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Banking Fundamentals Flashcards

7 cards from real Banking practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Banking Fundamentals flashcards as text

  1. What is 'wire transfer' in banking?

    Answer: An electronic transfer of funds between bank accounts, domestically or internationally

    A wire transfer is an electronic method of moving money between accounts at different financial institutions, processed through networks like Fedwire or SWIFT.

  2. What is 'net interest margin (NIM)'?

    Answer: The difference between interest income earned and interest paid out, expressed as a percentage of earning assets

    NIM measures a bank's profitability by comparing the interest it earns on loans to the interest it pays on deposits, divided by average earning assets.

  3. What is a 'syndicated loan'?

    Answer: A large loan provided by a group of lenders acting together to share the risk

    A syndicated loan involves multiple lenders pooling funds to provide a single large loan to one borrower, spreading the credit risk among participants.

  4. What is the 'velocity of money'?

    Answer: The rate at which money circulates through the economy in a given period

    Velocity of money measures how many times a unit of currency is used to purchase goods and services within a specific time period.

  5. What is a 'standby letter of credit'?

    Answer: A bank's guarantee to pay a beneficiary if the applicant fails to fulfill a contractual obligation

    A standby letter of credit is a bank's contingent commitment to pay a third party if the bank's customer defaults on an obligation, serving as a financial safety net.

  6. What is 'Tier 1 capital' in banking regulation?

    Answer: A bank's core capital, including common equity and retained earnings, used to absorb losses

    Tier 1 capital is the highest quality regulatory capital, consisting primarily of common equity tier 1 (CET1) and additional tier 1, used to gauge a bank's financial strength.

  7. What is the purpose of the Community Reinvestment Act (CRA)?

    Answer: To require banks to meet the credit needs of all segments of their communities, including low- and moderate-income areas

    The CRA, enacted in 1977, requires banks to actively meet credit needs in all parts of their service areas, particularly underserved communities.