Risk / Call Report Flashcards
This is a demand deposit balance designed to compensate for the lender’s expenses inservicing the line of credit.
compensating balance
This is a short‐term money market obligation with maturity ranging from 1 day to 270 days. It is an unsecured obligation of the parent company, is not insured by the FDIC and must be marketed in such a way that there is no misunderstanding or confusion as to who the obligor is. This type of instrument may also be rated by a rating agency such as Moody’s or Standard & Poors or a rating can be bought from a large HC or insurance co which will guarantee the paper
Commercial Paper
FBO Supervision
- Strength fo Support Assessment (SOSA) - evaluates the willingness and ability of the parent FBO to provide support to US Operations. 2. ROCA Risk Management (mkt, liquidity, credit, reputational, legal, operational), Operational Controls, Compliance, Asset Quality
Debits (DR) and Credits (Cr)
To increase: Assets (Dr), Liabilities (Cr), Capital (Cr), Income (Cr), Expenses (Dr) *(natural balances indicated)
Above vs. below water
Above water = investment portfolios mkt value > book value. Below Water = portfolios mkt value is
Six Key Risks of Risk-Based Supervision
Credit; Market; Liquidity; Operational; Reputational; Legal
Repo
Repo Agreements: Securities purchased under agreemt to resell, bank temporarily lends to another bank by buying the securities of the other bank/ liquidity source/involves some credit risk, low liquidity and mkt risk/ normally has a ST duration
Consolidated earning & capital of a BHC is rated when consolidated assets have a value…
> = $150MM
Section 29 sets forth 3 tiers of civil money penalties
1st Tier: $5M (any violation) 2nd Tier: $25M (has caused loss to institution or gain to person) 3rd Tier: $1,000M (participation in unsafe/unsound practice, causes substantial loss to bank or gain to person)
Section 23 FR Act Reg F - Interbank Liability
Prudential Standards - develop and adopt internal policies and procedures to evaluate and control all types of exposures to correspondents with which they do business. Credit Exposure - bank’s internal limit on interday credit exposure to an individual correspondent may not be more than 25% of the exposed bank’s total capital, unless the bank can demonstrate that its correspondent is at least ‘‘adequately capitalized,’’ as defined in section 206.5(a) of the rule.
Banks that are ineligible for alternate year exams
Banks in excess of $10 billion in assets and are rated a composite 3 or worse and bank that undergoes a change in control must be examined by the FRB within 12 months of the change in control
Reg O Lending Limit
Limited to 15% of capital and surplus if not fully secured and 25% if fully secured by marketable collateral. A bank w/total deposits less than $100MM may elect by annual resolution to adopt legal limit not to exceed 2 times bank’s captial and surplus.
3 financial stmts necessary to prepare a cash flow stmt
- income statement (current) 2. balance sheet (beginning of period) 3. balance sheet (end of period)
When are earning and capital evaluated on a consolidated basis
for a large bank with assets worth > or = $150 MM
AT cost of borrowing
(I - tax rate) x (stated interest rate)
Reg O stipulations on lending to affiliates
$25M or 5% of capital and surplus; aggregate loans $500M
2 primary purposes of a bank’s investment portfolio
- liquidity 2. income
US Non-Bank subs of US BHC are required to file what?
FR Y-11 for each nonbank sub over $250M FR Y - 11S for each nonbank sub $50MM - $250MM
Impact - Risk management factors include?
Strategic considerations, operational considerations, legal and reputational considerations, and concentration considerations
Contingent Liabilities = off balance sheet items
Type 1 - converts to Assets (lines of credit) Type 2 - converts to Expense (can not estimate)
Section 23 FR Act Reg F - Interbank Liability
Prudential Standards - develop and adopt internal policies and procedures to evaluate and control all types of exposures to correspondents with which they do business.
Credit Exposure - bank’s internal limit on interday credit exposure to an individual correspondent may not be more than 25% of the exposed bank’s total capital, unless the bank can demonstrate that its correspondent is at least ‘‘adequately capitalized,’’ as defined in section 206.5(a) of the rule.
Reg O Lending Limit
Limited to 15% of capital and surplus if not fully secured and 25% if fully secured by marketable collateral. A bank w/total deposits less than $100MM may elect by annual resolution to adopt legal limit not to exceed 2 times bank’s capital and surplus.
Banks can move from a 12 month exam cycle to 18 month if?
Total assets of
Banks can move from a 12 month exam cycle to 18 month if?
TA of
According GLBA, the FRB, should supervise by focusing on…
- the financial strength and stability of FHCs 2. their consolidated risk-mgmt processes 3. overall capital adequacy
Other Assets (accrued interest receivable, prepaid expenses, teller, transit accts)
should not remain outstanding past 90 days
CAMELS components are reviewed in the following order:
Asset Quality, Earnings, Capital, Liquidity, Sensitivity, Management
What document must be filed w/the FRB by all domestic BHCs?
FRY6 = annual report
3 main functions of banks
- taking deposits 2. facilitating pmts, 3. extending credit
What must contracts have to be legally binding?
Contain offer and acceptance; supported by consideration; entered into voluntarily; enter into by parties having capacity; represent legal purpose
Commercial paper should not be used to fund long‐term assets,such as an investment in a subsidiary?
TRUE
Contingent liabilities that turn to assets are classified:
Type 1, because, Type 2 items don’t go on the balance sheet.
These consolidated reports are filed by Top-tier BHC that have over $500MM?
FR-9C, quarterly, submitted 45 days of report date
Reg K
International Banking Operations
Banks can operate with lower capital levels because?
FDIC insurance supports liability structure of insured banks
What are the 4 basic assumptions of financial accounting?
Economic entity, Going concern, Time period, Unit measure.
Call report submission is required to provide
comparable data analysis
Assets are categorized as
liquid or non-liquid
Parties have directly stated the terms of their contract orally or in writing at the time contract was formed?
Express contract
Who has the responsibility for the development of operating procedures?
Senior and executive mgmt
2 business risks in granting 30 years mortgages
credit and liquidity
What is the emphasis of risk-based supervision?
key risks
What are the payment system risks?
Liquidity risk, credit risk, and systemic risk
This is used to transfer funds from one party to another?
Payment system
What are the two accounting methods?
Cash Basis and Accrual Basis
No legal obligation because it fails to contain the basic elements required for enforceability?
Void Contract
4 types of bank lending
Industrial, Commercial, Real Estate, Consumer
A Banks Investment Acct is typically made up of
Securities, FRB Funds Sold, Repos, Interest Bearing Bank Balances
What governs sales of NDIPS for retail purposes
The intra-agency statement on sale of non-deposit investment products
Where is unrealized gain/loss on AFS securities reported on the balance sheet
Under the Capital Acct
This provides info on the organizational structure changes to BHC?
FR Y-10
All registered BHC are required to file which FR-Y?
FR-Y6, annually, submit within 90 days
Foreign Branch Organizations are required to file which FR-Y?
FR- Y7 and 7A, annually, submitted withing 4 months of fiscal YE
Banks with domestic and foreign offices are required to file this?
FFIEC 031, quarterly, submitted 30 days of report date
Large bank holding companies are required to file?
FR-9LP, quarterly, submitted 45 days of report date
Small bank holding companies are required to file?
FR-9SP, sem-annually, submitted 45 days of report date
Banks with domestic offices only are required to file this?
FFIEC 041, quarterly, submitted 30 days of report date
how does the FRB act as an intermediary in the payments system?
Settling transactions through reserve accounts.
