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PART VI

Commercial Banking

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CHAPTER 17

Commercial Bank Operations

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CHAPTER 17 OVERVIEW

A. Describe the most common source of funds for commercial banks

B. Explain the most common use of funds for commercial banks Bank Market Structure

C. Describe typical Off-Balance Sheet Activities for commercial banks

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A. The Most Common Source of Funds for Commercial Banks

1. Bank Market Structure:

a. Bank Participation in Financial Conglomerates

b. Impact of the Financial Service Modernization Act

1.) Benefits of the Act to Individuals and Firms

2.) Benefits of the Act to Financial Institutions

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A. The Most Common Source of Funds for Commercial Banks

2. Most Common Source of Deposits

a. Transaction Deposits

Electronic Transactions

b. Savings Deposits

c. Time Deposits

1.) Certificates of Deposit

2.) Negotiable Certificates of Deposit

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A. The Most Common Source of Funds for Commercial Banksd. Money Market Deposit Accounts

e. Federal Funds Purchased

f. Borrowing from the Federal Reserve Banks

g. Repurchase Agreements

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A. The Most Common Source of Funds for Commercial Banks

h. Eurodollar Borrowing

i. Bonds Issued by the Bank

j. Bank Capital

k. Summary of Bank Sources of Funds

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B. The Most Common Uses of Funds by Banks

1. Cash

2. Bank Loansa. Types of Business Loansb. Loan Participationsc. Loans Supporting Leveraged Buyoutsd. Collateral Requirements on Business

loanse. Volume of Business Loansf. Types of Consumer Loansg. Real Estate Loans

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B. The Most Common Uses of Funds by Banks

3. Investment in Securities

a) Bank Investment in Securities over Time

4. Federal Funds Sold

5. Repurchase Agreements

6. Eurodollar Loans

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B. The Most Common Uses of Funds by Banks

7. Fixed Assets

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C. Off-Balance Sheet Activities

1. Loan Commitments

2. Standby Letters of Credit

3. Swap Contracts