Retail banks and building societies Flashcards

1
Q

Originate and distribute model

A

Banks make loans, but instead of keeping these loans they bundle them into pools of assets and sell them to outside investors

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2
Q

ATM

A

Automatic teller machine - where a teller is an employee of a bank that deals directly with customers

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3
Q

Gilts

A

Highly reliable investments issued by the government

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4
Q

Wholesale market

A

Another term for the money market, so called because of the large amounts which are lent and borrowed

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5
Q

Summary of Northern Rock events

A

Aggressive use of originate and distribute model. Make mortgage loans and sell them in the market; receive higher rate from homeowners than you pay in the market for the money -> profit. Sub-prime lending leads to vulnerability to falling house prices, investor confidence causes share prices to fall. Money markets no longer open to financing NR - no emergency funding - runs out of money - run on the bank - Alastair Darling has to guarantee all deposits in any bank.

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