Banking system

Question 1

Name 7 Functions of the central bank

Answer 1

1) Bank for the state - Handling settlements of public institutions
2) Bank for banks – all commercial banks have an account there
3) Cash Issuance – Control of the Cash Money Supply
4) Conducting monetary policy – stabilising inflation
5) Lender of last resort
6) Management of foreign exchange reserves
7) Financial supervision

Question 2

define what is Lender of last resort

Answer 2

• Institution granting a loan when no one else wants to do it
• Bailouts – customer protection

Question 3

Management of foreign exchange reserves? what is it ?

Answer 3

• Reserves are the part of a central bank’s assets denominated in a foreign currency
• They are an important element of central bank collateral

Question 4

what is Financial supervision ?

Answer 4

• Regulation of entry into the banking market
• Regulation of banks’ activities
• Capital requirements
• Deposit guarantees

Question 5

How bank distribute bank loans?

Answer 5

Via

1) Current loans
2) Investment loans
3) Consumer loans

Question 6

what is a current loan

Answer 6

• Loans intended to finance the day-to-day operations of enterprises
• Short-term
• They have the largest share in bank loans

Question 7

what is Investment loans?

Answer 7

• Loans for fixed assets

* Medium and long term

Question 8

what is the Consumer loans

Answer 8

• Usually for households
• They finance consumption
• Repayment in installments

Question 9

what are the features of commercial banks

Answer 9

1) Commercial banks can issue virtual money, NOT CASH
2) Interest rate profit and custom operating profit
3) Handling payments
4) Financing international trade
5) They act as brokers and market makers
6) They act as underwriters in the issue of bonds

Question 10

what is an investment banks

Answer 10

1) They have the function of consultants, assist in raising capital as underwriters, assist in M&A

Question 11

name Transnational international banks

Answer 11

1) European Central Bank

2) Bank for International Settlements

Question 12

what the European Central Bank and do Bank for International Settlements ?

Answer 12

1) European Central Bank
• Responsible for a single monetary policy in the euro area
• Reserves made up of national central bank funds
• Under the Treaty, the ECB cannot act as a lender of last resort
2) Bank for International Settlements
• Central Bank
• Banking services for central banks and international institutions