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9 Cards in this Set
- Front
- Back
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What are building societies most important assets and liabilities?
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Building societies most important Asset is family home mortgage loans and its most important liabilities are saving and time deposits.
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What are Credit unions most important assets and liabilities?
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Credit unions most important assets are consumer loans (mainly vehicle and real estate), investment securities, and deposit holdings. Their most important liabilities are members share deposits, share-draft deposits, and certificates of deposit.
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What types of finance companies exist and what does each do?
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- Consumer finance companies: make loans to consumers
- Sales finance companies: Buy credit contracts generated by retail deals. - Captive finance companies: finance goods from their parent company - Factors: Finance business firms by buying and collecting their accounts receivable. - Business finance companies: General business loan needs. - Leasing Companies: purchase equipment needed by their customers and lease it to their customers. |
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When and why were building societies started in Australia?
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Started in mid 1800s. Until 1900s grew in number, however remained small community-based organisations under the legislative jurisdiction of the relevant state. in the period leading up to 1970s building societies grew rapidly, spurred on by strong demand for home ownership, increasing living standards, the acceptance of high ration mortgage lending and a banking sector that was slow to respond to the needs of consumers.
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Why has the number of building societies declined in recent years?
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Capital adequacy has trended upwards while weak thrifts have liquidated or consolidated with healthy ones and mutual form has largely given way to stock form. interest rate spreads have widened with low interest rates in the last decade or so. Loan losses have declined to nominal levels. overall earnings have thus improved. the number of charters has declined through merger, conversion to bank charters, aquisitions of thrifty by banks, and disposition of failed institutions.
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What are the different types of nonbank financial institutions in Australia?
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Non bank financial institutions in Australia include
- Building societies, credit unions & finance companies. By number there are far more of them then banks however they are significantly smaller in scale, often regional based or in the case of finance companies offer a limited set of financial products. Both Credit Unions and building societies are authorised deposit taking institutions (ADI's) and are approved by APRA to accept retail deposits. Finance companies issue both consumer and business loans, however do not accept deposits form the public to obtain funds. |
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What are the advantages and disadvantages of credit union common-bond requirement? why has this been relaxed in recent years?
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Common bond is and advantage to credit unions because it promises institutional loyalty, which is thought to account for thei much lower loan losses compared to other lenders. it also frees credit unions from the need to compete much with each other and enables them to cooperate in competing with other depository institutions.
The major disadvantage is that it can limit the potential for growth, and thus limit the potential for economies of scale. Understanding this, credit unions have lobbied successfully for relaxation of common bond criteria even as they have retained their tax-exempt status (not for profit) |
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Compare the retail operations of a commercial bak with a typical credit union today. taking into account the expanded product range of credit unions, how will they compare in the future?
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Banks are altogether more thoroughly diversified on both sides of the balance sheet. they raise loanable funds through many more types of deposit and non-deposit liabilities, and they employ loanable funds to make many more types of loans. Credit unions mostly retain their focus on consumer loans funded by share and share draft (savings and checking) deposits. Since receiving expanded powers in the 1980, however, credit unions have competed successfully with banks and have taken retail market share from them. this trend continues as the credit union industry grows, experiments with non traditional financial services, and perfects its own cooperative mechanisms for adjusting liquidity.
All depository institutions, including banks and credit unions, will be more alike than different in the future. |
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How do finance companies differ from banks, credit unions and building societies?
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Finance companies cannot issue demand deposits. they cannot issue savings instruments unless chartered as "industrial banks" under detailed regulatory guidelines. They are not regulated for risk by APRA as ADIs are. As private firms that simply lend money, they are regulated more for the sake of consumer protection.
They typically underwrite higher credit risks and longer maturities than depository institutions, differentiate themselves in speed and convenience, and consequently charge higher interest rates. |
