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15 Cards in this Set

  • Front
  • Back

Demand deposits

<> an account from which deposited funds can be withdrawn at any time without any advance notice.

<> usually pays no interest but will have higheradministrative costs.

<>Expenses for deposits, withdrawals and checksare usually a function of whether the transaction is conducted with a teller,on the telephone, an ATM, a payment card ....

Time deposits

<>A savings account or certificate of deposit (CD) held for a fixed-term, with the understanding that the depositor can make a withdrawal only by giving notice.

<>Time deposits will usually have one deposit andone withdrawal and the major expense will be the interest on the deposit.

Check 21 Act

<>October 28, 2004

<>banks can transfer electronic images (electronicconversion) instead of the actual check.

<>This process reduces operating costs and float associated with the checks

A bank must know how much it_______to produceeach type of deposit service


___________ is one of the largest sources of noninterestincome or fees for banks.

Service charges on deposits

One fee that accounted for about 75% of the totalservice charges in the U.S. that is expensive

Overdraft fees

Primary purposes of FDIC Deposit Insurance Fund (DIF)

(1) to insure the deposits and protect thedepositors of insured banks on deposits less than or equal to $250,000

(2)to resolve failed banks.

The reserve ratio is....?

the DIF balance divided by estimated insured deposits.

Total Base Assessment Rates vary from______ to ______ basis points or cents per $_____ of deposit insurance assessment baseand vary by risk.

2.5 ; 45 ; $100

in April 2011 FDIC defined a bank's assessment base as ?

its average consolidated total assets minus its average tangible equity.

cost of a deposit formula

Rdep = [interest expense + administrative costs -service charges + dep. insurance premium]/[average collected balance X (1 -reserve requirement)]

Average collected balance =

(balance - float).

Float is the amount of deposits that have not yet been collected by the bank.

We will assume reserve requirements are _____ on all transaction accounts(demand deposits and NOW accounts) and _____ on other deposits.

10% ; 0%

MCdep =

Δ Total Cost / Δ Amount of Funds

EU deposit insurance

<> Was a minimum in each EUcountry of 20,000 Euros but could be greater in some countries, e.g., Finland =25,000 Euros.

<> Insurance premiums arebased on capital adequacy.