Awareness Flashcards

What is a 'currency transaction report' (CTR) in U.S. banking?

Answer: A mandatory report for cash transactions exceeding $10,000

Banks must file a CTR with FinCEN for any cash transaction exceeding $10,000, whether a deposit, withdrawal, or exchange.

Which of the following best describes 'Basel III' in banking?

Answer: An international framework for bank capital adequacy, stress testing, and liquidity

Basel III is an international regulatory framework developed by the Basel Committee to strengthen bank capital requirements and reduce risk.

What is 'loan-to-value ratio' (LTV) used to assess?

Answer: The risk of a mortgage loan relative to the property's appraised value

LTV compares the loan amount to the appraised property value; a higher LTV signals greater risk for the lender.

What is the primary role of the Federal Open Market Committee (FOMC)?

Answer: Setting the federal funds rate and conducting open market operations

The FOMC directs U.S. monetary policy, including setting the target federal funds rate and managing the Fed's securities portfolio.

Which type of bank account typically earns higher interest but restricts the number of monthly withdrawals?

Answer: Savings account

Savings accounts earn interest but historically limited withdrawals to six per month under Regulation D (though the Fed suspended this limit in 2020).

What is 'subprime lending'?

Answer: Extending credit to borrowers with poor or limited credit histories at higher rates

Subprime lending targets borrowers with low credit scores or limited credit history, typically charging higher interest rates to offset greater default risk.

What is the purpose of a 'stress test' conducted by the Federal Reserve on large banks?

Answer: To assess whether banks have enough capital to survive a severe economic downturn

The Fed's stress tests (DFAST/CCAR) simulate adverse economic scenarios to determine if large banks hold sufficient capital buffers.