Lesson Flashcards: Banks

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Definition

Financial market

A marketplace where a firm’s securities, such as stocks and bonds, are traded

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Definition

Specialized banks

Generally government-owned banks that lend money only to firms working in a designated field, such as agriculture, industry, or real estate, to boost the growth of specific sectors

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Definition

Default risk

The possibility that borrowers would not be able to fulfill their debt obligations

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Definition

Electronic (virtual) banks

Banks that perform all of their activities over the Internet without having physical buildings for customers to walk into

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Definition

Investment banks

Banks that act purely as intermediaries between investors and firms in the financial market

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Definition

Central bank

One centralized national agency, a financial institution with authority over a large number of monetary issues, from monetary policy to operating as the government’s bank

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Definition

The gold standard

A system that ties the value of a nation’s currency to the amount of gold held in that nation’s reserves

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Definition

Financial intermediary

An entity that serves as a middleman in financial tansactions, such as a bank

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Definition

Commercial bank diversification

The process used by commercial banks to reduce the amount of default risk they are exposed to in a specific sector by distributing loans across a wide variety of sectors

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Definition

Direct finance

The flow of money directly between a lender and a borrower without going through a financial intermediary

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