Commercial Bank Management, Exam 1

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credit union

nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services

investment bank

offer professional advise to corporations, help clients raise funds in market, seek acquisitions, trade securities

finance companies

offer short term loans to commercial enterprises

Annuities

long-term savings plans that promise the payment of a stream of income to the annuity holder at a designated future date

discounting commercial notes

making loans to local merchants who sold the debts they held against their customers to a bank in order to raise cash quickly

security underwriting/investment banking

marketing new securities to raise funds for corporations and other institutions

mutual funds

professionally managed investment programs that acquire a pool of stocks, bonds, securities and other assets

life and property/casualty insurance companies

protect against risks to persons or property and manage the pension plans of businesses and the retirement funds of individuals

hedge funds

sells shares in a pool of assets

Savings Associations

specialize in selling savings deposits and granting home mortgage loans and other forms of household credit to individuals and families

Services offered by banks & their competitors

1. Carrying out currency exchanges 2. Discounting Commercial notes and making business loans 3. Offering savings deposits 4. Safekeeping valuables and certification of value 5. Supporting government activities with credit 6. Offering checking accounts (demand deposits) 7. Offering trust services 8. Granting consumer loans 9. Financial Advising 10. Managing cash 11. Offering equipment leasing 12. Making venture capital loans 13. Selling insurance policies 14. Selling and managing retirement plans 15. Dealing in securities 16. Offering mutual funds, annuities and other investment products 17. Offering merchant banking services 18. Offering risk management and hedging services

Roles of Financial Institutions

1. Move funds from savers to borrowers 2. Move funds through time 3. Help spread out risk-bearing

financial holding company

A financial institution that may offer a broad range of banking-related services. The Federal Reserve Board regulates financial holding companies.

What portion of financial assets do banks hold?

Approximately 25%

security brokers and dealers

Buy and sell securities on behalf of their customers and for their own accounts

Bank

Can be defined by 1. economic functions it performs 2. services it offers its customers 3. legal basis for its existence

legal basis for banking

Post-1980s a bank is any institution that can qualify for FDIC insurance

trust services

acting as trustees for wills, managing an estate, keeping assets safe, ensuring heirs receive inheritance

Money Market Funds (MMFs)

collect liquid funds and invest in short-term quality securities

security brokerage services

executing buy and sell orders for security trading customers

Financial Services Modernization Act of 1999

gave commercial banks the full authority to enter the investment banking and insurance business (aka GLB or Gramm-Leach-Bliley Act)

fringe banks

include payday lenders, pawn shops, and check-cashing outlets, offering small loans bearing high risk and high interest rates to cover the immediate financial needs of cash-short individuals and families

money center banks

large commercial banks that provide both traditional and investment banking services throughout the world


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