Awareness Flashcards

What does 'LIBOR' (London Interbank Offered Rate) represent in banking?

Answer: A benchmark interest rate at which major global banks lend to one another short-term

LIBOR was a globally used reference rate for short-term interbank lending, now largely replaced by SOFR in the U.S.

Which U.S. law prohibits banks from discriminating in lending based on race, color, religion, national origin, sex, familial status, or disability?

Answer: Fair Housing Act

The Fair Housing Act prohibits discriminatory practices in residential real estate transactions, including mortgage lending.

What is a 'certificate of deposit' (CD)?

Answer: A time deposit that pays a fixed interest rate until a specified maturity date

A CD is a savings product where a customer deposits money for a fixed term and earns a higher interest rate than a regular savings account.

What is 'fractional reserve banking'?

Answer: A system where banks keep only a fraction of deposits in reserve and lend out the rest

Under fractional reserve banking, banks hold a small fraction of deposits in reserve and lend the remainder, effectively creating money in the economy.

Which U.S. regulation governs the disclosure of mortgage loan terms to borrowers before closing?

Answer: Regulation Z (Truth in Lending Act)

Regulation Z implements the Truth in Lending Act and requires lenders to disclose APR, finance charges, and other loan terms to borrowers.

What is the 'discount rate' in the context of the U.S. Federal Reserve?

Answer: The interest rate the Fed charges commercial banks for short-term loans from its discount window

The discount rate is the interest rate the Federal Reserve charges depository institutions for short-term borrowing at its discount window.

What is 'wire fraud' in the context of banking awareness?

Answer: Using electronic communications to deceive someone for financial gain

Wire fraud involves using electronic communications such as email, phone, or the internet to execute a scheme to defraud someone of money.