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CBP'S CTP 2017 > Chapter 02 > Flashcards

Chapter 02 Flashcards

1
Q

Central banks

A
  • implements/manages country’s monetary policy, money supply, interest rates
  • in many countries, also oversees commercial banking and pmt systems
  • Examples
    • European Central Bank (ECB)
    • Bank of England
    • Fed Reserve Bank (US)
    • People’s Bank of China
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2
Q

Fin. Stability Board (FSB)

A
  • coordinates w/ int’nl fin. authorities and standard-setters
  • develops and promotes regulatory, supervisory, and other fin. sector policies
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3
Q

Bank for International Settlements (BIS)

A
  • principal center for cooperation beween int’nl central banks and other agencies pursuing monetary and financial stability
  • collects, compiles, and disseminates econ. and fin. statistics
  • HQ in Basel
  • world’s oldest int’nl fin. institution
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4
Q

Bretton Woods Agreement

A
  • post WWII rules governing $ relations btwn. world’s major financial powers
  • est’ed. Int’nl Monetary Fund (IMF) and Int’nl Bank for Reconstruction and Development (IBRD) – both now part of the World Bank
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5
Q

Basel Committee on Banking Supervision (BCBS)

A
  • Objectives:
    • reduce systemic risk (more resilient banks)
    • enhance understanding of key supervisory issues
    • improve quality of banking supervision WW
  • Published Basel I-III
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6
Q

Group of Governors & Heads of Supervision (GHOS)

A
  • governing body of Basel Committee
  • central bank governors + non-central bank heads of supervision from member countries
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7
Q

Basel I - III

A

Basel I (G10s implemented in 1992)

  • min capital ratios for large banks, per credit risk of bank’s various assets
  • originally “1988 Basel Capital Accord”

Basel II (3 pillars) (2004)

  • min. capital requirements (addressing credit and operational risks)
  • supervisory review (framework to address/evaluate risk)
  • mkt. discipline (req’d disclosures re: risk metrics, capital adequacy)

Basel III (2011-2018)

  • stress-test and shock-absorption (i.e. to improve banking sector’s ability to absorb shock from fin and econ stress, etc)
  • improve risk mgmt. and governance
  • stronger bank transparency and disclosures
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8
Q

Committee on Global Fin. System (CGFS)

A
  • int’nl central bank forum
  • monitors and examines broad issues re: fin. mkts. and systems
  • elaborates/recommends policy to support central banks’ stability efforts
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9
Q

Committee on Payment & Settlement System (CPSS)

A
  • sets standards for payment and securities settlement systems
  • int’nl central bank forum: to monitor/analyze system developments (domestic pmt, settlement, and clearing), x-border and multicurrency settlement schemes
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10
Q

European Payments Council (EPS)

A
  • coordinates and makes decisions re: payments, for European banking industry
  • purpose: support/promote SEPA (e.g. develop pmt. schemes and frameworks for integrated euro payments mkt, define common positions for cooperative space of pmt. svcs.)
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11
Q

Single Euro Payments Area (SEPA)

A

European Union (EU) initiative to integrate/simplify pmt. processes and standards throughout euro area

  • create single-set of European pmt. schemes (i.e. integrate existing nat’nl credit xfer and direct debit schemes); step towards Euro = single, fully operational ccy.
  • create uniform standard for card pmts. across nat’nl borders (i.e. a consistnet consumer experience, to make/accept card pmts. throughout euro area)
  • incentivize/increase electronic pmt. usage (via standard practices)

(framework in Payment Svcs. Directive (PSD))

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12
Q

European Securities & Markets Authority (ESMA)

A
  • indep. EU authority
  • helps safeguard EU fin system/stability and protect investors
  • securities mkts’ integrity, transparency, efficiency, and functioning
  • partly responsible for EMIR
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13
Q

European Mkt. Infrastructure Regulation (EMIR)

A
  • European Parliament and Council adopted in 2012
  • to increase stability of OTC derivatives mkt. throughout Europe
  • reporting and clearing obligations similar to US’ Dodd-Frank
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14
Q

Int’nl Association of Deposit Insurers (IADI)

A

enhanced efficacy of deposit insurance systems WW

  • promotes/guides int’nl. cooperation
  • members rsrch. and guide other members seeking to est./ improve deposit insurance syst.
  • to increase depositor confidence, reduce “bank run” risk (more stable)
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15
Q

Int’nl Org of Securities Commissions (IOSCO)

A
  • int’nl standard-setter for securities mkts
  • provides comprehensive technical assistance to members
  • aims to est./apply rigorous regs and standards for int’nl securities transactions
  • stronger enforcement against offenses
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16
Q

Financial Action Task Force (FATF)

A
  • developes/promotes anti-money laundering, terrorist financing
    • monitors members’ progress to implement
    • reviews techniques/counter-measures
    • promotes global adoption of appropriate measures
  • 30+ member countries (int’nl org)
  • est. “KYC” guidelines
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17
Q

Int’nl Assoc. of Insurance Supervisors (IAIS)

A
  • int’nl standard-setting group for insurance regulators and supervisory entities
  • covers most WW insurance premiums (190 jurisdictions, ~140 countries)
  • maintenance of efficient, fair, safe, and stable insurance markets
  • benefits/protects policyholders, too
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18
Q

Int’nl. Swpas and Derivatives Assoc. (ISDA)

A
  • improve safety and efficiency of world’s swaps and derivatives mkt
    • doc. procedures
    • enforceability of netting and collateral provisions
  • reduce counterparty, credit, and legal risks
  • 805+ members across 67 countries
  • created 1985
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19
Q

Fed. Reserve REG D

A

set reserve requirements (re: Fed. Reserve Act 1913)

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20
Q

Fed. Reserve REG E

A

EFT act provisions, consumer protection re: ATMs, ACH, CCs

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21
Q

Fed. Reserve REG J

A

check collection and settlement

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22
Q

Fed. Reserve REG J

A

check collection and settlement

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23
Q

Fed. Reserve REG Q

A

no interest on corp DDAs (per Glass-Sten)

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24
Q

Fed. Reserve REG Y

A

allows specific activities for bank hold cos. and foreign banking orgs. operating in US

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25
Q

Fed. Reserve REG Z

A

truth in lending

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26
Q

Fed. Reserve REG BB

A

banks to help credit needs of entire community where they conduct business

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27
Q

Fed. Reserve REG CC

A

expedited funds availability act (speed ck collections, etc.)

28
Q

Fed. Reserve REG FD

A

“fair disclosure” re: investments and securities (requires public disclosure of non-public info, if shared with certain parties)

29
Q

Fed. Reserve REG Y

A

allows specific activities for bank hold cos. and foreign banking orgs. operating in US

30
Q

SEC Rule 2a-7

A

money mkt fund stipulations (e.g. healthy diversification, etc.)

31
Q

Uniform Commercial Code (UCC)

A
  • unform set of US laws over commercial transactions
  • rights/duties of all parties
  • statutory definition of commonly accepted biz practices
32
Q

UCC: Article 3

A

negotiable instruments– esp. paper-based pmts. to corps (e.g. re: “paid in full” on cks, etc.)

33
Q

UCC Article 4

A

bank deposits and collections

34
Q

UCC Article 4a

A

funds xfers

35
Q

UCC Article 5

A

letters of credit

36
Q

UCC Article 9

A

secured transactions

37
Q

BK: Ch 7

A

liquidate firm

38
Q

BK: Ch 9

A

financially distressed municipality (city, county, state, etc.)

39
Q

BK: Ch 11

A

biz reorg.

40
Q

BK: Ch 13

A

personal BK (w/ income source)

41
Q

BK: Ch 15

A

establishes trustee for BK with companies, assets, individuals, in more than 1 country

42
Q

Volcker Rule

A
  • restricts certain bank investment activities– specifically proprietary trading (i.e. trading securities on the bank’s own acct), hedge funds, and private equity business - after Paul Volcker (chairman of US central bank, 1979-1987)
43
Q

What is “net interest margin” to banks?

A
  • Difference btwn (1) interest rate at which the bank lends to borrowers and (2) interest rate the bank pays to depositors for funds held on deposit - primary source of bank’s earnings
44
Q

List 5 specific areas of financial regulation

A
  1. Monitor and manage overall safety of banking system 2. Monetary policy 3. Guidelines to charter banks/other depository institutions 4. Protect consumers (and allocate credit to certain econ. segments) 5. Protect investors purchasing securities through FIs
45
Q

“Seigniorage”

A
  • income derived from central bank issuing currency and providing it to FIs and other investors in exchange for govt bonds
  • funds central bank’s operations or is remitted to the local govt.
46
Q

“Hersatt risk”

A
  • refers to FX settlement risk, esp. between bank counterparties
  • potential systemic risk caused by failure of one, large int’nl bank between contract execution and maturity/settlement (e.g. FX trades)
47
Q

3 stages of “money laundering”

A
  1. placement - deposit illegal activity proceeds @ a FI
  2. layering - series of transactions to separate cash from criminal/terrorist origins
  3. integration - create appearance of a legit explanation/source of funds (e.g. donated for a charitable purpose)
48
Q

Dept of Justice (DOJ)

A
  • w/ Fed, reviews/approves bank mergers and hold co. aquisitions
  • FBI (sub-group) investigates FI fraud/theft, enforces key money laundering legis.
49
Q

Federal Deposit Insurance Corp. (FDIC)

A
  • est. by Glass-Steagall Act in 1933
  • protects depositors
    • provides depisit insurance for covered FIs
    • supervises select depository institutions
    • trustee (bank failure)
  • administers Deposit Insurance Fund (DIF)
    • backed by full faith and credit of US govt.
    • covers individuals’ DDA/savings deposits < $250K
50
Q

Financial Crimes Enforcement Network (FinCEN)

A
  • oversees/implements counter-money laundering by criminal/terrorist orgs.
  • investigates, strategizes, provides intelligence/reports to other law enforcers
  • serves as the US fin. intelligence unit (FIU)
  • operates as a bureau of the Treasury
51
Q

Financial Industry Regulatory Authority (FINRA)

A

independent regulator for securities firms and registered securities reps; purpose: to protects investors, reinforce mkt integrity, and provide compliance/ technology-based services

  • registers and educates industry participants (brokers, registered investment advisors, etc.)
  • examines brokerage firms
  • writes and enforces rules re: fed securities laws
  • informs/educates the investing public
  • provides trade reporting and other industry utilities
  • administers dispute resolution forum

created in 2007

52
Q

Financial Stability Oversight Council (FSOC)

A
  • identifies threats to stability and gaps in regs to prevent systemic risks
  • coordinates btwn fed and state agencies
  • does NOT make/enforce laws– only recomends
53
Q

Nat’nl Credit Union Admin (NCUA)

A
  • indep. federal agency
  • charters/supervises federal credit unions
  • operates the National Credit Union Share Insurance Fund (NCUSIF)– insures savings of account holders in all fed (and many state) credit unions, like FDIC for credit unions
54
Q

OFAC

A
55
Q

US Secret Service

A
  • mission: safeguard nation’s fin infrastructure, pmt. systems
  • handles CC and ck fraud, and ID theft
  • est. in 1865 as anti-counterfeit currency
  • now, part of Homeland Security
56
Q

Securitie and Exchange Commission (SEC)

A
  • maintain fair/orderly mkt
  • regulates/supervises securities sales (stocks, bonds, derivative instruments)
  • requires public corps to disclose all relevant fin info to investors, etc.
57
Q

Bank Secrecy Act

A
  • US legis., est. by FinCEN
  • combat money laundering and use of secret, foreign bank accts
  • requires banks to report clients’ large/suspicious money xfers
  • requires any trade/business org. that receives > $10K cash to file IRS Form 8300 (ID from whom the cash came, to whom, transaction method)
58
Q

Glass-Steagall Act (aka Banking Act of 1933)

A
59
Q

Gramm-Leach-Bliley Act of 1999

A
60
Q

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

(Dodd-Frank Act)

A
  • wide US legis, post ‘07-‘09 crisis
  • est.
    • Fin. Stability Oversight Council (FSOC) -
      • oversees fed bank regulators (i.e. OCC, Fed’s Board of Governors, FDIC)
      • monitors systemic risk in fin. systs, recommendations to regulators
  • Commodity Futures Trading Commis. (CFTC) - regulates OTC derivatives w/ SEC (more oversight, to minimize irresponsible practices)
  • Consumer Fin. Protection Bureau (CFPB) - consolidate consumer protection, oversee federal law enforcement re: fair access to credit for individs/communitites; examines/enforces regs for:
    • student lenders
    • payday lenders
    • all mortgage-related business
    • banks and CUs w/ assets > $10B
61
Q

EFT Act (1978)

A
62
Q

Money Laundering Control Act (MLCA) of 1986

A
  • made it a crime to structure transactions to avoid req’d reporting per Bank Secrecy Act (civil and criminal penalties)
  • Requires FIs to:
    • establish KYC guidelines
    • be aware of large-value funds xfers
    • file currency trans. reports and criminal referrals
63
Q

US PATRIOT ACT (2001)

A
  • extended MLCA obligations to non-bank FIs and non-financial businesses w/ potential for large-value transactions (car, boat, plane, jewelry dealers)
  • made all foreign banks w/ US accounts subject to US jurisdiction (including power to obtain records and customer info)
  • US banks: no correspondent accts for “foreign shell banks” (no physical presence in any country)
  • US CC system operators: not allowed to authorize foreign banks to issue/accept US CCs w/o taking steps to prevent terrorist usage
  • requires banks’ KYC (increased due diligence)
  • public firms must:
    • internal controls over fin reporting
    • audit committee must:
      • pre-approve audit/non-audit svcs. from auditor
      • be briefed by auditors on firm’s acct’ing and alternative methods
    • annual reports to include:
      • code of ethics for sr. officers in annual reports
      • disclose audit committee financial expert
    • Form 8-K, if ethics code is waived/changed
      *
64
Q

“Red Flags Rule”

A
  • Requires FIs and creditors develop/implement ID theft protection programs
  • document/disclose, per Fair and Accurate Credit Trans. Act of 2003 (FACT)
  • applies to: most entities regulated by the Fed and NCUA
    • state/nat’nl banks
    • state/nat’nl savings and loan assoc.
    • mutual savings bank
    • state/fed credit union
65
Q

Foreign Acct Tax Compliance Act (FATCA)

A

requires US taxpayers to file/report:

  • annual report of all foreign fin accts and offshore assets

requires foreign fin institutions to report:

  • fin accts held by US taxpayers
  • foreign entities substantially owned by US taxpayers
66
Q

Report of Foreign Bank and Fin Accts (FBAR)

A

Requires US persons/businesses to file a report if BOTH:

  • was a signer or had a fin. interest on/in a bank acct outside the US
  • acct(s)’ aggregate value > $10K

at any time throughout the yr.

CBP'S CTP 2017 (21 decks)

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