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a financial institution that accepts deposits and makes loans |
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nondepository institutions |
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a financial intermediary that does not issue deposit liabilities |
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a bank's vault cash plus the balance in its account at the Federal Reserve |
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currency that is physically held inside a bank's vaults and automated teller machines (ATMs) |
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a loan from the Federal Reserve, usually to a commercial bank |
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reserves in excess of required reserves |
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the market where banks lend their excess reserves to other banks; the loans are unsecured |
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repurchase agreement (repo) |
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a short-term collaterized loan in which a security is exchanged for cash, with the agreement that the parties will reverse the transaction on a specific future date, as soon as the next day |
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bank assets minus bank liabilities. The net worth of the bank. The value of the bank to its owners. |
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a portion of a bank's capital that is set aside to cover potential losses from defaulted loans |
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bank net profits after taxes divided by total bank assets; a measure of bank profitability |
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bank net profits after taxes divided by bank capital; a measure of the return to the bank's owners |
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a bank's interest income minus its interest expenses divided by total bank assets; net interest income as a percentage of total bank assets |
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the difference between the interest rate a bank recieves on its assets and the interest rate it pays to obtain liabilities; can also be risk spread |
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off-balance-sheet activities |
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bank activies, such as trading in derivatives and issuing loan commitments, that are neither assets nor liabilities on the bank's balance sheet |
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the risk that a financial insitution's liability holders will suddenly seek to cash in their claims; for a bank this is the risk that depositors will unexpectedly withdraw deposit balances |
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reserves that a bank must hold to meet the requirements set by the regulators, in the US, the Fed |
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the probability that a borrower will not repay a loan |
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the risk that changes in interest rates will affect a financial intermediary's net worth; it arises from a mismatch in the maturity of assets and liabilities |
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trading risk/ market risk |
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the risk that traders who works for a bank will create losses on the bank's own acount |
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the risk a financial institution faces from computer hardware or software failure, natural disaster, terrorist attacks, and the like |
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the license authorizing the operation of a bank |
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a company that owns one or more banks and possibly other nonbank subsidiaries |
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defined-benefit pension plan |
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a pension plan in which beneficiaries receive a lifetime retirement income based on the number of years they worked at the company and their final salary |
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defined-contribution pension plan |
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Definition
a pension plan in which beneficiaries make payments into an account and then receive the accumulation, plus the which time they must decide what to do with the funds. Options include accepting a lump sum, removing small amounts at a time, or converting the balance to a fixed monthly payment for life by purchasing an annuity |
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the system in the US in which banks investment income, on retirement, at supervised by federal and state government authorities coexist |
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when the average cost of producing a good or service falls as the quantity produced increases |
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when the average cost of producing a good or service falls as the number of different types of goods produced increases |
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dollar-denominated deposits outside the US |
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Fannie Mae - the Federal National Mortgage Association |
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a government-sponsored entity that aids in the financing of home mortgages |
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financial holding company |
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a company that owns a variety of financial intermediaries |
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private, largely unregulated, investment partnerships that bring together small groups of people who meet certain (high) wealth requirements |
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LIBOR (London Interbank Offered Rate) |
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the interest rate at which banks lend eurodollars to other banks |
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property and casualty insurance |
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insurance against damage from events like automobile accidents, fire, and theft |
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insurance that provides a payment to the policyholder's beneficiaries in the event of the insured's death at any time during the policy's term |
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the process through which an investment bank guarantees the price of a new security to a corportation and then sells it to the public |
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an institution that engages in all aspects of financial intermediation, including banking, insurance, real estate, brokerage services, and investment banking |
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when the contributions your employer has made to the pension plan on your behalf belong to you |
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a combination of term life insurance and a savings account in which a policyholder pays a fixed premium over his or her lifetime in return for a fixed benefit when the policyholder dies |
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a nondepository financial institution that raises funds directly in financial markets to provide loans to businesses and households |
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Board of Governors of the Federal Reserve System |
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The seven-member board that oversees the Fed system, including participation in both monetary policy and financial regulatory decisions |
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the interest rate at which the Fed makes discount loans to commercial banks |
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the Fed's extraordinary authority to lend to nonbanks when circumstances are deemed "unsual and exigent" |
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the countries in Europe that use the euro as their common currency |
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the interest rate banks charge each other for overnight loans on their excess deposits at the Fed; the interest rate targeted by the FOMC |
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Federal Open Market Committee |
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The 12-member committee that makes monetary polocy decisions in the US. Members include the 7 members of the Board of Governors, the president of the Federal Reserve bank of NY, and the presidents of 4 other Fed Reserve banks |
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the 12 reginoal banks in the Federal Reserve System |
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The central bank responsible for monetary policy in the US |
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The press release that usually follows the FOMC meeting; usually contains an announcement of the federal funds rate target, an evaluation of the current economic environment, and a statement of the risks to the economy |
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