...Deposit insurance tends to increase the likelihood of banking crises, the more so where bank interest rates are deregulated and the organized environment is weak. Also, the adverse impact of deposit insurance on bank stability tends to be stronger the more extensive the coverage offered to depositors, where the system is funded, and where it is run by the government rather than the private sector. The oldest system of national bank deposit insurance is the U.S. system, which was established in 1934 to avoid the extensive bank runs that subsidized to the Great Depression. It was not until the Post-War period, nonetheless, that deposit insurance initiated to spread around the world. Despite its increased service among policy makers, the desirability of deposit insurance remains a matter of some debate amongst economists. Whether or not deposit insurance is the best strategy to prevent depositor runs, all authors acknowledge that it is a source of moral hazard: as their ability to appeal deposits no longer imitates the risk of their asset collection, banks are encouraged to finance high-risk, high-return projects. As a result, deposit insurance may lead to more bank failures and, if banks take on risks that are correlated, systemic banking crises may become more frequent. The U.S. Savings & Loan crisis of the 1980s has been widely attributed to the moral threat created by a combination of generous deposit insurance, financial liberalization, and regulatory failure. Thus, according...
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...TABLE OF CONTENTS Executive Summary Problem (Issue) Statement 1 1 Data Analysis Key Decision Criteria Alternative Analysis Recommendations Action and Implementation Plan Exhibits Conclusions References 2 4 4 4 5 5 5 6 I. Executive summary Rural Bank XYZ Inc., (XYZ) is a newly incorporated rural bank which started operations on 14 February 2010. It has seven branches located in the province of Pampanga and Bulacan. Majority stockholder is the Arroyo Family Group owning 99.7 percent of the voting stock. The Bankis classified as “Very High Risk” considering its extremely unsound financial condition and the various unsafe and unsound banking practices noted in the previous and latest general examination. Conservatorship under Section 29 of R.A. No. 7653 (The New Central Bank Act) can no longer be considered an option for XYZ, since its liabilities exceeded its realizable assets and the Bank’s continuance in business would involve probable losses to its depositors and creditors. II. Problem (Issue) statement XYZ, with head office located at San Fernando, Pampanga, is a newly incorporated rural bank which started operations on 14 February 2010 following the consolidation of the Rural Bank of ABC, Inc. and Rural Bank of DEF, Inc. It has seven branches, five of which are located in the province of Pampanga (Mexico, Masantol, Bacolor, San Simon and San Luis) while the other two are in the Province of Bulacan (Pandi and Marilao). Majority stockholder is the...
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...|during a nationwide commercial bank failure |To get rid from the Great Depression of the |securities | |and the Great Depression. Two members of |economy. | Created the Federal Deposit Insurance | |Congress put their names on what is known |Commercial banks were accused of being too |Corporation (FDIC), which insures bank | |today as the Glass-Steagall Act (GSA). |speculative in the pre-Depression era, not |deposits with a pool of money appropriated | | |only because they were investing their assets |from banks. | | |but also because they were buying new issues | Public confidence was restored by the act in | | |for resale to the public. |banking practices of U.S. government during | | | |the Great Depression | |The Banking Act of 1935: |Permanent establishment of the FDIC as a |The Insurance fund and FDIC guidelines for | |The act is established in 1935 as the...
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...Unethical Behavior Paper Throughout history, criminal activity has been a concern for American citizens. But with advancements in technology, the types of criminal activities from the past have changed from breaking-and-entering and robbery at gunpoint, to complete identity theft, fraud, and robbery without lifting a finger via electronic manipulation of banking systems. To help battle these new criminal activities caused by advancements in technology, Congress passed the “Electronic Funds Transfer Act of 1978”, which establish consumer rights and protections when transferring funds via electronic systems. According to "Federal Deposit Insurance Corporation" (n.d.), “the purpose of this title to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems. The primary objective of this title, however, is the provision of individual consumer rights” (Electronic Funds Transfer Act). With the establishment of the Electronic Funds Transfer Act of 1978, a new standard was established to protect consumers from theft and illegal monetary transfers from accounts. The act established accountability and liabilities for both consumers and banking institutions to hold parties accountable for funds transfers and illegal accounting activities. Further measures were taken to restrict criminal activities with the establishment of the Computer Fraud and Abuse Act of 1986. The act establish guidance and...
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...puzzle and impacts EVERYONE to the common man on the street, please speak with me in class or ask your groupmates :) Please remember what discussed on the LIBOR scandal(market abuse, impact on the banking sector, stakeholders, clients, financial system etc) during our lab sessions. As you can see in the Financial Times article, the LIBOR scandal is in the same league as the Enron and Lehman Brothers fraud cases so you MUST mention this in your paper. If you are not clear on how LIBOR fits in the big puzzle and impacts EVERYONE to the common man on the street, please speak with me in class or ask your groupmates :) If the US definition of one includes Federal Deposit Insurance Commission (FDIC) insured deposits, then by logic, Singapore's encompasses the SDIC insured deposits (Singapore Deposit Insurance Corporation limited to 50,000 sgd introduced in 2011, after the global financial crisis, by who??...it's your job to figure all this out during your group work and explain what the rules and regulations are and how best Victor bank's stakeholders etc should meet their obligations/duties etc etc etc). https://www.sdic.org.sg/ We discussed Singapore's # 1 ranking in offshore Chinese renminbi NDFs and how the latter is essential in trade finance (year 1 core where you learnt for example, the standby letter of credit, a type of guarantee that the bank only pays in the event of default, therefore an item not on the balance sheet but never the less becomes "alive" upon...
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...Recommendation Brief for an Internal Accountant Lisa Tucker ACC 544 April 8, 2013 Fred Johnston Recommendation Brief for an Internal Accountant A client has an out-of-control system that is in need of change to get it back into control. Internal controls are an important part of a company. The role of internal controls is to keep mistakes from occurring as much as possible. It also aids in preventing individuals from being dishonest. The system the client is using is out-of-control and it is highly recommended that the company hire an internal accountant. The internal can provide information to managers to limit any problems and audit the system internally. Implementing internal audits will help build credibility within the company and keep violations from occurring that would violate laws and regulations. An internal auditor would work with management and owners to analyze important areas of the company’s performance. These areas that would be analyzed would include assets, accuracy of financial information, and ensuring that government and industry standards and regulations are being followed. Another point that the internal auditor would confirm is that the policies and procedures are aligned with the company’s goals. An internal auditor would add security and be an asset to the company. The first step an internal auditor would initiate would develop a plan to evaluate the current control system that is in place. Any deficiencies...
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...Argentina’s 1980-1982 Banking Crisis In Argentina’s crisis of 1980’s financial institutions were forced to rely heavily on Central Bank financial assistance when they encountered deposit withdrawals. The largest investment bank and the second largest commercial bank failed. More than 70 institutions had to be liquidated or placed in intervention between 1980 and 1982. Bank Runs: After Mexican Peso Crisis, foreign investors’ feared Argentina with a weakening economy would devalue its currency, initiated a capital flight. As a result, lower wages, lower salaries, and high unemployment rates began to rise. Widespread fear of a financial meltdown triggered Bank Runs. Suspension of Payments: Banks, suspended payments denying the ability to withdraw funds. Debt for Deposit Swap: The government offered government bonds swap for deposits with few takers. Deposit Insurance: The Central Bank established a deposit-insurance program to rebuild confidence. Bank Nationalization and Restructuring: The Central Bank closed some banks, and nationalized others. The 1982-86 Banking Crisis in Chile Reaction Phase Toxic Assets Removal: Banks were assessed for their long-term viability. Viable banks sold ‘bad loans’ to the Central Bank, with a repurchase agreement. Most banks used this facility to the tune of $5 billion. Liquidity Enhancement Central Bank’s Secured and subsidized Loans on Collateral: Government provided secured loans (using bank assets as collateral)...
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...two years ago, the fund recently fell into the red. The prospect of more failures has led the F.D.I.C. to seek new ways to replenish the fund with higher and earlier payments by healthy banks, even after setting aside reserves for future losses. The initial wave of failures has also unsettled some communities, even though most of the troubled institutions have been bought by other banks rather than shuttered. While deposits are safe thanks to federal insurance, the new buyers often do not have the same ties to local businesses as the former owners. In some cases, they tighten lending and make it harder for longtime customers to obtain loans or favorable terms. In other cases, managers of the new bank make other changes, like ending offers for high-interest certificates of deposit and calling in certain lines of credit. In the longer term, some new owners are likely to close branches of the bank they have acquired in order to cut costs. “In the near term, bank failures can be painful,” said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation. But a bank that is teetering on collapse is not going to lend, she said, and “that’s not good for the economy.” Regulators...
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...Investing in Bank of America Bank of America Corporation (NYSE:BAC) is one of the largest banking institutions in America. Bank of America (NYSE:BAC) headquarter is located in Charlotte, North Carolina, and is a member of the Federal Deposit Insurance Corporation (FDIC). Bank of America Corporation as any other company or banking institutions has its vicissitudes in the stock market because of the financial crisis in 2009. As one of the world’s largest financial intuitions, Bank of America serves approximately 58 million consumers and small businesses around the world, doing business with one out of every two households in the United States and 99 percent of the U.S. Fortune 500 companies. The company has approximately 5,700 banking centers and approximately 17,800 ATMs. (Webmedia, 2011, para 2) When investing in any company it is in the investor’s best interest to be aware of its Strengths, Weaknesses, Opportunities, and Threats (SWOT). An SWOT analysis is a tool for auditing an organization and its environment. An SWOT analysis is the first stage of planning and helps marketers to focus on key issues. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. The strengths, weaknesses, opportunities, and threats (SWOT) analysis is a helpful tool when reviewing a business profit margin. In this paper I will present the strengths, weaknesses, opportunities, threats (SWOT) analysis; as well if I suggest Bank of America Corporation (NYSE:BAC)...
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...1933 and Federal Deposit Insurance 1. In 1929 there were more than 25,000 commercial banks in the U.S. Today there are still approximately 7000 banks. In most other countries there are just a handful of major banks – often 4 to 8 institutions dominate the market place. What explains the vastly different character of the banking system in the U.S. from that of other countries? Similarly, most other countries have not in the past provided government sponsored deposit insurance, though some have put it in place as part of their response to the credit crisis. Does the unique structure of the U.S. banking system indicate a greater need for such insurance? In 1933, banks in the United States were unsecure and there was widespread fear based on the previous closures. Depositors panicked as banks were experiencing difficulties. What differentiated U.S banks from other banks is that US banks were composed of two main banks: national banks that were following the federal law and regulation and which it could share funds and resources across US, and the State banks that were following the state law and regulations. It was proven after the crisis that local units banks were more vulnerable to the crisis than national banks. Many states restricted branch banks form developing that made some banks riskier and it limited their liquidity. In 1929 crash, customers were unable to pay back their loans that led to a severe liquidity problem as payment of loans and deposits provided most of...
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...total cost of those banking fees? | Total cost | $ | Explanation: $34 × 12 months × 4 years = $1,632 | 3. A payday loan company charges 3.2 percent interest for a four-week period. What would be the annual interest rate from that company? (Round your answer to 1 decimal place.) | Annual interest rate | % | 4. What would be the annual percentage yield for a savings account that earned $31 in interest on $500 over the past 365 days? (Round your answer to 1 decimal place.) | Annual percentage yield | % | 5. Janie has a joint account with her mother with a balance of $749,000. Based on $250,000 of Federal Deposit Insurance Corporation coverage, what amount of Janie’s savings would not be covered by deposit insurance? | Amount | $ | 6. A certificate of deposit often charges a penalty for withdrawing funds before the maturity date. If the penalty involves one months of interest, what would be the amount for early withdrawal on a $19,000, 5 percent CD? (Do not round intermediate calculations. Round your answer to 2 decimal places.) | Amount | $ | 8. A bank that provides overdraft protection charges 12 percent for each $100 (or portion of $100) borrowed when an overdraft occurs. | a. | What amount of interest would the customer pay for a $340 overdraft? (Assume the interest is for the full amount borrowed for a whole...
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...to notify you that any purchase of USAA insurance is optional and will have no impact on any credit application decision. Additional related disclosures are included in the attached form. Please sign and fax the attached Insurance Disclosure Form to USAA Federal Savings Bank at 1-800-531-5717. We know you have a choice when it comes to banking, and we think you'll find that USAA Federal Savings Bank provides consistently great value and best-in-class service. If you have any questions, please call us at 1-800-531-USAA (8722). We value your business and look forward to continuing to serve all your financial needs. Thank you, USAA Federal Savings Bank DM#449 84866-0611 Insurance Disclosure Form USAA Federal Savings Bank 10750 McDermott Freeway San Antonio, TX 78288-0544 09/08/2015 Applicant Information BANK_037711339_LN_2_1 100000122865327 100000122865328 JACOB W HART 5126 N LOOP 1604 E APT 1307 SAN ANTONIO TX 78247 - 5953 Important Legal Information For all applicants: For purposes of this paragraph, "Product" refers to any insurance or annuity you purchase from USAA Federal Savings Bank, any of our affiliates, or an unaffiliated third party to whom you were referred. With regard to any Product you purchase, the following apply: The Product is not a deposit account or other obligation of, and is not guaranteed, insured, issued or underwritten by USAA Federal Savings Bank, any depository institution, the Federal Deposit Insurance Corporation (FDIC), or any agency...
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...Week one notes Note: These notes are not a substitute to the textbook. They merely highlight important points and add some needed information to the assigned text. The title of this course is Management of Financial Institutions. This is a very broad and a far reaching topic. To make it possible, the course will concentrate on Bank management. Many of the concepts we will learn in course are transferable to other financial institutions. To begin the discussion, let us define banks. What is a bank? What do Banks do? A bank is a chartered financial institution that accepts savings deposits and makes commercial loans. This is the most basic definition of a bank. However, if you look at banks, you will see that they take many types of deposits and make many types of loans. In addition, if you are familiar with banks, you will notice that they act as intermediaries in many financial transactions. The banking is a vital function of the economy; without banks, the economy will not function properly. Why? The answer is that banks provide the link between savers and borrowers. In the US, people are net savers and businesses are net borrowers. Without banks and some other financial institutions, the borrowers, businesses, will not be able to raise finds by borrowing from people, the savers. This function takes many forms. We will look at some if these forms in this course and in other courses in the finance concentration in the MBA program. The Nature of Banking in the US ...
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...Depression era banking legislation. Each Act has its unique impact on the United States banking system and the economy. Also known as the Glass- Steagall Act, the Banking Act of 1933 main purpose was established Federal Deposit insurance Corporation (FDIC) as a temporary agency, separated commercial and investment banking as different lines of commerce and founded the Federal Deposit Insurance Corporation for insuring bank deposits. The Act has a significant impact on the U.S. banking system. The establish of the FDIC required all federally chartered banks and all state banks that were part of the Federal Reserve system to join and regulate by it. Moreover, the Act also permitted the Fed to allocate the currency. The FDIC insured bank deposits separated commercial banks from investment banks. Commercial banks were insured and allowed to accept deposits, but it couldn't underwrite or own any stock. Restrictions were placed by the Act on the assets of the bank that it can only approved safe securities and loans. In contrast, investment banks could not accept deposits nor offer savings or checking accounts. However, it could offer brokerage services and underwriting. The FDIC also provided cheap, flat fee based insurance to bank; covers funds in deposit accounts,...
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...INTRODUCTION * In the words of Fred C. Dobbs in the Pulitzer winning WSJ series, Way back in American history there has always been a conflict between the federal government intervening in the banking business vs. the Federal government staying out of the banking business * In 1830 when Andrew Jackson (the founder of the Democrat Party) was elected president. He terminated the fed government sponsored US Bank, and resolved the conflict. * The fed government basically stayed out of the banking business until the ’30s, when FDR took office, and the fed government intervened deeply into the ‘banking business,’ which was defined by the IRS, FDIC, Comptroller of the Currency, SEC (if public-owned), and State Bank Supervisors etc. * By defining what the ‘business of banking’s was the statutes, regulations, and enforcement personnel administering these laws, bankers were boxed into doing business as defined by state and federal governments. * Still In present day Banks are financial institutions that hold too much control over the economy and if they fail there are enormous consequences hence the need for government bailouts, in which government financial assistance is provided to banks or other financial institutions who appear to be on the brink of collapse. WHY THE NEED FOR REGULATORS * Bank regulations are a form of government regulation which subject banks to certain requirements, restrictions and guidelines. * To create transparency between...
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