Commercial Banking Chapters 1-5 Vocabulary Flashcards

A complete list of vocabulary terms and definitions covering commercial banking basics, organizational structures, products, central banking functions, and regulatory acts from Chapters 1 through 5.

Commercial Bank

A financial institution that accepts deposits withdrawable on demand and makes loans, including credit to businesses, while providing payment services.

Net Interest Income

The dollar amount calculated as interest income earned minus interest expense paid: $\text{Net Interest Income} = \text{Interest Income} - \text{Interest Expense}$.

Fee Income

Noninterest revenue generated from services such as account maintenance, payment processing, treasury management, and wealth management.

Community Bank

A bank classification defined in the course outline as having less than $\$10\text{ billion}$ in assets, focusing on local relationships, household banking, and small-business banking.

Regional Bank

A bank classification defined in the course outline as having $\$10\text{ billion}$ to $\$50\text{ billion}$ in assets, focusing on a larger geographic region and broader business services.

Money Center Bank

A bank classification defined in the course outline as having more than $\$50\text{ billion}$ in assets, focusing on large corporate clients, major financial markets, and wider reach.

SIFI (Systemically Important Financial Institution)

A regulatory designation for an institution whose distress could cause severe harm to the broader financial system, with a course shorthand size of greater than $\$250\text{ billion}$ in assets.

D-SIB (Domestic Systemically Important Bank)

A bank whose distress or failure could seriously affect its home domestic financial system.

G-SIB (Global Systemically Important Bank)

A bank whose distress or failure could have significant international systemic effects.

Too Big to Fail

A concept describing concern that a major financial institution's failure could cause severe broader systemic damage, creating pressure for government intervention.

Insured Bank

A bank whose eligible deposits are covered by FDIC deposit insurance within applicable legal limits.

Nationally Chartered Bank

A bank authorized under a federal charter issued by the Office of the Comptroller of the Currency (OCC).

Member Bank

A commercial bank that is a member of the Federal Reserve System.

Unit Bank

A bank organizational model operating from a single banking office location.

Branch Bank

An organizational structure consisting of one bank charter operating multiple banking facilities.

Bank Holding Company

A parent corporation that owns or controls one or more subsidiary banks.

Financial Holding Company

A qualifying holding company permitted to engage in a broader range of financial activities, such as securities underwriting or insurance, through affiliates.

Executive Committee

A senior management committee focused on senior management coordination, execution, and implementing strategic priorities.

Risk Committee

A committee responsible for managing and monitoring risk concentrations and exposures across the bank.

Asset Liability Committee (ALCO)

An internal committee responsible for managing funding, liquidity, and interest-rate risk mismatches.

Credit Committee

A management committee responsible for evaluating credit risk and making lending approval decisions within its authority.

Audit Committee

A board of directors committee that oversees financial reporting integrity, internal controls, and audit relationships.

Noninterest Checking (DDA)

A demand deposit account used primarily for payments, offering convenient access without earning interest.

NOW Account

Negotiable Order of Withdrawal account; an interest-bearing payment account subject to eligibility and account rules.

MMDA (Money Market Deposit Account)

An interest-bearing bank deposit product featuring account-specific payment rules and terms.

Time Deposit (CD)

A Certificate of Deposit with an agreed maturity term, where early withdrawal may incur a monetary penalty.

Individual Retirement Arrangement (IRA)

A tax-advantaged retirement account framework that can hold various underlying deposit or investment instruments.

Line of Credit (LOC)

A revolving loan arrangement for seasonal inventory or working-capital needs that allows borrowing up to a specified limit and reuse as principal is repaid.

Term Loan

A loan with a defined repayment schedule over an agreed term, commonly used for major long-lived purchases such as equipment.

Construction Loan

Short-term financing provided during the building phase of a property, with funds often advanced as work progresses.

Commercial Mortgage

Longer-term financing for business real estate where loan payments are supported by the property or business cash flow.

Bridge Loan

A short-term gap loan used before a specific anticipated event, sale, or permanent replacement financing occurs.

Lockbox

A treasury service where a bank receives and processes customer check remittances sent to a designated address.

Remote Deposit Capture

A treasury management service allowing commercial customers to scan check images for deposit without transporting paper checks to a branch.

Automated Clearing House (ACH)

An electronic network used for batch credit and debit transfers, such as payroll direct deposit and recurring bill payments.

Positive Pay

An anti-fraud treasury service that compares presented checks against a company's issued-check file and flags discrepancies.

Controlled Disbursement

A cash management service providing daily notifications of checks expected to clear so a treasurer can plan exact funding requirements.

Cashier's Check

A check drawn directly by a bank on itself.

Teller's Check

A check drawn by a bank on another bank, or made payable at or through a bank.

Certified Check

A personal check drawn by a customer that the bank certifies and guarantees payment for.

Federal Funds Rate

The interest rate charged on overnight lending of reserve balances among eligible financial institutions.

Discount Rate

The interest rate charged by the Federal Reserve System on short-term loans extended to depository institutions through the discount window.

Banking Act of 1933 (Glass-Steagall)

Depression-era legislation that created the FDIC and established historical separation between commercial banking and securities underwriting.

Truth in Lending Act (1968)

Title I of the Consumer Credit Protection Act, requiring standardized disclosures of consumer credit costs and terms, including APR and finance charges.

Bank Secrecy Act (1970)

Federal law establishing recordkeeping and reporting standards, including Suspicious Activity Reports (SARs), to detect and prevent financial crime.

FDICIA (1991)

Federal Deposit Insurance Corporation Improvement Act of 1991; strengthened supervision, prompt corrective action, and least-cost resolution for failing institutions.

Riegle-Neal Act (1994)

Interstate Banking and Branching Efficiency Act of 1994; expanded interstate banking and branch combinations across state lines subject to deposit concentration limits.

Gramm-Leach-Bliley Act (1999)

Financial Services Modernization Act of 1999; permitted broader affiliations among banking, securities, and insurance activities via financial holding companies and mandated consumer privacy notices.

Sarbanes-Oxley Act (2002)

Legislation responding to accounting fraud that created the PCAOB and strengthened corporate management accountability for financial reporting and internal controls.

Check 21 Act

Check Clearing for the 21st Century Act (enacted 2003, effective 2004); granted legal equivalence to qualifying paper substitute checks to enable electronic check image processing.

Dodd-Frank Act (2010)

Comprehensive financial reform law enacted in 2010 that established the CFPB, expanded systemic risk oversight tools, and made the standard $\$250,000$ FDIC deposit insurance limit permanent.