© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 1

Learning Objectives
1.
2.
3.
4.
5.
6.
7.
Identify the functions and characteristics of money
Summarize how the Federal Reserve System regulates the money supply in order to maintain a healthy economy
Describe the organizations involved in the banking industry
Identify the services provided by financial institutions
Understand how financial institutions are changing to meet the needs of domestic and international customers
Explain how deposit insurance protects customers
Discuss the importance of credit and credit management
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 2

The Great Recession
 Be prepared to discuss the Great Recession , the most recent severe global economic recession
• How severe was it?
• What triggered the wave in foreclosures?
• Why did so many people and businesses have to file for bankruptcy?
• Why is borrowing money more difficult in a recession?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 3

What Is Money?


Define
• Barter System
• Money
• Consumer Price Index
• Purchasing Power
Know the Functions of Money
• Medium of Exchange
• Measure of Value
• Store of Value
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 4

Characteristics of Money
 Know the key Characteristics of Money
• Divisibility
• Portability
• Stability
• Durability
• Difficulty of
Counterfeiting
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 5

The Supply of Money: M1 and M2


Define
• Demand Deposit
• Time Deposit
What are the two Main Measures of the Supply of Money ? Be able to contrast them
• M1
• M2
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 6

The Federal Reserve System






Be prepared to explain what The Federal Reserve
System is and what it does
What was the Fed’s response to the most recent economic crisis?
How does the Fed regulate Reserve Requirements and make more or less required reserves ?
How does the Fed regulate the Discount Rate ?
• Why is it important to regulate the discount rate?
What is involved in the Fed’s Open Market Operations ?
What other responsibilities does the Fed have?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 7

The American Banking Industry
 Define
• Commercial Bank
National Bank
State Bank
• Savings and Loan Associations (S&Ls)
• Credit Unions
• Mutual Savings Banks
• Insurance Companies
• Pension Funds
• Brokerage Firms
• Finance Companies
• Investment Banking Firms
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 8

Careers in Banking
 Know the traits of successful bankers
• Honesty
• Ability to interact with people
• Strong background in accounting
• Appreciation for the banking-finance relationship
• Basic computer skills
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 9

Services Provided by Financial Institutions


Be familiar with Traditional Services Provided by
Financial Institutions
• Checking Accounts
Check
NOW Accounts
•
Savings Accounts
Passbook Savings Account
Certificate of Deposit (CD)
•
Short- and Long-Term Loans
Line of Credit
Revolving Credit Agreement
Collateral
• Credit-Card versus Debit Card Transactions
What are some Electronic Services and International
Services provided by financial institutions?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 10

Changes to the Banking Industry
 Be prepared to discuss Anticipated Changes in the Banking Industry
• What global events and trends have changed and are changing the banking industry?
Globalization
Economic Cycle
Technology
Consumer Demands
Regulatory Issues
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 11

Online and International Banking



Know the advantages and disadvantages of Online
Banking
Define Electronic Funds Transfer (EFT) System
• How has this system changed how banks do business?
Automated Teller Machines (ATMs)
Automated Clearinghouses (ACHs)
Point-of-Sale (POS) Terminals
Electronic Check Conversion (ECC)
Know the popular methods of paying for Import and
Export Transactions
• Letter of Credit
• Banker’s Acceptance
• Currency Exchange
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 12

The FDIC and NCUA
 Define and give a brief history and overview of
• Federal Deposit Insurance Corporation
(FDIC)
• National Credit Union Association (NCUA)
 How much is each FDIC or NCUA account insured to?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 13

Effective Credit Management



Define
• Credit
• Borrower
• Lender
Be prepared to discuss how Individuals and
Businesses can get money/loans from a bank after a credit crisis
Know the Five Cs of Credit Management
• Character
• Capacity
• Capital
• Collateral
• Conditions
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 14

Checking Credit Information


Know some reliable Credit Information Sources regarding Businesses and Individuals
Be prepared to explain the Fair Credit Reporting
Act


What is the Credit Card Act of 2009 ?
How are the Fair Credit Reporting Act and the
Credit Card Act of 2009 different?
• What are they designed to do?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 15

Sound Collection Procedures


Be prepared to discuss Sound Collection
Procedures
What are effective Collection Techniques ?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18 | 16