M1 Flashcards
How do you credit union acts influence the corporate governance of credit unions
It addresses issues such as who qualifies to be a director, who can vote, quorum, notice requirements and certain committees a board to be created.
CREDIT UNIONS
What is the significance of the corporate credit association act for credit unions (CCA)
Governs the activities of credit Union Central of Canada. Restricts centrals to providing financial, administrative, educational, promotional, technological and consulting services to members only.
CREDIT UNION CENTRAL
The legislation which provides for the establishment of credit union centrals is called?
The cooperative credit association act(CCA)
True or False
Credit unions are subject to federal legislation, provincial legislation and provincial legislation places certain restrictions on credit unions.
True
Federal legislation acts
Cooperative credit association act (CCA) Income tax act Bankruptcy Act Interest Act National housing act
What is the largest financial institution system asset wise?
Chartered Banks. NOT credit Unions
Which products were developed as a result of collaboration between credit Union Central credit Union?
Ethical Funds Inc., Procuron, CuNet & NoCurves Leasing.
Interac was NOT developed by credit unions
T or F
Credit union sell derivatives to members with sufficient equity
False
Which of the following methods are often used by financial institutions to increase financial margin?
Increase the rate loans and or increased the return on investment
A credit union matching the mature maturities of its assets and liabilities is likely attempting to protect itself against what?
Interest rate risk
Which of the following options available to deposit protection agency for dealing with an insolvant CU is considered the most serious?
Liquidation
Which of the following service innovations is multifunctional and includes special purpose applications?
Smart Card
What type of ratio incorporates information from both the balance sheet and income statement
Return ratio
Concenta Financial
It is a national trust company
It provides a wide range of banking services for credit unions
It provides estate planning services for credit union members
Strategic planning for credit unions strategies
- a low priced approach is still A popular growth strategy for credit unions
- recruiting and retaining employees is becoming increasingly difficult
- older employees are likely to become increasingly important
- New technology will not solve the credit unions organizational problems
What is the leverage or Capital adequacy test?
The leverage test requires that credit unions have capital equal to 5% of assets. Which means for every $100 in assets they must find an additional $5 dollars to meet the capital adequacy requirement.
Place the credit union by law, credit union policies, the provision of a credit union act and the regulations issued under that act hierarchical order from top to bottom.
- The Credit union act - provincial
- Provincial regulations
- By-laws and policy and procedure
Credit unions are provincially regulated. Do federal status affect cu’s?
Yes. Federal status such as the bankruptcy act governs the actions of credit unions and to the extent that’s the statue such as the Bank Act governs credit union competitors
List three types of shares that could be issued by credit unions in some provinces to raise capital
- Member Shares
- Bonus, Patronage or member contributed equity shares
- Preferred Shares
What are the BIS rules and how do they affect credit unions?
The bank of international settlement established rules set out the amount of capital an international bank should maintain as a percentage of its assets. They adopted a risk-weighted approach to establishing levels of capital adequacy. Government guaranteed deposits were 0% and personal loans were 100%. Deposits at Central would be 100% risk-weighted under the BIS risk rated rules.
What is a standing committee?
A standing committee is one that is always in place.
Executive, audit, credit committee
The deposit is sure or guarantor duties are
- Monitory and inspect
- Legislative compliance
- Credit union solvency
- Deposit protection
5 sound business practices
Who were the members of the Rochdale society of Equitable Pioneers?
They were displaced lace workers who opened the first successful consumer cooperative in Rochdale, England in 1844.
They wrote the first set of cooperative values which essentially still adhered to today.
What is the difference between a close bond credit union and open bond credit union?
Close bond credit unions share a common bond of association such as a particular house of worship, ethnic origin, employees at a particular company, and people with similar occupations.
And open bonded credit union is open to anyone in the geographic area.
What are credit union preferred shares?
Preferred shares are shares which promised the holder a rate of return. It can be fixed or variable and is paid as a dividend. Dividends on preferred shares are not guaranteed.they also must be paid out first before member shares
The regulations of government are
- Incorporation
- Regulation
- Public protection
In French what is the credit union called
The credit unions called Caisse Poulaire and the system is referred to as le Mouvement Desjardins. It is the dominant financial institution in Quebec with assets more than the entire system in all the other provinces.
Who was Alphonse Desjardins?
He was a journalist who founded the first credit union in Canada in Levis, Quebec in 1900
The six core cooperator values adopted by the international alliance in 1995
1 mutual self-help 2 self responsibility 3 democracy 4 equality 5 equity 6 Solidarity
Social objectives
Enhance the quality of life for community residents (eg creating employment). Provide greater opportunities for member involvement. But still corporate citizenship obligations
Business objectives
Develop new market sector, marketing opportunities and position, develop new products, provide learning opportunities for staff, improve social and economic returns a community involvement
List at least five trade association functions engaged by centrals. What to provincial centrals do for us?
- develop promotional materials
- Central purchasing
- advertising campaigns
- New products and services
- legal advice
- Government relations
Which provinces have 2 centrals?
Ontario Manitoba and New Brunswick
What are two main functions of the credit union Central
Central banking, trade association
Who arranges interest rate swaps?
tier 2 - the provincial central
Explain accured interest
Interest that has been earned but not yet paid. Liability to the credit union since it is owed to the member
Explain equity
Is the capital invested by its owner of the company. Credit union equity is typically made up of members shares and retained earnings
Explaine retained earnings
Retained earnings represent the total accumulated earnings of the credit union less any amounts distributed to the members as dividends in any amount transferred to other capital accounts. Over the years all net income is added to retained earnings
ROA - return on assets
Credit union profit after taxes
ROE - return on equity
This is credit union after taxes profit expensed as a percentage of members equity. How much profit is generated per dollar of equity
Executing a will is an example of which of the following functions
Fiduciary
What is the relationship between net income and profit?
Net income and profit are the same thing
What was the Antigonish Movement?
The movement was started in 1930 in Nova Scotia by father Moses Cody and Jim Thompkins. The movement emphasized the need for a wide range of cooperative enterprises to ensure the economic health of the residents of that area in 1932 the first credit union in Nova Scotia was formed. The Antigonish movement was the cradle of the credit union system outside of Quebec.
What is unique about credit unions that make it more difficult for them to manage credits and liquidy risk that it is for bags and trust companies
The members of credit you often have a common bond, like geographic location, employer, our profession. This makes credit unions especially vulnerable to downturns in a social location, our layout by specific employer, which could lead to a large number of customers defaulting on loans are withdrawing their savings.
Which products or credit union innovations
Consumer loans, daily interest accounts, debit cards, telebanking, Flexible mortgage payment plans, internationally connected ATM
What are the five C’s of credit
capacity, capital, collateral, conditions, and character
Interest rate risk
Risk of mismatch in interest rate between payment on deposits(liabilities ) and payment earned and borrowers (assets)
What is financial margin
Financial margin is the difference between interest received from loans and investments less the interest paid on deposits another inter-bearing liabilities and dividends paid members. Martin is important to the credit union because it is the primary source of a credit unions revenue profit
Credit risk
Risk a borrower defaults
What are two common techniques for managing interest-rate risk?
Maturity matching an interest-rate swaps
Derivatives risk
Risk of hedge going the wrong way
Liquidity risk
Risk of mismatch between demands by members and funds available
Investment
Risk of the company in which you invest becoming insolvent
Three primary areas of focus in preventing and liquidy and insolvency
- Capital adequacy requirement
2 Liquidy asset requirement - Restriction on loans and investments
Uncorrelated versus correlated
If the return to investments is negative correlated then one of the investment is likely to do well only if the other is doing poorly
Financial margin
Interest income from loans \+ interest from investments - interest expense (interest paid to depositors and on other liabilities and dividends paid) = financial margin
Consumer protection
Regulation of how debits are collected, deposit insurance, interest-rate disclosure regulations, lost governing use of depositors personal information
What level of government has primary regulatory authority for credit unions, for banks, for trust companies?
The level of government that has primer regulatory authority for credit unions is provincial; for banks, it is federal; for trust companies, federal or provincial but the majority of trust companies are regulated federally
Insurance ability of financial institutions
Static for liquidy, requirements for sound business practice, requiring licenses to engage in certain types of lending, standard of capital adequacy
Enhancing competition and efficiency
Trent towards harmonize in regulations between provinces
Restrictions on banks from selling life insurance in their branches
Read regulation of the financial service industry
The two main reglet Tory bodies for financial institutions are?
Government regulatory and deposit insurer/guarantor
What is OS F I
Office of the superintendent a financial institutions it is a federal regulatory response for banks, insurance and federally incorporate a trust companies
What is CD I C
Canadian deposit insurance Corporation, the federal deposit insurer.
ROLLS:
- assist the institution
- assist merge or amalgamation
- operate themselves
- liquidate FI
Are credit unions governed by OSFi and CD I C regulations?
No. Credit unions are provincially regulatory OS F I and CDIC or federal organizations.
line of defence against insolvency
- Sound business practices
- CDIC
- Government
The primary forces driving change in the financial services industry are:
Technology, telecommunication, demographic change, changing consumer
Cash value card
For transactions that require small bills are quoins; value downloaded it ATMs; cards are refillable and or disposable and are available in prescribed amounts
Relationship pricing
Designed to encourage greater service usage
Targeted cross-selling
Allows the customization of services
Loyalty building
Involves knowing what the members value
Integrated marketing
Integrated marketing communication ensures that members receive the same message from the credit union whether they are dealing face-to-face, reading a newsletter or receiving a direct mail package
Which credit union service or product innovation is fundamental for credit unions?
Consumer lending is fundamental to credit unions
What is relationship marketing?
It refers to a program that serves to bind the member to the credit union it’s such a way that he or she is not likely to leave solely on the basis of more comp competitive loan or savings rate.
The four components of relationship marketing are:relationship pricing, target cross-selling, loyalty building and marketing communications
What’s on the income statement
The income statement consists of revenues, expenses [including financial expenses, operating expenses and income tax] and profit-alsocalled net income or net earnings.
The income statement shows revenue and expenses, net earnings, net profit or loss, provides a measure of firms liquidy; Records only results for the under review.
Employee training costs
Depreciation of fixed assets
Interest paid on RRSP deposits
Property taxes
How is capital calculated for deposit taking financial institutions?
Capital = assets - liabilities [excluding liabilities to shareholders]
What is meant by the term benchmarking?
Benchmarking refers to the process of comparing a credit union’s performance to that of a peer group
What are fixed assets?
Computer, furniture, buildings owned
What are receivables,?
Loan interest do but not yet received
Retained earnings
If a member leave a credit union the member will be able to withdraw the value of her shares, but she would not have no claim on retained earnings
What does Amortization mean?
Credit unions physical assets, such as furniture, are recorded as assets on the balance sheet. As the furniture gets older it’s worth declines
What to national corporate financial institutions provide insurance services to credit unions and credit union members?
The cooperators group and Cumis
What three major services does it Concentra financial offer credit unions?
Trustee services, estate planning, mortgage funds and mortgage funds
Which five companies owned by cooperatives and credit union system provide investment related services to credit union members?
Credential financial Inc. Credential asset management Inc. Credential securities Inc. Credential direct Prudential insurance services Inc.
What is the Canadian cooperative Association
The Canadian corporate association is the national trade association for anglophone cooperatives in Canada
What is the world Council of credit unions(WOCCU)?
It is the international Association of credit unions form to assist in the development, organization, expansion, improvement and intricate Gratian of credit unions and related institutions around the world
CUMIS
- Market insurance products to credit unions
- Was originally of subsidiary of CUNA mutual of the US it is been a Canadian controlled since 1980
- offer the range of non-financial products such as training
- is wholly owned by corporate is in Canada and CUNA of the US
Concentra Financial
Is under federal legislation and is it operates nationally
Made service up in such a financial to credit unions are trustee services, estate planning, And the provision of mortgage funding
It is 100% owned by the Cooperative system
It has existed for over 50 years has over 17 billion in assets
Explain Ethical funds:
It is an example of cooperative innovation, as it was pioneered by Van city and since 1992 operates nationally
Credit union Receives free income from ethical funds
The general public can purchase through their stockbroker
Funds must be ethical in nature
Supply cooperatives
To make merchandise available to members. Can be very small very large such as Federated co-op with billion-dollar
Production cooperative
The wheat pool are examples of production cooperatives.
Service cooperatives
Corporate is involved in healthcare, housing and travel
What are three main parts of a credit unions balance sheet
Liabilities, assets, and members equity Deposit at credit union Central Depreciation of fixed assets RRSP deposits Mortgage loans to members
Credit unions in the US
Credit unions in the US are closed bonded
Credit unions in the US have a big advantage over banks in that they are not taxed on profits
29% of the US population are members of credit union
206 credit unions in the US assets in excess of$500 mil
What is CUIS?
Credit union insurance services is a joint marketing project of the Cooperatives and Cumis. It is not a Merger or a new company, but rather allows for a comprehensive portfolio of insurance services to be made available to credit union is a credit union members
What is CDF?
Cooperative development foundation. Is a national charitable organization that links people think co-ops who wish assistance with volunteers with expertise in coops development
What is loaned securitization?
It is the process of selling pools of loans or mortgages into a program to provide the credit union with cash that I can reinvest in additional mortgages and loans assets to need to borrow and amounts of its members. It can also assist a credit union with acid/liabilities matching problems
What is SME?
Small to medium size enterprise market and increased 40% of the new jobs in Canada
What is RFID?
Radio frequency the dedication microchip.
What is the yield curve?
The yield curve. Is the relationship between the yield on a debit instrument issued by the same issue her and the term to maturity of these instruments
Prime interest rate
The rate lender charge their best customers
Administered rates
Rates adjusted from time to time by financial institutions
Nominal interest rates
The stated rate being paid for deposits
Real interest rate
The resulting rate when you allow for inflation
Overnight rate target
The rate the Bank of Canada charges the chartered banks for short-term funds
Money market
Cash; T-bills; short term GICs; commercial papers; bankers acceptance
Who arranges interest rate swaps?
tier 2 - the provincial central
Explain accured interest
Interest that has been earned but not yet paid. Liability to the credit union since it is owed to the member
Explain equity
Is the capital invested by its owner of the company. Credit union equity is typically made up of members shares and retained earnings
Explaine retained earnings
Retained earnings represent the total accumulated earnings of the credit union less any amounts distributed to the members as dividends in any amount transferred to other capital accounts. Over the years all net income is added to retained earnings
ROA - return on assets
Credit union profit after taxes
ROE - return on equity
This is credit union after taxes profit expensed as a percentage of members equity. How much profit is generated per dollar of equity
Executing a will is an example of which of the following functions
Fiduciary
Which products or credit union innovations
Consumer loans, daily interest accounts, debit cards, telebanking, Flexible mortgage payment plans, internationally connected ATM
What is financial margin
Financial margin is the difference between interest received from loans and investments less the interest paid on deposits another inter-bearing liabilities and dividends paid members. Martin is important to the credit union because it is the primary source of a credit unions revenue profit
What is unique about credit unions that make it more difficult for them to manage credits and liquidy risk that it is for bags and trust companies
The members of credit you often have a common bond, like geographic location, employer, our profession. This makes credit unions especially vulnerable to downturns in a social location, our layout by specific employer, which could lead to a large number of customers defaulting on loans are withdrawing their savings.
What is the relationship between net income and profit?
Net income and profit are the same thing
What are the five C’s of credit
Capacity, capital, collateral, conditions, and character
What are two common techniques for managing interest-rate risk?
Maturity matching an interest-rate swaps
And interest rate swap is a form of_______?
Derivative
Uncorrelated versus correlated
If the return on investments is negative correlated then one of the investment is likely to do well only if the other is doing poorly
Interest rate risk
Risk of mismatch in interest rate between payment on deposits(liabilities ) and payment earned and borrowers (assets)
Credit risk
Risk a borrower defaults
Derivatives risk
Risk of hedge going the wrong way
Liquidity risk
Risk of mismatch between demands by members and funds available
Investment
Risk of the company in which you invest becoming insolvent
Financial margin
Interest income from loans \+ interest from investments - interest expense (interest paid to depositors and on other liabilities and dividends paid) = financial margin
How is capital calculated for deposit taking financial institutions?
Capital = assets - liabilities [excluding liabilities to shareholders]
Three primary areas of focus in preventing and liquidy and insolvency
- Capital adequacy requirement
2 Liquidy asset requirement - Restriction on loans and investments
Consumer protection
Regulation of how debits are collected, deposit insurance, interest-rate disclosure regulations, lost governing use of depositors personal information
Insurance ability of financial institutions
Static for liquidy, requirements for sound business practice, requiring licenses to engage in certain types of lending, standard of capital adequacy
Enhancing competition and efficiency
Trent towards harmonize in regulations between provinces
Restrictions on banks from selling life insurance in their branches
Read regulation of the financial service industry
The two main reglet Tory bodies for financial institutions are?
Government regulatory and deposit insurer/guarantor
What is OS F I
Office of the superintendent a financial institutions it is a federal regulatory response for banks, insurance and federally incorporate a trust companies
What is CD I C
Canadian deposit insurance Corporation, the federal deposit insurer.
ROLLS:
- assist the institution
- assist merge or amalgamation
- operate themselves
- liquidate FI
Consumer cooperatives
Sell items that support production; that if I with agriculture sector such as a grocery store
The primary forces driving change in the financial services industry are:
Technology, telecommunication, demographic change, changing consumer
Cash value card
For transactions that require small bills are quoins; value downloaded it ATMs; cards are refillable and or disposable and are available in prescribed amounts
Targeted cross-selling
Allows the customization of services
Loyalty building
Involves knowing what the members value
Integrated marketing
Integrated marketing communication ensures that members receive the same message from the credit union whether they are dealing face-to-face, reading a newsletter or receiving a direct mail package
Which credit union service or product innovation is fundamental for credit unions?
Consumer lending is fundamental to credit unions
What is relationship marketing?
It refers to a program that serves to bind the member to the credit union it’s such a way that he or she is not likely to leave solely on the basis of more comp competitive loan or savings rate.
The four components of relationship marketing are:relationship pricing, target cross-selling, loyalty building and marketing communications
What are three main parts of a credit unions balance sheet
Liabilities, assets, and members equity Deposit at credit union Central Depreciation of fixed assets RRSP deposits Mortgage loans to members
What’s on the income statement
The income statement consists of revenues, expenses [including financial expenses, operating expenses and income tax] and profit-alsocalled net income or net earnings.
The income statement shows revenue and expenses, net earnings, net profit or loss, provides a measure of firms liquidy; Records only results for the under review.
Employee training costs
Depreciation of fixed assets
Interest paid on RRSP deposits
Property taxes
What is the significance of the word balance in the name balance sheet?
The two sides of the balance sheet months always equal each other. Total assets must be equal to total liabilities plus members equity.
A balance sheet is a statement of assets and liabilities; provides a measure of a company’s solvency; The number shown on the balance sheet are the cumulative results of all transactions for the time the business opened its doors up to the including the date specified
What is meant by the term benchmarking?
Benchmarking refers to the process of comparing a credit union’s performance to that of a peer group
What are fixed assets?
Computer, furniture, buildings owned
What are receivables,?
Loan interest do but not yet received
Retained earnings
If a member leave a credit union the member will be able to withdraw the value of her shares, but she would not have no claim on retained earnings
What does Amortization mean?
Credit unions physical assets, such as furniture, are recorded as assets on the balance sheet. As the furniture gets older it’s worth declines
What to national corporate financial institutions provide insurance services to credit unions and credit union members?
The cooperators group and Cumis
What three major services does it Concentra financial offer credit unions?
Trustee services, estate planning, mortgage funds and mortgage funds
Which five companies owned by cooperatives and credit union system provide investment related services to credit union members?
Credential financial Inc. Credential asset management Inc. Credential securities Inc. Credential direct Prudential insurance services Inc.
What is the Canadian cooperative Association
The Canadian corporate association is the national trade association for anglophone cooperatives in Canada
What is the world Council of credit unions(WOCCU)?
It is the international Association of credit unions form to assist in the development, organization, expansion, improvement and intergation of credit unions and related institutions around the world
CUMIS
- Market insurance products to credit unions
- Was originally of subsidiary of CUNA mutual of the US it is been a Canadian controlled since 1980
- offer the range of non-financial products such as training
- is wholly owned by corporate is in Canada and CUNA of the US
Concentra Financial
Is under federal legislation and is it operates nationally
Made service up in such a financial to credit unions are trustee services, estate planning, And the provision of mortgage funding
It is 100% owned by the Cooperative system
It has existed for over 50 years has over 17 billion in assets
Explain Ethical funds:
It is an example of cooperative innovation, as it was pioneered by Van city and since 1992 operates nationally
Credit union Receives free income from ethical funds
The general public can purchase through their stockbroker
Funds must be ethical in nature
Supply cooperatives
To make merchandise available to members. Can be very small very large such as Federated co-op with billion-dollar
Production cooperative
The we pool our examples of production cooperatives.
Consumer cooperatives
Sell items that support production; that if I with agriculture sector such as a grocery store
Service cooperatives
Corporate is involved in healthcare, housing and travel
Credit unions in the US
Credit unions in the US are closed bonded
Credit unions in the US have a big advantage over banks in that they are not taxed on profits
29% of the US population are members of credit union
206 credit unions in the US assets in excess of$500 mil
What is CUIS?
Credit union insurance services is a joint marketing project of the Cooperatives and Cumis. It is not a Merger or a new company, but rather allows for a comprehensive portfolio of insurance services to be made available to credit union is a credit union members
What is CDF?
Cooperative development foundation. Is a national charitable organization that links people think co-ops who wish assistance with volunteers with expertise in coops development
What is loaned securitization?
It is the process of selling pools of loans or mortgages into a program to provide the credit union with cash that I can reinvest in additional mortgages and loans assets to need to borrow and amounts of its members. It can also assist a credit union with acid/liabilities matching problems
What is SME?
Small to medium size enterprise market and increased 40% of the new jobs in Canada
What is the yield curve?
The yield curve. Is the relationship between the yield on a debit instrument issued by the same issue her and the term to maturity of these instruments
Administered rates
Rates adjusted from time to time by financial institutions
Nominal interest rates
The stated rate being paid for deposits
Real interest rate
The resulting rate when you allow for inflation
Overnight rate target
The rate the Bank of Canada charges the chartered banks for short-term funds
Money market
Cash; T-bills; short term GICs; commercial papers; bankers acceptance
line of defence against insolvency
- Sound business practices
- CDIC
- Government
Our credit unions governed by OS FY and CD I C regulations?
No. Credit unions are provincially regulatory OS F I and CDIC or federal organizations.
Relationship pricing
Designed to encourage greater service usage
Smartcard
Multipurpose; can be used for higher value transactions and for other purposes that simply payment
And interest rate swap is a form of_______?
Derivative
