Question

17) Briefly, define the following:

a) Wholesale banking
b) Trust Department
c) Basel Accords
d) Fringe bank
e) Commercial Paper (What is it used for? What type of firm issues it?)
f) Bank line of credit

18) What activities can a financial holding company perform that a bank holding company cannot?

Answer 1

17)a)Wholesale banking - This type of banking involves deals with larger parties. If you go by the word wholesale in layman terms which includes large volumes, it is easy to remember. It mainly includes corporate banking with Financial Institutions and investment banking.

f)Bank line of credit - It is the facility of certain loan amount sanctioned by the bank to a company which can be used in bits when necessary usually at a high rate of interest. This is usually withdrawn for unusual expenses or to fullfil working capital requirements. This is similar to credit card facility

b)Trust department - This department manages the trust accounts. Mainly focuses to manage the additional assets and decides where to put their investments.

c) Basel accords are the standards of a bank which it has to adhere while maintaining cash balances to avoid various risks.

e) Commercial paper is a promissory note given by corporations as a loan document which usually is taken to fund the inventories

d)Fringe banks deal with post dated checks which get cleared after the customer's payday.