Chapter 11: International Banking Flashcards

1
Q

Canadian Banking System and American Banking System

A

Canadian system is a branch-based system involving a small number of large banks (six major banks)
- thousands of branches

US system is structured such that there are over 8,300 banking companies
- less than 5 - 600 branches

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2
Q

4 main types of deposit taking financial institutions in the US

A
  1. Commercial banks
    - Similar in structure to the major Canadian banks
    - widely-owned by by shareholders
    - small number are national in their scope of operation
  2. Savings and loan associations
    - closely resemble mortgage loan companies that we find in Canada
    - privately owned business
    - local in focus
  3. Mutual savings banks
    similar to S&Ls, except that they are owned by their depositors and may have a number of branches
  4. Credit unions
    similar to mutual savings banks, in that they are owned by their depositors, but are smaller in scope
    -one office or branch
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3
Q

What is the US Invetment Banks’ main fucnction?

A
  • help companies convert from being privately owned to publically-owned
  • creates a large number of common shares that are listed on stock exchanges and raise large amounts of capital

-

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4
Q

Different Types of Financial Instituions in the Unites States? KNOW 4

A
  • Life insurance companies
  • Property and casualty insurers
  • Mutual fund companies
  • Pension funds
  • Stock brokerage firms
  • Financial planners
  • Trust companies
  • Bond dealers
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5
Q

The Federal Reserve System (FED) is made up of how many federal reserve banks?

A

12

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6
Q

Who governs and administers the FED

A

Federal Open Market Committee (the FOMC).

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7
Q

FED 8 Primary Roles. KNOW 4

A
  1. Serve as the central bank for the US government, by issuing its paper currency and coins.
  2. Act as the agent for the US government when it needs to raise capital in the markets by issuing treasury bills and bonds.
  3. Strengthen the financial standing of the US in the world economy.
  4. Facilitate a cheque-clearing system for the country’s financial institutions.
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8
Q

Canada has the Over-night Rate and the Bank Rate.

What is equivalent in America?

A

discount rate and the Fed funds rate are the American equivalents

Discount rate = Bank Rate (deposit taking institutions pay when they money over night directly from FED)
-lender of last resort

FED Funds Rate = Overnight Rate (Interest rate when a Bank borrows from a bank over night)

Usually 1/4% point spread between discount rate and fund rate

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9
Q

The purpose of the Bank for International Settlements (BIS)

A

is to act in the capacity of an international financial organization that promotes international monetary and financial cooperation and stability amongst its memer agencies

“central banks for central bankers”

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10
Q

The Basel II Accord requires that banks have capital that represents a minimum of what percentage or risk weighted assets? What do tier 1 levels exceed?

A

8%

Tier 1 exceed 8% (Major Canadian Banks)

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11
Q

Risk is measured by what three reasons to the bank?

A
  • Credit risk to that bank.
  • Market risk to that bank.
  • Operational risk to that bank
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12
Q

Primary toles of BIS? KNOW 2

A

• A forum to promote discussion and policy analysis among central banks and within the international financial community.
1.• A centre for economic and monetary research.
• A prime counterparty for central banks in providing adequate global money supply.
2.• An agent or trustee in connection with international financial operations.

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13
Q

Main Responsibilities fof the IMF (International Money Fund) - KNOW 3

A
    1. Promoting international monetary cooperation.
    1. Facilitating the expansion and growth of international trade.
    1. Promoting exchange rate stability.
      1. Assisting in the establishment of an international system of payments.
      2. Providing financial assistance to member nations experiencing balance of payments difficulties
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14
Q

Focal Points of the IMF (International Monetary Fund)

A
  • surveillance
  • providing technical assistance
  • providing financial assistance
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15
Q

What is Surveillance?

A
  • is the activity with the greatest degree of importance

- this is how small issues can be rectified before they have the chance to develop into a major economic crisis

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16
Q

What is Technical Assistance? and its 4 areas

A

help countries strengthen their ability to create and implement effective economic policies

  1. Fiscal policy.
  2. Monetary and exchange rate policy.
  3. Banking and financial system regulation and supervision.
  4. Statistical collection, reporting, and interpretation
17
Q

What is Financial Assistance?

A
  • support a member country when it develops the need to correct a balance of payment difficulty
  • For low-income countries
  • concessional lending facilities (low and often zero rate financing)