, most notably default of the agent that purchases the letter of credit.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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FOREIGN EXCHANGE RISK
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The risk that exchange rate changes can affect the value of an FI's assets and liabilities denominated in foreign currencies.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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COUNTRY RISK
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The risk that repayments from foreign borrowers may be interrupted because of interference from foreign governments.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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TECHNOLOGY RISK
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The risk incurred by an FI when its technological investments do not produce anticipated cost savings.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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OPERATIONAL RISK
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The risk that existing technological support systems may malfunction or break down.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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INSOLVENCY RISK
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The risk that an FI may not have enough capital to offset a sudden decline in the value of its assets relative to its liabilities.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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SOVEREIGN RISK
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The risk that repayments from foreign borrowers may be interrupted because of interference from foreign governments.
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Ch. 19
Types of Risks Incurred by Financial Institutions |
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REPORT of CONDITION
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Balance sheet of a commercial bank reporting information at a single point in time.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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REPORT of INCOME
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Income statement of a commercial bank reporting revenues, expenses, net profit or loss, and cash dividends over a period of time.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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RETAIL BANK
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A bank that focuses its business activities on CONSUMER banking relationships.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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WHOLESALE BANK
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A bank that focuses on its business activities on COMMERCIAL banking relationships.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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CORRESPONDENT BANK
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A bank that provides services to another commercial bank.
(such as: check collection, check processing, fed funds trading, and investment advice) To pay for the above listed services banks keep deposits at other financial institutions. |
Ch. 12
Commercial Banks' Financial Statements and Analysis |
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NET WRITE-OFFS
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Actual loan losses less loan recoveries.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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EARNING ASSETS
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Investment securities plus net loans and leases.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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NOW ACCOUNTS (NEGOTIABLE ORDER OF WITHDRAWAL ACCOUNTS)
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Negotiable order of withdrawal account is similar to a demand deposit but pays interest when a minimum balance is maintained.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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MMDAs
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Money market deposit accounts with retail savings accounts and some limited checking account features.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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OTHER SAVINGS DEPOSITS
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All savings accounts other than MMDAs.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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RETAIL CDs
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Time deposits with a face value below $100,000
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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WHOLESALE CDs
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Time deposits with a face value of $100,000 or more.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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NEGOTIABLE INSTRUMENT
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An instrument whose ownership can be transferred in the secondary market.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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BROKERED DEPOSITS
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Wholesale CDs obtained through a brokerage house.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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CORE DEPOSITS
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Deposits of the bank that are stable over short periods of time and thus provide a long-term funding source to a bank.
*(Core deposits are non-interest rate sensitive) |
Ch. 12
Commercial Banks' Financial Statements and Analysis |
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PURCHASED FUNDS
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Rate-sensitive funding sources of the bank.
(Sounds like non-core deposits -- Which are Very interest rate sensitive.) |
Ch. 12
Commercial Banks' Financial Statements and Analysis |
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LOAN COMMITMENT
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Contractual commitment to loan to a firm a certain maximum amount at given interest rate terms.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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UP-FRONT FEE
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The fee charged for making funds available through a loan commitment.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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COMMITMENT FEE
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The fee charged on the unused component of a loan commitment.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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COMMERCIAL LETTERS of CREDIT
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Contingent guarantees sold by an FI to under-write the trade or commercial performance of the buyers of the guarantees.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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STANDBY LETTERS of CREDIT
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Guarantees issued to cover contingencies that are potentially more severe and less predictable than contingencies covered under trade-related or commercial letters of credit.
(off-balance sheet item) |
Ch. 12
Commercial Banks' Financial Statements and Analysis |
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LOANS SOLD
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Loans originated by the bank and then sold to other investors that can be returned to the originating institution.
(off-balance sheet item) |
Ch. 12
Commercial Banks' Financial Statements and Analysis |
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RECOURSE
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The ability to put an asset or loan back to the seller should the credit quality of that asset deteriorate.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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DERIVATIVE SECURITIES
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Futures, forward, swap, and option positions taken by the FI for hedging or other purposes.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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TOTAL OPERATING INCOME
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The sum of the interest income and non-interest income.
(Report of Income item) |
Ch. 12
Commercial Banks' Financial Statements and Analysis |
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TIME SERIES ANALYSIS
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Analysis of financial statements over a period of time.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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CROSS-SECTIONAL ANALYSIS
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Analysis of financial statements comparing one firm with others [at one point in time].
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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SPREAD
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The difference between lending and borrowing rates.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
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OVERHEAD EFFICIENCY
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A bank's ability to generate non-interest income to cover non-interest expense.
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Ch. 12
Commercial Banks' Financial Statements and Analysis |
