Flashcards on Commercial Banks: Functions, Loans, and Risks
Commercial Banks: Functions, Loans, and Risks Explained
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Commercial Banking
28 cards
Card 1
Question: What is a commercial bank defined as in the Slovak Republic (SR)?
Answer: A legal entity headquartered in the SR, established as a joint-stock company and licensed to receive deposits and make loans.
Card 2
Question: What is the main aim of a commercial bank?
Answer: To gain maximum profit or to maximize the price of its shares.
Card 3
Question: List the types of commercial banks by function and ownership.
Answer: By function: universal or specialized (e.g., mortgage, investment, municipal). By ownership: private, public (state-owned), or mixed.
Card 4
Question: What are the three main activities of a commercial bank described in the content?
Answer: 1) Receiving deposits, 2) Making loans, 3) Other activities (payment services, currency exchange, consulting, securities trading).
Card 5
Question: In a deposit relationship, who becomes the debtor and what is the bank's liability?
Answer: When a depositor puts money in a bank, the bank becomes the debtor; the deposits plus interest owed are the bank's liability.
Card 6
Question: How are interests treated for the bank when receiving deposits and when making loans?
Answer: Interest paid to depositors is a cost for the bank; interest received from loans is revenue for the bank.
Card 7
Question: What are passive operations of commercial banks?
Answer: Operations focused on acquiring sources (liabilities) that help the bank conduct its activities, including own capital and borrowed capital.
Card 8
Question: What are the two main categories of sources in passive operations?
Answer: a) Own sources (own capital) — shareholders and retained earnings. b) Borrowed capital (loan capital) — funds obtained that must be returned with inte
Card 9
Question: Name the types of deposits listed.
Answer: Demand deposits, savings deposits, fixed term deposits, and deposit slips. Also mentioned: mortgage bonds and bank bonds.
Card 10
Question: What are demand deposits and what is their key risk for banks?
Answer: Short-term deposits in current accounts that clients can use freely; they are the least stable borrowed capital and are risky for bank liquidity.