2.1 // Financial Institutions Flashcards
What is a financial institution?
An establishment that focuses on dealing with financial transactions.
What are the two categories financial institutions are separated into?
Depository and non-depository.
What is the function of a depository institution?
To accept and manage deposits; to provide personal and commercial loans.
What is an example of a depository institution?
Commercial banks; savings and loan associations; credit unions
What is the function of a non-depository institution?
They don’t accept deposits, but get money with investor contributions or by selling insurance policies; they provide investment and brokerage services, and loans.
What is an example of a non-depository institution?
Insurance companies; investment companies; financial conglomerates; brokerage firms; pension funds
What is a bank?
A financial intermediary that accepts deposits from customers and businesses, then uses the deposits to make loans.
What is a financial service provided by a bank?
Checking accounts; savings accounts; CDs; credit cars; loans; retirement accounts
What are the three main types of banks?
Commercial banks, thrift institutions, and credit unions.
What services are offered by commercial banks?
Checking and savings accounts, CDs, ATM cards, deposit cards, loans, mortgages, credit cards, advisory services, and pension and retirement planning.
Who are commercial banks regulated by?
The federal reserve system, the Federal Deposit Insurance Corporation, and state and federal banking agencies.
What is the primary source of funds for commercial banks?
Their primary source of funds is customer deposits; demand deposits(checking accounts), time deposits(certificates), or savings deposits.
What are thrift institutions?
Financial institutions that obtain the majority of their funds from the savings of the public.
What are the primary types of thrift institutions?
Savings and loan associations, credit unions, and mutual banks.
Who are thrift institutions insured and regulated by?
Regulated by the government; insured by the FDIC
Credit unions are (?) institutions.
non-profit
What is the result of credit unions being non-profit?
They are not taxed, so they have lower loan rates, higher savings rates, and low cost/free services/
In a credit union, who makes the decisions?
The board of directors.
By making deposits to a credit union, you are ___.
Buying membership.
What is the requirement for membership in a credit union?
All members share a common bond; occupation, company, residential area, etc.
How do credit unions get their money?
Members pool their own savings.
Who are credit unions regulated and insured by?
Regulated by government; insured by the National Credit Union Association(NCUA).
What is a lending institution?
A financial organization that provides loans. May or may not be a depository institution.
What does a bank do when it receives your money?
Part of the money is reserved in your account, most of it is put into making loans.
What two things does the rate of interest depend on?
- How many people want to borrow money
2. How much money is available
What are some reasons why banks fail?
They expand too quickly; they put too much money into a loan; fraud; changing economic conditions - loans are hard to pay back
