Regulation of Financial Institutions Flashcards
Deposit-type Financial Institutions
provide traditional checking and savings accts
Non-deposit type Financial Institutions
financial institutions other than banks
Federally Chartered Banks are regulated by which 3 institutions
-Federal Reserve
-FDIC
-Office of Comptroller of Currency OCC
Who would restrict the amount of interest a state bank could charge?
State regulators
State Banks are regulated by
Federal Reserve, FDIC, state banking authorities
Banks that operate under a national charter are exempt from
Many state banking laws and regulations such as usury laws
Fair lending laws apply to national banks
OCC handles what banks
-charters and regulates NATIONAL banks & branches of FOREIGN banks
OCC monitors
-bank capital levels
-liquidity and asset quality
-sensitivity to market risk/interest rate risk
-compliance
Services Commercial Banks Offer
-checking and savings accts
-credit cards
-safety deposit boxes
-financial consulting
-all types of lending services
Whats another name for a Savings and Loan institution
Thrift
Savings and Loans or Thrifts
-borrow money from depositors
-lend it out primarily as mortgages
Corporate Savings and Loan depositors receive what
interest rather than dividends, just like a commercial bank
Mutual Savings and Loan depositors receive what
dividends rather than interest
Savings and Loans regulated by what 4 agencies and what else
FDIC, OCC, CFPB, Federal Home Bank Board
state agencies if they are state chartered
What is an advantage of a Savings and Loan savings account
it may earn up to a quarter point more interest than a commercial savings account
Savings Banks are owned by whom
depositors - basically making them a mutual savings bank
Primary Purpose of Savings Bank
provide mortgages
What do Savings & Loans have in common with Savings Banks?
Primarily issue mortgages
What agency oversees Savings & Loans and Savings Banks?
The Financial Stability Oversight Committee
Community banks have less than how much assets?
1 Billion
Who owns a credit union?
Depositors
Credit Unions operate how (what type of biz)
Not for profit with membership requirement
Who insures accounts at credit unions?
National Credit Union Administration insures accounts up to 250k
How do credit unions raise capital?
Retaining earnings
FDIC can force change in mgmt or policy if what happens?
if the banks risk-based capital ratio falls under 6%
When can the FDIC take over a bank?
If the bank becomes critically undercapitalized 2% or below
FDIC insures what 2 types of banks
commercial banks and S&Ls
Say a couple owns a CD in a joint account worth $550k - what portions are insured
Since its a joint account their shares are divided up equally as 275k
They EACH have insurance of 250k.
They EACH have 25k that is uninsured
SIPC insures what and how much
replaces missing stocks and other securities up to 500k including 250k in cash if a member brokerage or bank brokerage fails
Other names for savings account
time deposit or passbook account
Money Market Acct
market rate interest sensitive acct that invests in money market instruments like commercial paper, T Bills, repurchase agreements etc.
Certificate of Deposit
debt instrument issued by a bank that pays a fixed rate of interest keeps funds on deposit for a set period of time
Full Service Broker
-take buy and sell orders
-extend margin
-hold securities for safekeeping
-collect cash dividends
-offer research and planning advice
Discount Broker
-take orders from clients
-little or no investment advice
-extend margin
-hold securities
-accumulate cash and dividends
-Schwab
Deep Discount Broker
-electronic broker that takes orders online
Governing federal insurance law
Mccarran-Ferguson act
What did the Mccarran Ferguson act do?
turns over regulation of insurance industry to the states
2 laws that effect the continuation of health coverage
COBRA
HIPPA
Office created under dodd frank re:insurance
Federal insurance office
What doesnt the federal insurance office monitor
-health insurance
-some long term care -insurance
-crop insurance
What does federal insurance office monitor
-all aspects of ins industry
-underserved communities
-recs to FSOC about risky insurers
-admin terrorism insurance program
-international ins matters
-determine if state ins measures are preempted by covered agreement
-consulting with states
Who can sponsor a retirement plan?
An employer, union or individual
Function of pension and retirement plans
combine a % of your pre retirement earnings with SS and private savings
Institutions that administer retirement plans
-part of a mutual fund co
-insurance co or asset management co subsidiary
2 types of sponsored plans
defined benefit
defined contribution
Defined contribution plan
-each employee has acct that the employer and usually employee makes contributions
-employee DEFINES how much is put into plan
Who defines the contributions on a def cont plan
the employee
A pension is what type of plan
defined benefit
Defined benefit plan
pension benefit is determined by a formula takes into account years of service, and in most cases wages or salary
3 types of defined benefit formulas
flat amount
flat percentage
unit credit
Who absorbs the investment risk on a defined benefit plan
The sponsor or an insurance company
What is required for defined benefit that is not for defined contrib.
Annual actuarial assessment
