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Principle of Banking
Chapter 1
| Term | Definition |
|---|---|
| Affiliate | A business organization sharing with another organization some aspect of common ownership and control, such as interlocking directorates, stock ownership, or parent company. |
| Agreement corporation | A corporate subsidiary of a bank engaged in international banking and finance. |
| Bank holding company | A corporation that owns or controls one or more banks. |
| Banknote | Currency issued by a bank promising to pay the amount of money designated on its face when the note is presented to the bank. |
| buying on margin | Using borrowed funds to buy assets such as stock. |
| Charter | A document issued by a federal or state supervisory agency granting a bank or other financial institution the right to do business. |
| Code of conduct | A formal set of guidelines approved by the board of directors that represents a company’s policies for corporate governance and individual conduct. |
| Community Reinvestment Act | A federal law mandating that federal bank regulators regularly evaluate how financial institutions help meet the credit needs of their communities, including low- and moderate- income sections of the community, and publicly rate the bank’s performance. |
| Corporate governance | The manner in which directors, management, and auditors handle their responsibilities to shareholders. |
| dual banking system | The banking system in the United States today in which a bank may be chartered by either a state or the federal government. |
| Edge Act corporation | Established under the Federal Reserve Act, a corporation that is a bank subsidiary for either foreign trade-related banking or foreign investment. |
| Ethics | Principles of conduct and judgment that affect business practices. |
| Federal Register | A daily publication of the federal government that contains, among other material, proposed and final regulations adopted by federal agencies. |
| Federal savings association | A thrift institution that is chartered by the federal government to provide deposit services and extend credit for homes and other goods and services. |
| Identity theft | A crime involving the possession of identifying information not lawfully issued for the possessor’s use, or the attempt to access the financial resources of another person by illegally obtained identifying information. |
| Money market deposit account (MMDA) | A type of savings account created in 1982 that pays a market interest rate and gives account holders limited check-writing privileges. |
| Mortgage-backed security | An investment instrument that is backed by mortgage loans as security. |
| National bank | A bank that is chartered by the federal government to provide financial services (as opposed to a state bank). |
| Nonbank financial company | A financial institution that does not have a banking license but is allowed to provide most banking services. |
| Nonbank subsidiary | An entity owned by a bank holding company that offers nonbank products and services. |
| NOW account | An interest-earning transaction account against which check-like instruments (negotiable orders of withdrawal) may be drawn. |
| pyramided reserves | The reserve patterns of banks before the Federal Reserve System was authorized. Smaller banks would place their reserves in larger banks, which would then place their reserves and those of the smaller banks in money center banks. |
| Recession | A period of significant economic slowdown, often defined as a decline in the gross domestic product over two or more consecutive quarters. |
| reserve requirement | A mandate that each bank set aside a portion of its cash assets against its outstanding deposits. Today reserve requirements are managed by the Federal Reserve as part of its monetary policy duties and apply only to the deposits in transaction accounts. |
| Saving and loan holding company | A corporation that owns or controls one or more savings and loan associations or savings institutions. |
| Securities Investor Protection Corporation (SIPC) | A non-profit membership organization created by the Securities Investor Protection Act of 1970 to provide financial protection to customers of failing brokers or dealers who are members. |
| State bank | A bank that is chartered by a state to provide financial services (as opposed to a national bank). |
| Subprime loan | A loan made to a borrower who does not qualify for prime market interest rates because of credit problems or other deficiencies. A subprime loan charges a higher interest rate and/or greater fees. |
| Unbanked | People who do not have a relationship with a bank or similar financial institution and generally rely on cash or money orders to receive or make payments. |
Created by:
Sharon.Spence
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