Fin 346 Commercial Banking

Chapter 1 Homework # 1 Slides 1-10

Name: ____Timothy Hart_______ Date: _____01/15/2020___

1- What are two primary roles of commercial banks?

1. the principal source of credit (loanable funds) for individuals and families (consumers) and
for many units of government.
2. assets held by U.S. banks represent about 20% of the total assets in the financial system.

2- What are some of the expanding services that banks offer?

1. Investment banking, (Providing debt to company, offering equity, and allowing mergers
for companies. Available for fees)
2. Wealth management, (personal finance and growth in investments)
3. Securities brokerage, (Selling individual investments)
4. Insurance
5. risk-management services. (what could go wrong and how to prevent it OR when this
goes wrong then what can we do to fix it)

3- What is the difference between a money center bank and a community bank?
Money-Centered banks:
- Cover whole regions, nations, and continents. (Global)
- Offer the widest possible Menu of financial services
- Tough global competition
Community banks
- Much Smaller
- Service Loval communities and towns
- Typically offers a narrower, more personalized menu of financial services.

4- What does an investment bank do?

Assists corporations and governments in raising new funds pursuing acquisitions and exploring
new markets. Providing debt to company, offering equity, and allowing mergers for companies.
Available for fees.

5- What is a mortgage bank?

Originate residential mortgages, but uses private sources of funding, like from other banks or
from investors, rather than taking in and using deposits.
 6- What is the difference between a wholesale bank and a retail bank?
Wholesale banks
- Large commercial banks that focus on large corporate and government customers.

Retail banks
- Small commercial banks that focus on Individual and Small business customers.

7- What is a virtual bank?

Have very little or no physical offices or branches but operate on the internet.

8- What is a fringe bank?

Pawn shops, Pay-day lenders and rent to own furniture stores that are set up to make loans.

9- What are 3 legal aspects of a bank?

First - A bank is any business offering Deposits subject to withdrawal on demand (checking
accounts) and making Loans of a commercial or business nature.
Second - Congress then defined a bank as any institution that could qualify for deposit insurance
provided by the Federal Deposit Insurance Corp FDIC.
Third - Under Federal law in the U.S., a bank had come to be defined, not so much by its array of
service offerings, but by which government Agency insures its deposits.

10- What are 3 supporting services offered by banks?

1.Payment Services- credit and debit card processing for business
2. Risk protection services- identifying risk and protecting against it, like insurance
3. Liquidity service- investing cash and paying bills

11- What are two ways companies circumvent banks?

1. by borrowing directly from a limited number of
institutional investors with whom they establish
relationships
2. by issuing bonds rather than taking out loans