Banking Operations and Services Flashcards

A bank's net interest margin (NIM) is calculated as:

Answer: Net interest income divided by average earning assets

NIM measures profitability by dividing net interest income by average earning assets, expressed as a percentage.

Which type of bank account typically earns the highest interest rate?

Answer: Certificate of deposit (CD)

Certificates of deposit earn higher rates because funds are locked in for a fixed term, reducing liquidity for the depositor.

Under Regulation CC, what is the maximum hold period a bank may place on local checks for most customers?

Answer: Two business days

Regulation CC generally allows banks to place a two-business-day hold on local checks, though next-day availability applies to certain items.

A correspondent banking relationship is best described as:

Answer: One bank providing services to another bank

Correspondent banking involves a larger bank providing services such as check clearing, wire transfers, and foreign exchange to smaller banks.

Which wire transfer system is used for large-value, time-critical interbank payments in the U.S.?

Answer: Fedwire

Fedwire Funds Service is the Federal Reserve's real-time gross settlement system for large-value domestic payments.

When a bank sells a mortgage loan it originates, the bank is acting as a:

Answer: Mortgage banker

A mortgage banker originates loans and sells them into the secondary market, often retaining servicing rights.

A stop-payment order on a check is valid for how long under the UCC unless renewed?

Answer: 6 months

Under UCC Article 4, a stop-payment order expires after six months unless the customer renews it in writing.