Chapter 30

Financial Institutions

Zabihollah Zabi Rezaee, PhD, CPA, CMA, CIA, CGFM, CFE, CSOXP, CGRCP, CGOVP

The University of Memphis

30.1 Overview

(a) Changing the Environment

(b) Role in the Economy

(c) Types of Financial Institutions

(i) Banks and Savings Institutions

(ii) Mortgage Banking Activities

(iii) Investment Companies

(iv) Credit Unions

(v) Investment Banks

(vi) Insurance Companies

(vii) Finance Companies

(viii) Securities Brokers and Dealers

(ix) Real Estate Investment Trusts

30.2 Banks and Savings Institutions

(a) Primary Risks of Banks and Savings Institutions

(i) Interest Rate Risk

(ii) Liquidity Risk

(iii) Asset-Quality Risk

(iv) Fiduciary Risk

(v) Processing Risk

(vi) Operating Risk

(vii) Market Risk

(b) Regulation and Supervision of Banks and Savings Institutions

(c) Regulatory Background

(i) Office of the Comptroller of the Currency

(ii) Federal Reserve Board

(iii) Federal Deposit Insurance Corporation

(iv) Office of Thrift Supervision

(d) Regulatory Environment

(e) Federal Deposit Insurance Corporation Improvement Act Section 112

(i) The Regulation and Guidelines

(ii) Basic Requirements

(iii) Holding Company Exception

(iv) Availability of Reports

(f) Capital Adequacy Guidelines

(i) Risk-Based and Leverage Ratios

(ii) Tier 1, Tier 2, and Tier 3 Components

(iii) Risk-Weighted Assets

(iv) Capital Calculations and Minimum Requirements

(v) Interest Rate Risk and Capital Adequacy

(vi) Capital Allocated for Market Risk

(g) Prompt Corrective Action

(i) Scope

(ii) ...

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