Commercial Bank Management, Exam 1
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
