Poly Financial Reg 1 - What is a bank? Financial...

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4/6/10 What is a bank? Financial intermediation Key feature: accept deposits from public Bank’s role in money creation: expanding supply of money through deposits and loan transactions Role in payment system: checks, checking accounts
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4/6/10 Why Regulate Protect consumer: ensure financial firms provide adequate information Check abuse of monopoly power Protect public from illegal activity: financial fraud, money laundering, tax evasion. Protect consumers from discrimination of other unfair
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4/6/10 Regulatory Agencies The Board of Governors of the Federal Reserve System (the Fed) State Regulatory agencies Office of the Comptroller of the Currency (OCC) Federal Deposit Insurance Corporation (FDIC)
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4/6/10 Who Regulates What? Responsibility for supervision is shared with OCC, FDIC and state regulators. Primary supervision for a bank depends on charter type of the banking institution. National banks chartered and supervised by OCC. Banks chartered under state law are
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4/6/10 The Fed and Monetary Policy Central Bank of the US Network of 12 regional Federal Reserve Banks plus 25 branches Open market operations: buy and sell US Treasury bills to influence level of reserves in depository system Reserve requirements: Fed sets requirements regarding amount of
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4/6/10 Reserve Requirement Taken from Reserve Manual
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4/6/10 Fed Regulatory Authority Some Fed regulations apply to entire banking system, others only to banks that are members of the Federal Reserve systems Members includes: National banks (automatically member) State banks that have chosen to join the Federal Reserve System
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4/6/10 Comptroller of the Currency (“OCC”) Bureau of the U.S. Department of the Treasury Chartering authority for national banks Regulates, and supervises all national banks Also supervises the federal branches and agencies of foreign banks
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4/6/10 What Does OCC Do? Examine the banks Approve or deny applications for new charters, branches, capital, or other changes in corporate or banking structure. Take supervisory actions against banks that do not comply with laws and regulations or that otherwise engage in unsound banking
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4/6/10 Federal Deposit Insurance Corporation (FDIC) FDIC insures the deposits in all national banks Originally created FDIC as a temporary regulatory agency under the Banking Act of 1933. Independent agency to protect depositors from bank failure and avoid bank runs
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FDIC Coverage FDIC insures deposits up to $100,000 per account with the same legal interest in one given bank (i.e. per institution). Congress has temporarily increased FDIC deposit insurance from $100,000 to $250,000 per depositor through December 31, 2009. Insured bank deposits are: (1)
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Poly Financial Reg 1 - What is a bank? Financial...

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