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15 Cards in this Set
- Front
- Back
Demand deposits |
<> an account from which deposited funds can be withdrawn at any time without any advance notice. <> usually pays no interest but will have higheradministrative costs. <>Expenses for deposits, withdrawals and checksare usually a function of whether the transaction is conducted with a teller,on the telephone, an ATM, a payment card .... |
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Time deposits |
<>A savings account or certificate of deposit (CD) held for a fixed-term, with the understanding that the depositor can make a withdrawal only by giving notice.
<>Time deposits will usually have one deposit andone withdrawal and the major expense will be the interest on the deposit. |
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Check 21 Act |
<>October 28, 2004
<>banks can transfer electronic images (electronicconversion) instead of the actual check.
<>This process reduces operating costs and float associated with the checks |
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A bank must know how much it_______to produceeach type of deposit service |
costs |
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___________ is one of the largest sources of noninterestincome or fees for banks. |
Service charges on deposits |
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One fee that accounted for about 75% of the totalservice charges in the U.S. that is expensive |
Overdraft fees |
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Primary purposes of FDIC Deposit Insurance Fund (DIF) |
(1) to insure the deposits and protect thedepositors of insured banks on deposits less than or equal to $250,000 (2)to resolve failed banks. |
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The reserve ratio is....? |
the DIF balance divided by estimated insured deposits. |
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Total Base Assessment Rates vary from______ to ______ basis points or cents per $_____ of deposit insurance assessment baseand vary by risk. |
2.5 ; 45 ; $100 |
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in April 2011 FDIC defined a bank's assessment base as ? |
its average consolidated total assets minus its average tangible equity. |
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cost of a deposit formula |
Rdep = [interest expense + administrative costs -service charges + dep. insurance premium]/[average collected balance X (1 -reserve requirement)] |
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Average collected balance = |
(balance - float). Float is the amount of deposits that have not yet been collected by the bank. |
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We will assume reserve requirements are _____ on all transaction accounts(demand deposits and NOW accounts) and _____ on other deposits. |
10% ; 0% |
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MCdep = |
Δ Total Cost / Δ Amount of Funds |
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EU deposit insurance |
<> Was a minimum in each EUcountry of 20,000 Euros but could be greater in some countries, e.g., Finland =25,000 Euros. <> Insurance premiums arebased on capital adequacy. |