Depository Institutions and Finance Companies Review

A collection of vocabulary flashcards summarizing key terms and concepts related to depository institutions and finance companies.

Depository Institutions (DIs)

A type of financial institution legally allowed to accept monetary deposits from the public, including commercial banks, savings institutions, and credit unions.

Financial Services Modernization Act (1999)

Legislation that repealed the Glass-Steagall Act of 1933, allowing financial institutions to offer a wider range of services.

Volcker Rule

Part of the 2010 Wall Street Reform and Consumer Protection Act that limits certain risky activities of financial institutions.

Community Banks

Small banks that specialize in retail or consumer banking, making up over 99 percent of all banks.

Commercial Banks

The largest group of DIs that accept deposits and make loans, with a varied composition of assets and liabilities.

Securitization

The process of pooling various types of contractual debt and selling that related cash flow to third party investors as securities.

Off-Balance-Sheet (OBS) Activities

Activities not recorded on the balance sheet that represent significant parts of bank activities, including derivatives.

CAMEL Ratings

A system used to evaluate the overall condition of banks, assessing Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity.

BASEL Accords

A set of international banking regulations developed to ensure financial stability and compliance in the banking industry.

PEARLS

A monitoring system for credit unions based on quantitative financial indicators that assess their financial condition.

Sales Finance Institutions

Finance companies that specialize in loans to customers of a specific retailer or manufacturer.

Return on Equity (ROE)

A profitability ratio calculated as Net Income divided by Total Equity.

Net Interest Margin

A measure of profitability calculated as (Interest Revenues – Interest Expenses) divided by Total Assets.

Credit Unions (CUs)

Nonprofit depository institutions owned by member-depositors, often providing better rates and services for members.