FIN361 chapter 2

Member Banks

All banks chartered by the Comptroller of the Currency and those few state banks willing to conform to the Fed's supervision and regulation

federal reserve act

principal role to serve as a lender of last resort to help stabilize the financial markets and the economy

community reinvestment act

prohibits us banks from discriminating against customers residing within their trade territories merely on the basis of the neighborhood in which they live

Federal Deposit Insurance Corporation

Created to guarantee the public's deposits up to a stipulated maximum amount (initially $2.5k up to $250k) in order to enhance confidence in the banking system

State Insurance Commissions

Describe the types and content of insurance policies sold to the public, often set maximum premium rates the public must pay, license insurance agents, scrutinize insurer investments for the protection of policy holders, charter new insurance companies, and liquidate failing ones

functional regulation

The Gramm-Leach-Bliley Act (Financial Services Modernization Act) calls for linking the government supervision of the financial-services firm to the types of activities that the firm undertakes. For example, the insurance portion of the firm would be regulated by state insurance commissions and the banking portion of the firm would be regulated by banking regulators. This approach to government supervision of financial services is known as:

Federal Reserve Banks

A chartered federal bank in each district to supervise and serve member banks

Asian Central Banks

Asian banks appear to be under closer control of their government

Monetary Policy

Making sure the supply and cost of money and credit form the financial system contribute to the nations economic goals

Securities and Exchange Commission

Oversees the securities markets

European Central Bank

The relatively free and independent of government control central bank of Europe

Federal Open Market

Sets policies that guide the conduct of open market open market operations

Dual Banking System,

Both federal and state authorities have significantly regulatory powers

USA Patriot Act

Made a series of amendments to the Bank Secrecy Act that required selected financial institutions to report "suspicious" activity on the part of their customers

Federal Deposit Insurance Corporation Improvement Act

Permitted the FDIC to borrow from the Treasury to remain solvent, called for risk based insurance premiums, and defined the actions to be taken when depository institutions fall short of meeting their capital requirements

Gramm Leach Bliley Act

Permitted well managed and well capitalized banking companies with satisfactory Community Reinvestment Act ratings to affiliate with insurance and securities firms under common ownership

State Banking Commissions

Primary regulators of American banks at the state level

Sarbanes Oxley Accounting Standards Act

Public Company Accounting Oversight Board to enforce higher standards in the accounting profession and to promote accurate and objective audits of the financial reports of public companies

Office of Thrift Supervision

Supervise Federally chartered savings associations

National Credit Union Administration

Supervises and examines federal credit unions

ensuring price stability

The European Central Bank has the main goal of:

Glass Steagall Act

The banking act of 1933 that enacted stricter rules and regulations

Open Market Operations

The buying and selling of securities by the Federal Reserve Banks

glass steagall act

The federal law that prohibited federally supervised commercial banks from offering investment banking services on privately issued securities is known as:

Board of Governors

The governing body of the Federal Reserve System must contain no more than seven persons, each selected by the president of the United States and confirmed by the senate for terms not exceeding 14 years

Gramm Leach Bliley Act

The law that allows banks to affiliate with insurance companies and securities firms to form financial services conglomerates is:

the Depository Institutions Deregulation and Monetary Control Act

The law which lifted government deposit interest ceilings in favor of competitive interest rates is:

Systemic Risk

The risk associated with firms who have interlinked themselves through securities

national currency and bank acts

first major federal government law in US banking; set up the OCC

consumer credit protection act

required that lenders spell out the customers rights and responsibilities under a loan agreement

True

T/F National banks cannot merge without the prior approval of the Comptroller of the Currency.

False

T/F Passed in 1977, the Equal Credit Opportunity Act prohibits banks from discriminating against customers merely on the basis of the neighborhood in which they live.

False

T/F The 1994 Federal Interstate Banking bill does not limit the percentage of statewide or nationwide deposits that an interstate banking firm is allowed to control.

True

T/F The Gramm-Leach-Bliley Act of 1999 essentially repeals the Glass-Steagall Act passed in the 1930s.

False

T/F The federal law that states individuals and families cannot be denied a loan merely because of their age, sex, race, national origin, or religious affiliation is known as the Competitive Equality in Banking Act.

False

T/F The term "regulatory dialectic" refers to the dual system of banking regulation in the United States and selected other countries where both the federal or central government and local governments regulate banks.

True

T/F Under the terms of the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act, adequately capitalized and managed bank holding companies can acquire a bank anywhere inside the United States.

False

T/F When the Federal Reserve increases the discount rate, it generally causes other interest rates to decrease.

Federal Reserve System

A second federal bank regulatory agency whose principal roles are to serve as lenders of last resort - providing temporary loans to depository institutions of last resort facing financial emergencies

dual banking system

An institutional arrangement in which federal and state authorities both have significant bank regulatory powers is referred to as:

Comptroller of the Currency

Assesses the need for and charters new national banks, but also regularly examines those institutions

Dodd Frank Financial Reform Law

Calls for greater separation between commercial banks and these riskier private investors

True

T/F In the United States, fixed fees charged for deposit insurance, regardless of how risky a bank is, led to a problem known as moral hazard.

firms in regulated industries actually seek out regulations because they bring monopolistic rents

One of the earliest theories regarding the impact of regulation on banks was developed by George Stigler. He contends that:

Riegle Neal Interstate Banking and Branching Efficiency Act

Repealed provisions of the McFadden Act of 1927 and the Douglas amendment of 1970 that prevented full-service interstate banking nationwide.

False

T/F Federal Reserve Act authorized the creation of the Federal Deposit Insurance Corporation.

dodd-frank regulatory reform bill

emphasized providing consumers wit more complete language to convey service prices and avoid misleading information

open market operations

in the US, involves the buying and selling of US treasury bills, bonds, and notes and selected federal agency securities; most important policy tool for many central banks

equal credit opportunity act

individuals and families cud not be denied a loan merely because of their age, sex, race, etc