473 Review sheet

473 Review sheet - Commercial Bank: Accept demand deposits...

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Commercial Bank: Accept demand deposits and make commercial loans . Chapter 1: The Changing Banking Environment Pg. 4 The goals and functions of bank regulation o To ensure the safety and soundness of banks and financial instruments o To provide an efficient and competitive financial system o To provide monetary stability o To maintain integrity of the nation’s payments system o To protect customers from abuses by credit-granting institutions pg. 5 Supervision and Examination: CAMELS o Capital Adequacy Measures bank’s ability to maintain capital commensurate with the bank’s risk o Asset Quality Reflects the amount of credit risk with the loan and investment portfolios o Management Quality Reflects management’s ability to identify, measure, monitor, and control risks o Earnings Quality Reflects the quantity, trend, and quality of earnings o Liquidity Reflects the sources of liquidity and funds management practices o Sensitivity to Market Risk Reflects the degree to which changes in market prices and rates adversely affect earnings and capital Pg. 7 Exhibit 1.2 Commercial Banks and Their Regulators Types of Commercial Banks Types of Regulation National State/Member Insured State NonMember Noninsured State Nonmember Bank Holding Companies Safety and Soundness Supervision and Examination Comptroller Federal Reserve and State Authority FDIC and State Authority State Authority Federal Reserve Deposit Insurance FDIC FDIC FDIC State Insurance or NONE N/A Chartering and Licensing OCC State Authority State Authority State Authority Federal Reserve and State Authority Efficiency and Competitiveness Branching Comptroller Federal Reserve and State Authority FDIC and State Authority State Authority Federal Reserve and State Authority Mergers and Acquisitions Comptroller Federal Reserve and State Authority FDIC and State Authority State Authority Federal Reserve and State Authority Pricing New Products Federal Reserve and State Authority Federal Reserve and State Authority Federal Reserve and State Authority Federal Reserve and State Authority N/A Consumer Protection Federal Reserve Federal Reserve and State Authority Federal Reserve, FDIC, and State Authority Federal Reserve and State Authority N/A Pg. 8 Federal Deposit Insurance Corporation (FDIC) o Currently insures customer deposits up to $100,000 per account in commercial banks and savings institutions
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Original limit in 1933 was $5,000 o FDIC maintains the deposit insurance fund at 1.25% of insured deposits. o Currently, the fund is “well-funded” and over 90% of banks pay no insurance premium o FDIC Act of 1991: the act greatly increased the powers and authority of the FDIC, recapitalized the Bank Insurance Fund and allowed the FDIC to borrow from the Treasury. The act mandated a least-cost method and prompt corrective action for dealing with failing banks as well as establishing new capital requirements for banks. Both state-chartered and national banks must apply to FDIC for deposit insurance.
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473 Review sheet - Commercial Bank: Accept demand deposits...

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