which is an example of a banking regulation quizlet


In addition, SLHCs are now regulated by the FRB, like BHCs. At the end of each quarter, Patti deposits $1,200 into an account that pays 10% interest compounded quarterly. Banks are limited in their ability to pay dividends (can't be greater than retained earnings for the year). \text{201 Accts. \begin{array}{rl} Primarily examined by FDIC. \text{4} & \text{Purchased $\$ 3,000$ in rafting equipment on account from A-1 Adventure Warehouse, Invoice AW45. \text{Jones & Ritter} & \text{302 Juanita Ortega, Withdrawals}\\ Allowed depository institutions to offer money market deposit accounts (MMDAs), Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 1. BDs can generally engage in proprietary trading with their own funds, but recall that Volcker Rule Part I bars any "banking entity" -- including BHCs, BD subsidiaries of BHCs -- from proprietary trading. What does it mean to have an inelastic demand for your boyfriend or girlfriend? In addition, the law effectively bars insured depository institutions from passing funds to affiliates. ", three non-banking activities allowed to FHCs (but not other BHCs). Slow implementation; some items not fully in place until 2019, A regulating system that looks at a system of important characteristic that are crucial to maintaining a high-quality bank. Rule 23A of the FRA limits a bank's ability to engage in transactions with its affiliates (e.g., to extend credit or purchase assets it holds or its own securities). Exercises fiduciary powers to act as a trustee and investment advisor; does not take deposits (except in carrying out fiduciary activities). \text{105 Accts. "Qualified thrift lender": at least 65% of a thrift's investments must be in qualified thrift investments, mostly consumer and mortgage loans. For our purposes, notable in that it was modified by the PATRIOT Act after 9/11. Their executives are now more accountable for financial statements by personally verifying their accuracy. }\\ Requires national banks to abide by state branching laws, Establishes the Federal Deposit Insurance Corporation (FDIC). Which of these is an example of a labor law? Help politicians win support from their constituents. - Permitted depository institutions to offer money market deposit accounts (MMDAs). Moral hazard was a serious problem during the credit crisis because the government was attempting to prevent failures of banks. Required: Prepare a letter to Mr. Hopkins. He heard that you were a CPA and made the following comments to you: Why is it that I am forced to recognize depreciation expense in my companys income statement when I know that I could sell many of my assets for more than I paid for them? non-banking prohibitions: three major exceptions, BHC and its subsidiaries generally cannot buy (1) any voting securities of, or (2) more than 33% of total equity in, any company that is not a US bank. 1989. Title II of the DFA requires institutions to create a "living will" for regulators that tells the FDIC how to unwind and liquidate them in the event of an emergency. Separated commercial banking and investment banking, 1. The government can prevent the shortages that accompany price ceilings by doing what? \text{101 Cash in Bank} & \text{205 Accts. Off-balance sheet commitments occur when a bank guarantees a customer payment, through a standby letter of credit, or an interest swap, or foreign exchange commitments. Repeals Glass-Steagall Act, allows banks to sell insurance and engage in some investment banking activities like selling insurance, investing in real estate, and others. The government must force people to pay taxes so that it can do what? Bank capital requirements are different than reserve requirements, and are set by particular regulators (although they are generally the same). prepare the President's budget and suggest fiscal policies. c. Assumes that the cost of current inventory at the conclusion of a period and the cost of goods sold is the overall representation of all the costs that were incurred during this period. All depository institutions are examined by their regulators; this process may take weeks, and some large banks actually have resident examiners. \text{Jerry} & \text{$\$ 13,000$} & \text{12$\\\%$} & \text{Quarterly}\\ A fusion of tradition, modernity and surroundings. "conversions" of Goldman Sachs and Morgan Stanley. Every BHC or its depository institution subsidiary must be "adequately capitalized," and it has an advantage if "well capitalized." The profit motive undermines competition unless competition is protected. It increases the tax rate as income rises. In order for a BHC to "control" a bank, it must either (1) own or control more than 25% of voting securities in that bank; (2) have the power to control the majority of a board of directors; or (3) have the power to exercise "a controlling influence" over its management or politics (33%+ of equity). Producers are driven by the profit motive to work against competition. Licensed and chartered by the state and FRB with powers the same as state-chartered banks in the state, but no deposits (except certain large overseas deposits in NY). A branch or agency of a foreign bank that controls a US bank is still regulated under the BHCA as a "deemed" BHC (actually, a foreign bank organization, or FBO). $$ One of three ratios used in assessing capitalization of a depository institution ("adequately," "well"). Citibank, N.A. Explain the accounting concept of depreciation and include a brief example in your explanation showing that over the life of the asset the change in value approach to depreciation and the allocation of cost approach will result in the same total effect on income. For example, if it guaranteed payments to back corporations that issued commercial paper, and those corporations fail, it will have to make the payments. Test: (1) maintains an inventory of securities; and (2) holds itself out as willing to buy-sell securities by quoting prices. Regulators are concerned about this risk. Hasty movements of money into and out of a country's economic system, A. This is a company that meets the three BHC requirements -- (1) a company (2) that controls (3) a US bank -- and is thereby subject to regulation under the BHCA. 1 is good and 5 is bad for each individual part. b. }\\ All must have policies and procedures to combat terrorism and money laundering. Office of the Comptroller of the Currency, which is within Treasury; OCC is responsible for regulation of national banks. If banks need to maximize growth to fully achieve economies of scale, they would need to grow nationwide. Does not include "finders" (who introduce an investor and issuer), nor those who engage in proprietary trading w/out "intent to resell." $$ \end{matrix} The next two questions use the following facts. C. 10%. \text{10} & \text{Purchased supplies on account, \$1,100. JP Morgan trader who lost $2 billion of the firm's money in a proprietary trading scheme. $$

Securities Act of '33 governs offer and issuance of securities; Exchange Act of '34 governs secondary markets, broker-dealers. Neither works as a regulatory matter: (1) They needed access to the discount window, generally available to BHCs and not BDs. BHC insolvency is governed by the ordinary Bankruptcy Code. It says that banks can engage in activities that are "the business of banking or incidental to banking," which includes lending, deposit-taking, investment advice, etc. (This, some say, is what led to 30:1 leverage ratios at Bear and Lehman Bros.), Banks were long exempt from the definition of "broker" and could thus broker securities without registering as a BD. \text{5} & \text{Paid monthly rent, \$1,900. Government agencies are which of the following? Within a BHC, only brokers have to take such an exam (not, e.g., employees of depository institution).

FIFO a. \text{George} & \text{$23,000$} & \text{8} & \text{Annually}\\ More common than federally-licensed. They can only invest in bonds that are considered "investment-grade" quality. A PE or hedge fund that acquires a bank must be careful not to obtain more than 24.9% of voting shares in the bank, or it will be subject to the BHCA. Office of Foreign Assets Control at Treasury, which maintains the "Special Designated Nationals" (suspected terrorists) list. This makes "deemed" BHC's -- i.e., foreign bank branches that control a US bank -- subject to the BHCA. Part II relates to relationships with hedge funds and PE funds. Employees of an issuer who sell that issuers stock do not need to register as BDs. The capital requirements were imposed among numerous countries so that banks from any of these countries would be subject to the same rules and would not have an unfair advantage. While deposit insurance helps to prevent bank deposit runs, it encourages banks to take more risk.

But the DFA requires these to be "pushed out" to an affiliate. DFA mandates a study on whether industrial bank parents should be subject to BHCA. Balance sheet composition, Asset Quality; Diversification and quality of loan/investment portfolio, Management; Quality of management of risk etcc, Earnings; Quality and stability of Earnings, Sensitivity; to IR changes, economic environment etc.

One drawback to consumer-protection regulations is that they lead to what? In general, BHCs and subsidiaries are limited in their ability to own companies not US banks. All investment banks are broker-dealers (BDs); "investment bank" is applied to large BDs which also engage in other activities -- underwriting, dealing and M&A advising -- in addition to buying-selling securities for customer accounts. Derivative activities were ruled permissible for a bank under 24(7), setting forth the powers of national banks. Banks are required to pay a premium on deposits, to maintain a minimum level of capital, and are restricted to a maximum loan amount to any single borrower. Pay.Premier Processors}\\ Applicable to both BHCs and SLHCs (the latter post DFA); requires HC to provide managerial and financial assistance to a bank / S&L in the event of distress. The Board of Governors (FRB) is a central bank, and regulates state-chartered member banks (along with their state regulator); it acts via its 11 branches (e.g., Federal Reserve Bank of NY). Firms that accepted deposits could not underwrite stocks and corporate bonds. An entity that trades securities for client accounts (broker) or its own (dealer). Part I of the rule bars proprietary trading by any "banking entity," with these exceptions: (1) trade (purchase or sale) in US government securities; (2) trade in the course of market-making and underwriting; (3) trade for the purpose of hedging; (4) trade on behalf of customers (not really proprietary trading); and (5) trade solely outside the US. Why does the government need to collect taxes? \text{Elaine} & \text{$16,000$} & \text{6} & \text{Semiannually}\\

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