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Terms in this set (19)
What are the 3 roles of banks in the economy?
- Facilitate borrowing and lending
- Facilitate payments
- Risk management
A _______ is a firm that owns one or more banking firms.
Bank holding company
(1933) This act allowed commercial banks to sell on-the-run government securities, but prohibited underwriting and brokerage services; didn't allow other financial intermediaries to offer commercial banking activities.
_____ provide a safety net and are also helpful for putting together money for future needs such as a down payment on a house.
____ are a type of time deposit, and are usually safe ways to store money from seven days to several years; they are backed by FDIC and have small interest rates
A ________ looks at a person's or family's total financial picture, helps that person or family define and prioritize goals, and then works out a plan to achieve those goals.
Property used to secure the loan
Legal rights to take and hold property if the person does not pay the debt.
The cost of using money
What are 5 ways the U.S. government regulates banks?
- Federal Deposit Insurance
- Capital requirements
- Reserve requirements
- Restricting types of assets
- Bank examinations
What are the 4 primary bank regulators in the U.S.?
Office of the Comptroller of the Currency
Federal Reserve System
State bank regulators
Also known as regulatory capital; the ration of the bank's equity to its debt
Reserves must be greater than or equal to a specified percentage of their deposits
Banks cannot invest too larger a share of their deposits in a a single loan or a single industry; cannot lend funds at below-market rates
Restrictions on asset holding
Involve the review of a bank's financial statements and confidential accounts; gives a CAMEL score
CAMELS stands for what?
- Capital Adequacy
- Asset quality
- Sensitivity to market risk
Banking failure of the 1930s was due to what 2 things?
- Bank debt > assets
- Deposit outflow
Banking failure of the 1980s was due to...
- Financial innovations --> more competition, more risky assets
What caused the crisis of 2008?
- Government regulations began to erode the conventional lending standards
- Fed's manipulation of interest rates from 2002-2006 (lower interest rates means more ARMs) (when raised, defaults increase)
- Doubling the debt/income ration of households since the mid-1980s
THIS SET IS OFTEN IN FOLDERS WITH...
Chapter 1 Vocabulary
Chapter 2 Vocabulary
People and Organizations
Acts, Bills, and Laws
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