Banking Investment and Capital Markets Flashcards
6 cards from real Banking Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Banking Investment and Capital Markets flashcards as text
What is the Glass-Steagall Act in US banking history?
Answer: A 1933 law that separated commercial banking from investment banking activities
The Glass-Steagall Act of 1933 separated commercial banking from investment banking to reduce conflicts of interest, and was largely repealed by the Gramm-Leach-Bliley Act in 1999.
What is leverage in the context of banking and investment?
Answer: Using borrowed capital to increase the potential return on an investment
Leverage involves using borrowed funds to amplify investment returns, but it also magnifies potential losses if the investment declines in value.
What is a credit default swap (CDS)?
Answer: A derivative that transfers the credit risk of a debt instrument from one party to another
A credit default swap is a financial derivative that allows one party to transfer the credit risk of a reference entity (such as a corporation) to another party in exchange for periodic payments.
Which of the following best defines 'liquidity' in banking?
Answer: The ability to quickly convert assets into cash without significant loss of value
Liquidity refers to how easily and quickly an asset can be converted to cash at or near its market value, which is critical for banks meeting short-term obligations.
What is the Dodd-Frank Wall Street Reform and Consumer Protection Act primarily associated with?
Answer: Post-2008 financial crisis reforms to increase oversight of financial institutions and reduce systemic risk
Passed in 2010 in response to the 2008 financial crisis, Dodd-Frank introduced sweeping financial regulations including the Volcker Rule, stress testing, and the CFPB.
What does 'Basel III' refer to in international banking?
Answer: An international regulatory framework setting minimum capital adequacy and liquidity standards for banks
Basel III is a global regulatory framework developed by the Basel Committee on Banking Supervision that sets minimum capital, leverage, and liquidity requirements for banks.