BMGT 445: Banking and Financial Institutions

This set of flashcards covers key vocabulary and concepts related to Banking and Financial Institutions from BMGT 445.

Risk

The potential for loss or damage in financial terms.

Adverse Selection

A situation where one party in a transaction has more information than the other, leading to an imbalance.

Moral Hazard

A situation where one party takes risks because they do not have to bear the potential costs.

Market Power

The ability of a firm or individual to influence the price of a good or service.

Depository Institutions

Financial institutions that accept deposits and provide loans.

Securitization

The process of converting an asset into marketable securities.

Liquidity Risk

The risk that an entity will not be able to quickly convert an asset into cash without a significant loss in value.

Primary Securities (PS)

Financial claims issued directly by corporations, such as stocks and bonds.

Secondary Securities (SS)

Financial claims that are backed by primary securities and are typically more appealing to investors.

Delegated Monitors

Financial institutions that collect information or invest funds on behalf of smaller investors.

Credit Allocation Regulation

Regulations that direct lending towards socially important sectors, such as housing.

Consumer Protection Regulation

Laws designed to prevent discrimination and promote fair lending practices.

Investor Protection Regulation

Regulations aimed at protecting investors from fraud and malfeasance.

Enterprise Risk Management (ERM)

A process for identifying and managing risks that can affect an organization’s performance.

Fintech

Financial technology that uses software and technology to provide financial services.

Denomination Intermediation

Breaking down large financial assets into smaller units to make them more accessible to investors.

Safety and Soundness Regulation

Regulations that ensure financial institutions are stable and can meet their obligations.

Interest Rate Risk

The risk of changes in interest rates affecting the value of financial assets.

Shadow Banks

Non-bank financial intermediaries that provide services similar to traditional banks but operate outside normal banking regulations.