《金融市场与机构 Jeff Madura》ch17.pptVIP

17 Commercial Bank Operations Chapter Objectives Describe the most common sources of funds for commercial banks Describe the most common uses of funds for commercial banks Describe typical off-balance sheet activities for commercial banks Bank Participation in Financial Conglomerates Impact of the Financial Services Modernization Act (1999) Prompted by the Citicorp-Traveler’s merger Banks and other financial service firms were given more freedom to merge and offer a range of financial services Insurance Securities services Banks now a subsidiary of financial conglomerates Bank Participation in Financial Conglomerates Benefits of diversified services to individuals and firms Individuals can obtain all their financial services at a single financial conglomerate Deposits Loans Investing (brokerage) Insurance Businesses can obtain loans, issue stocks and bonds, and have their pension fund managed by the same institution Bank Participation in Financial Conglomerates Benefits of diversified services to the financial institution Reduce reliance on demand for single service Economies of scale and scope Diversification (service and geographical) may result in less risk Generate new business Bank Sources of Funds Transaction deposits Demand deposit account (checking) Negotiable order of withdrawal (NOW) account 1981 Requires larger minimum balance Savings Deposits Passbook savings Regulation Q until 1986 Bank Sources of Funds Time Deposits Certificate of deposit (CD) No secondary market Negotiable CD Short-term, minimum $100,000 Can trade among investors via dealer Money Market Deposit Accounts (MMDAs) More liquid than CDs : no specified maturity Limited check writing Created in 1982 Bank Sources of Funds Federal Funds Purchased Short-term loans between banks Allows banks to meet reserve requirement or funding needs Interest rate charged is the federal funds rate Borrowing from the Federal Reserve Banks Borrowing at the discount window Discount rate Intended for meeting temp