Chapter 3 Flashcards
Commodity money
Money that has value in itself or is redeemable as something of value; for example, gold coins
Maturity risk
The risk that changes in interest rates will adversely affect the prices or yields of long-term assets compared with short-term assets
Callable deposits
Deposits that are available on demand from a bank without penalty for early payment
Contagion
An effect in which the uncertainty about one bank’s finances can spill over to other banks and lead to heavy withdrawals by depositors
Lender of last resort (LLR)
Banks which provide liquid funds to financial institutions in need
Macroeconomic
Describes the relationships and forces that affect variables such as national income, prices and employment
Moral hazard
A theory that the existence of insurance may induce undesirable behaviour. In relation to banks, it is the idea that banks may take excessive risks wth depositors funds
Credit creation
The process by which banks create money from their lending of investors deposits
Superannuation
A scheme that allows individuals to invest funds over their working life to create income for when they retire
KiwiSaver
A voluntary, mainly workplace, incentive savings scheme open to all New Zealanders to save for their retirement via a variety of investment options, from conservative to growth, offered by various financial intermediaries
Securitisation
The process of repackaging and grouping loans so they have the characteristics of more liquid securities. For example, many of the mortgage loans in the United States have been repackaged into securities called collateralised mortgage obligations (CMOs)
Investment banks
Institutions or divisions of firms that originate and distribute securities to open-market investors
Unethical behaviour
A breach of a written or unwritten moral code
