| A | B |
|---|
| medium of exchange | an agreed-upon system for measuring the value of goods and services. |
| financial intermediary | a bank is this for the safeguarding, transferring, exchanging, or lending of money. |
| Commercial banks | are the institutions commonly thought of as banks |
| Retail Banks | this and other thrift institutions such as mutual savings banks, savings and loans, and credit unions, developed to help individuals not served by commercial banks |
| Central banks | the government banks that manage, regulate, and protect both the money supply and the banks themselves. |
| merger | occurs when one or more banks join or acquire another bank or banks. |
| identity theft | occurs when someone achieves financial gain by using another person's personal information to unlawfully assume the identity of the other person. |
| creditworthy | a customer that has a good credit rating, sufficient collateral for loans, and an ongoing income source sufficient to make timely loan payments. |
| depositers | people who put money into banks |
| spread | the difference between what a bank pays in interest and what it receives in interest. Also known as net interest income |
| revenue | income |
| Pofit | net income |
| asset | anything of value |
| liquid asset | anything that can be readily exchanged, like cash |
| liability | cash obligation |
| Return on assets(ROA) | the ratio of net income to total assets |
| Return on equity(ROE) | measures how well a bank is using its equity |
| equity | represents net assets, or total assets, minus total liabilities |
| niche markets | targeting particular customers in defined locations or by particular services. |
| deregulation | loosening of government control |
| Automated Teller Machines | a machine that can perform almost any banking action |
| Smart Card | are credit, debit or other types of cards that have embedded microchips |
| payroll card | a card where banks can facilitate salary payments between employers and employees |
| online banking | allows customers to perform banking transactions from their home computers |
| mobile banking | customers can execute a variety of banking transactions with mobile phones |
| currency | all media of exchange circulating in a country |
| bank currency | bank notes |
| deposit currency | a form of this is checks |
| Federal Reserve Act | created a system to stabalize the banking system |
| reserves | percentages of deposits that are set aside to help with liquidity drops |
| reserve liquidity | ways to convert the reserves readily to cash |
| margin | stocks bought for a fraction of their price, then resold for profit without the full purchase price of the stock ever being paid |
| bank run | when many people try to withdraw their money at once |
| Federal Deposit Insurance Corporation (FDIC) | guarantees deposits against bank failures up to $100,000 per depositor, per bank and sometimes even more for special kinds of accounts or ownership categories. |
| stagflation | when inflation rises but the economy as a whole is not doing well |
| recession | decline in total production lasting a minimum of two consecutive quarters |
| member bank | any bank that is part of the federal reserve system |
| District reserve bank | carry out banking functions for government offices in their area, examine member banks in their district, decide whether to loan bank funds, recommend interest rates, and implement policy decisions of the board of governors |
| federal funds rate | the rate at which banks borrow from eachother |
| Federal open Market Committee (FOMC) | makes discount rate decisions |
| inflation | when rising prices decrease the value of money |
| Truth in Lending Act | Title 1 of the consumer credit protection act guarantees that all information about costs of a loan |
| Equal Credit Opportunity Act | prohibit the use of race, color, religion, national origin, marital status, age, reciept or public assistance, or exercise of any consumer right against a lender as a factor in determining creditworthiness |
| Fair Credit Reporting Act | aims to protect the information that credit bureaus, medical information companies, and tenant screening services may collect. |
| Fair Debt Collection Practices Act | protects customers from unfair collection techniques |
| charter | legal approval to operate a business as a bank |
| CAMELS system | Capital adequacy, Asset adequacy, Management, Earnings, Liquidity, and Sensitivity |
| ROCA score | a composite score of performance in risk management, operational controls, compliance, and asset quality |
| fixed exchange rate | a monetary valuation of one country's currency is tied to the valuation of another country's currency |
| flexible exchange rate | enables currencies to fluctuate based on market conditions |
| balance of payments | record of all of the exchanges of goods and services that occur between two countries |
| Federal Reserve System Open Market Account | the account the fed maintains international reserves in is the... |
| money supply | is defined as the liquid assets held by banks and individuals |
| liquidity | is a measure of how quickly things can be converted to something of value like cash |
| commodity money | based on some item of value |
| Fiat money | money that is deemed legal tender by the government, and it is not based on or convertible into a commodity |
| fractional-reserve system | where one keeps back or reserves only a fraction of the total gold that had been deposited |
| primary reserves | consists of vault cashand the required percentage amounts on deposit in the Federal Reserve District Bank |
| vault cash | cash on hand |
| secondary reserves | including securities the bank purchases from the federal government, and deposits that are due from other banks |
| excess reserves | reserves held by a bank beyond its reserve requirement |
| multiplier effect | new deposits go out to customers as loans and create more deposits, thus expanding the amount of money in the system |
| federal funds rate | amount of interest charged for short-term, interbank loans |
| discount rate | interest rate that the federal reserve sets and charges for loans to member banks |
| prime rate | rate that the banks charge their best and most reliable customers |
| transaction account | an account that allows transactions to occur without restrictions on the frequency or the volume of transactions |
| demand deposit | payable on demand whenever the depositor chooses |
| individual account | owned by one person |
| joint account | 2 or more owners |
| Check 21 | created a new category of negotiable instrument |
| time deposits | deposits that are held for or mature at a specified time |
| Money Market deposit accounts | offer a higher rate of interest than savings accounts, but they usually require a higher initial deposit to open an account |
| Certificates of deposit | certificates issued by banks that guarantee the payment of a fixed interest rate until the maturity date |
| maturity | which is a specified date in the future |
| interest | price paid for the use of money |
| compound interest | adding interest to the principal and paying interest on the new total is called "" |
| Annual Percentage rate | nominal rate on which interest |
| negotiable instrument | a written order or promse to pay a sum of money, either to a specified party or to the person who holds it |
| endorsing | signing your name on the back of the check |
| payee | reciever of the funds |
| identification numbers | check number, bank number, and account number |
| drawee | bank that maintains the account and holds the funds of the person or business that is writing the check |
| drawer | person who is writing the check |
| draft | an order signed by one party that is addressed to another party |
| bill of exchange | a negotiable and unconditional written order, such as a check, draft, or trade agreement, addressed by one party to another |
| promissory note | a written promise to pay at a fixed or determinable future time a sum of money to a specified individual |
| holder in due course | a written, signed unconditional promise or order to pay a fixed amount on demand or at a defined time to "" |
| blank endorsement | signature of the holder |
| restrictive endorsement | limits the use of the instrument to a means specified by the endorser |
| full endorsement | transfers the check to another party |
| qualified endorsement | an attempt to limit the liability of the endorser without limiting an instruments further negotiability |
| transit number | a 9-digit number that identifies the bank that holds the checking account and is responsible for payment |
| returned check | a check written on an account that doesnt have adequate funds |
| charge cards | a consumer purchases but must pay the account in full at the end of the month |
| credit cards | allow consumers to pay all or part of their bills each month and finance the unpaid balance |
| cash cards | commonly used at an ATM |
| debit cards | transfer money from a persons designated account to the account of the retailer |
| Asset Transformation | using deposits to generate revenue by putting deposits to wrk via loans |
| adverse selection | concept that the borrowers who are most willing to accept a high interest rate are the same borrowers who are most likely to default on their loans |
| captive borrower | a consuemer with a weak credit history that can easily get a loan |
| moral hazard | when a borrower takes greater risks if they think the harm they will incur from those risks will somehow be minimalized |
| credit rationing | when banks refuse to provide a loan or when they lend less than the customer requested |
| installment loan | loan for which the amount of the payments, the rate of interest, and the number of payments are fixed. |
| personal loans | loans that dont require that a specific purpose be stated |
| secured loan | one in which some item of value backs the loan incase the borrower defaults on the loan |
| collateral | item that secures the loan |
| lien | a legal claim to the property to secure the debt |
| unsecured loan | a loan backed only by the reputation and creditworthiness of the borrower |
| grace period | an amount of time you have to pay the bill in full and avoid any finance charges |
| closed ended loan | a set amount, to be paid back in equal regular payments |
| subprime rates | higher than normal to offset the increased risk represented by a less-than-perfect borrower |
| consumer reporting agency(CRA) | a company that compiles and keeps records on consumer payment habits and sells these reports to banks to calculate creditworthiness |
| FICO score | a 3 digit number that credit granters can use in making a loan approval decision |
| revolving credit | a line of credit that has a maximum limit |
| sum-of-digits method | takes the total finance charge, divides it by the number of months in the loan term and assigns a higher ratio of interest to the early payments |
| previous balance method | take amount owed at beginning and calculate interest from that |
| adjusted balance method | subtract payments made during the billing cycle |
| average daily balance method | balances for each day are added and divided by number of days in billing cycle to yield an average figure on which the finance charge is calculated |
| predatory lending | occurs when lenders create problems for consumers by making credit too easily available without regard to the borrowers ability to pay |
| liquidity risk | risk that a bank will have to sell its assets at a loss to meet its cash demands` |
| credit risk | the banks estmate of the probability that the borrower can and will repay a loan with interest as scheduled |
| market risk | risk that investment wuill decrease in price as market conditions can change |
| mortgage origination | new morgtages |
| mortgage | a note, usually a long-term, secured by real property. |
| foreclosure | court-ordered sale of the property |
| fixed rate mortgages | loans with fixed interest rate for the life of the loan |
| balloon mortgage | interest and payment are fixed but at sme specific point the entire remaining balance of the loan is due in one single balloon payment. |
| adjustable rate mortgages(ARMs) | are those with rates that change over the course of a loan |
| buy-down mortgage | the borrower buys down, or prepays, part of the interest in order to get a lower rate. |
| point | value equal to 1% of the loan |
| PITI | principal, interest, taxes and insurance |
| escrow | minimum amount payed in advance |
| loan-to-value | value of loan compared to value of the asset |
| redlining | banks refusing to lend to certain neighborhoods |
| Fannie mae | federal national mortgage association |
| negative equity | when amount owed on a home is more than current value on a home |
