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Department of Economics |
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See Figure 1 central bank: government institution that has responsibility for the amount of money and credit supplied in the economy as a whole state banks: state-chartered banks national banks: federally chartered banks supervised by the Office of the Comptoller of the Currency dual banking system: banks supervised by the federal government and banks supervised by the states operate side by side Multiple Regulatory Agencies bank holding companies: companies that own one or more banks |
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A change in the financial environment will stimulate a search by financial institutions for innovations that are likely to be profitable. financial engineering: process whereby financial institutions research and develop new products and services that meet customer needs and prove profitable Responses to Changes in Demand Conditions:
Interest Rate Volatility Adjustable-Rate
Mortgages Financial
Derivatives hedge: protecting against interest-rate risk futures contracts: contracts in which the seller agrees to provide a certain standardized commodity to the buyer on a specific future date at an agreed-on price financial derivatives: futures contracts in financial instruments Responses to Changes in Supply Conditions:
Information Technology Bank
Credit and Debit Cards Electronic
Banking automated teller machine (ATM): electronic machine that allows customers to get cash, make deposits, transfer funds from one account to another, and check balances automated banking machine (ABM): combines in one location an ATM, an Internet connection to the bank’s web site, and a telephone link to customer service virtual bank: bank that has no physical location but rather exists only in cyberspace Junk
Bonds Commercial
Paper Market Securitization securitization: process of transforming otherwise illiquid financial assets (such as residential mortgages, auto loans, and credit card receivables), which have typically been the bread and butter of banking institutions, into marketable capital market securities Avoidance of Existing Regulations deposit rate ceilings: maximum limits on the interest rate that can be paid on time deposits disintermediation: loss of deposits from the banking system Money
Market Mutual Funds Sweep
Accounts sweep account: any balances above a certain amount in a corporation’s checking account at the end of a business day are “swept out” of the account and invested in overnight securities that pay the corporation interest Financial Innovations and the Decline of
Traditional Banking See Figure 2 Decline
in Cost Advantages in Acquiring Funds (Liabilities) Decline
in Income Advantages on Uses of Funds (Assets) Banks’
Responses Decline
of Traditional Banking in Other Industrialized Countries |
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See Table 1 See Table 2 Restrictions in Branching Responses to Branching Restrictions Bank
Holding Companies Automated
Teller Machines |
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See Figure 3 superregional banks: bank holding companies that have begun to
rival the money center banks in size but whose headquarters are not in one of
the money center cities ( economies of scope: ability to use one resource to provide many different products and services large, complex, banking organizations (LCBOs): consolidated financial institutions The Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 What
Will the Structure of the Are Bank
Consolidation and Nationwide Banking Good Things? |
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Erosion
of Glass-Steagall The
Gramm-Leach-Bliley Financial Services Modernization Act of 1999: Repeal of
Glass-Steagall Implications
for Financial Consolidation Separation
of Banking and Other Financial Services Industries Throughout the World |
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Savings
and Loan Associations Mutual
Savings Banks Credit
Unions |
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Eurodollar
Market Structure
of Edge Act corporation: special subsidiary engage primarily in international banking international banking facilities (IBFs): banks that can accept time deposits from foreigners but are not subject to either reserve requirements or restrictions on interest payments Foreign
Banks in the See Table 3 |
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Disclaimer: pages.slu.edu is a service of Saint Louis University, Saint Louis University does not control, monitor or guarantee the information contained in these sites. For more information » |