Important Concepts in Chapter 11
This is a big chapter. It has a lot of information. It covers everything that will be covered in the
chapters ahead.
Roles of intermediaries, adverse selection, moral hazard, asymmetric information, economies of
scale, regulation Q, financial disintermediation, money market mutual fund, savings and loan
crisis, commercial paper markets, defined benefit and contribution plans (also in chapter 13),
credit risk, interest rate risk (also in chapter 12), assets and liabilities of depository and nondepository institutions.
Important Concepts in Chapter 12
Understanding fundamentals of bank management
Asset: major assets and their trends, Liability: major liabilities and their trends, Equity, Bank
profitability, Calculation of ROA, ROE, NII NIM, Bank Risks: Leverage, credit, interest rate,
trading and liquidity
Trends in Bank management
Consolidation: Understanding the provision of McFadden Act, why and how it was repealed,
Economics of consolidation, economies of scale, economies of scope, Empirical evidence, reason
for consolidation.
Nontraditional banking: Understanding the provision of Glass-Steagall Act, why and how it was
repealed, section 20 affiliates, off-balance sheet activities
Globalization: expansion of US banks abroad, Eurodollar, Eurobond, IBF
Stop at subprime mortgage crisis.
Important Concepts in Chapter 13
Life insurance: whole, term and universal, how do they differ?
Pension fund: defined benefit and contribution. How do they differ?
Vesting, Funding, ERISA, PBGC
Mutual fund: open end, closed end, NAV, load and no-load fund
Finance company, LBO, bootstrap financing, insights of Michael Milken
Dealers and brokers: how do they differ?
Investment banks
Venture capital, mezzanine debt fund: their roles and how do they differ?
Convertible debt, subordinate debt
Gramm Leach Bliley Act
Universal banking