Chapter 16 Flashcards
1
Q
government regulatory oversight of off balance sheet activity is concerned with?
A
-reserve requirements
-deposit insurance premiums
-capital adequacy requirements
2
Q
what are the major types of OBS activities
A
-loan commitments (revolving lines of credit)
-standby letter of credits
3
Q
what is a standby letter of credit
A
acts as a guarantee to pay seller if banks client fails to pay
4
Q
what is settlement risk
A
intraday credit risk, risk that money doesnt make it to recipient through CHIPS
5
Q
what is affiliate risk
A
risk that can occur because of association with company (company goes bankrupt, employees are at risk because no work, not being paid
6
Q
what is loan commitment
A
promise from lender to give loan in future under certain conditions
