Test 3- Chapter 18 Bank Regulation Flashcards
Which act does this describe?
separated banking and securities activities, FDIC was introduced, prohibited interest on checking
Glass-Steagall Act
What is a bank run?
when people run to banks in masses to close their accounts
Why did bank runs happen?
severe economic crisis
banks failing in gloves
no depository insurance
Which act does this describe?
first major deregulation of banking industry
phaseout of deposit rate ceilings under Regulation Q
allowance of NOW(checking acct that pays interest) accounts for all depository institutions
new lending flexibility for depository institutions
increased FDIC insurance form $40,000 to $100,000
DIDMCA of 1980
The reason they created the DIDMCA:
banks profitability was sinking, competition was increasing because people started using money market mutual funds, which was a pooling of money together to invest in short term products. So banks wanted to be able to do what?
be able to create new products
more flexibility in who they could lend to
Which act does this describe?
allowed banks to offer Money market deposit accounts with no interest ceiling and permitted acquisition of failing banks across state lines
Garn- St. Germain Act
the reason the garn-st. germain act was created is because:
banks wanted to be able to compete with the money market mutual funds so they created money market deposit accounts. banks thought that since they were insured more people would prefer to purchase the deposit accounts versus the mutual funds. Unfortunately?
the mutual funds were pretty safe as well
Why was the Garn-St Germain Act important for the growth of banks?
liquidating banks was so disruptive to economy, so it helped banks who wanted to expand across state lines
Which act does this describe:
lifted interstate banking restrictions
restricted bank ownership to maximum 10% of countries deposits
Reigle-neal act
The Reigle-Neal act was essentially a forward thinking act, because they didn’t want, what created?
monopolies
Which act does this describe:
allowed consolidation of banks, securities firms, and insurance companies
financial services modernization act
Which act did the financial services modernization act do away with?
glass-steagal
Did banks want the financial services modernization act
yes
After the recession, lots of insurance companies sold off their bank aspects because they didn’t want what?
such heavy regulation, especially on the insurance side of their business
What did the financial services modernization act allow in the 2000s and up?
lots of different products
Which act does this describe:
tightens mortgage origination rules, requires ownership stake in mortgage backed securities if bank sells them
created financial stability oversight council
created an orderly liquidation plan
consumer financial protection bureau
Volker rule
concentration limit
Dodd Frank act
in the recession, many big banks got bailed out by the?
discount window from the Fed with super low interest rates
How many members does the Financial Stability Oversight Council consist of?
10 members form financial industries
what does the financial stability oversight council do?
recommend safer practices
Which part of the Dodd Frank act does this describe:
investigates consumer complaints, enforces laws, supervises banks, certain lenders, credit cards, and mortgage brokers
also made $250,000 deposit insurance permanent
consumer financial protection bureau
Which part of the Dodd Frank act does this describe:
bans proprietary trading, limits bank investment in hedge funds and private equity
Volker rule
did banks want the Volker rule?
no
Why did the government create the Volker rule?
government doesn’t want big banks to fail, and thinks they will fail using esoteric risky investments. If the bank losses deposit money to make risky investments and then proceeds to loss depositors money, this means banks have to pay those depositors.
Which part of the dodd frank act does this describe:
restricts banks ownership to 10% of all liabilities (includes deposits) in all financial system. Banks can grow organically, but need to hold more capital. Banks cannot merge if they are above the threshold without the Fed’s approval.
concentration limit
Global Bank Regulations are capital requirements, what are the name of the uniform requirements among countries
Basel I,II, III
with regards to the global bank regulations :
there are differing ______ of capital based on risk level
capital requirements have _________ globally since the 2008 financial crisis
Sets bank capital
Riskier banks required to have _____ capital
tiers
increased
more
with regards to the US regulatory system, there are many regulators but _____ oversight
poor
How might reintroducing the Glass-Steagall Act make banks safer today?
banks wouldn’t be able to take on such risky investments
Why did regulators lift the bank on interstate banks?
didn’t want banks to fail, more cost-effective to have banks taken over than liquidated
gov wanted to grow economy
stupid to have a bank operating in only one state
Why can’t anyone bank dominate at US market
restrictions to 10%