LO 5.2.2: Describe the services and products of non-bank financial intermediaries. Flashcards
Credit union
- Owned by members, sponsors financial products, place to save and borrow
- Membership may be restricted on the basis of employer or other association affiliation
- Each credit union member may vote to elect the board of directors that is responsible for setting credit union guidelines and providing leadership
- Issues loans similar to bank loans- including commercial loans.
Who receives the interest from loans and investments issued by credit unions
Earnings from loan interest and investments are allocated to the members in the form of dividends.
National Credit Union Share Insurance Fund (NCUSIF)
Insures member accounts of all federal and most state-chartered credit unions up to $250,000.
An agency of the federal government, regulates credit unions unless the institution is chartered by a state where separate regulation is provided.
How much does the NCUSIF insure credit union deposits
$250,000 per qualifying acct (like bank deposits)
Who is the administrator of the National Credit Union Share Insurance Fund (NCUSIF)
National Credit Union Administration
What is the National Credit Union Share Insurance Fund (NCUSIF) backed by
- The full faith and credit of the U.S. government.
- However, no federal tax dollars have been deposited into the fund.
- NCUSIF represents approx. 1.3% of federally insured credit union deposits.
What is an investment bank
- A securities broker-dealer that underwrites new issues
* Works with businesses or municipal governments to issue securities.
What are an investment bank’s functions
- Advising corporations on effective strategies to raise long-term capital
- Raising capital for issuers by distributing new securities
- Buying securities from issuers and reselling them to the public
- Distributing large blocks of stock to the public and institutions
- Helping issuers comply with securities laws
What is a brokerage company
A brokerage company is an intermediary that facilitates transactions involving sales of investments or real estate.
What do brokers do, and what do they charge
- Brokers, or agents, arrange trades for clients/between buyers and sellers.
- Commissions.
What do dealers do, and what do they charge
- Dealers, or principals, buy and sell securities for their own accounts, often called position trading.
- When selling from their inventories, they charge markups rather than commissions.
What is a markup
A markup is the difference between the current interdealer offering price and the actual price charged to the client.
Who oversees brokerage companies
The SEC is the primary regulatory body overseeing the sale and purchase of securities; however much of this responsibility has been delegated to FINRA.
What is an insurance company
In the business of furnishing insurance protection to business and customers.
How are insurance companies regulated
- Each state has its own department of insurance for insurance companies in that state
- National insurance programs, such as the National Flood Insurance program, are exceptions.
