Questions and Answers
Who are typical clients that financial institutions provide loans to?
What does the capacity of a client refer to?
What happens during a bank run?
Can banks issue loans to other banks?
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What do the 'conditions' refer to in a loan context?
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What is a primary duty of receivable collections?
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How is a savings account characterized?
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What defines capital in the context of loan repayment?
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Study Notes
Loan Clients and Financial Relationships
- Typical clients for financial institution loans include insurance companies, financing companies, and other financial institutions.
- Banks may provide loans to other banks as part of their lending practices.
Client Financial Capacity
- Capacity evaluates a client's ability to repay based on cash flow, not merely their equity or assets after debts.
- Capital is distinct from capacity; it focuses on the financial resources available for loan repayment.
Banking Operations and Risks
- A bank run occurs when many people withdraw deposits simultaneously, increasing the risk of default.
- Conditions of a loan pertain to the specific terms and requirements that must be met by the borrower.
Debt Collections and Management
- Banks may engage collection agencies or lawyers to recover debts, charging a service fee based on the amount collected.
- Accounts Receivable/Collections departments focus on sending overdue notices (dunning letters) to clients.
Banking Instruments
- A savings account is defined as an interest-bearing deposit account that allows the account holder to earn interest on their stored funds.
- The drawee is the individual or entity that writes the check, while the payee is the individual or entity to whom the check is written.
- A clearing house is typically an entity or branch of a bank responsible for facilitating the clearing of checks.
Banking Regulations and Policies
- General provisions require that new accounts may only be created after a face-to-face interaction and personal interview with authorized bank personnel.
- Banks are required to maintain real paper money as bank reserves, stored either on-site in a vault or in accounts with other commercial banks.
- Banks have the discretion to refuse prospective clients from opening new accounts based on their policies.
Check Formatting and Structures
- The recent check format includes the Peso sign within the Amount in Figure section.
- Banks do not need prior approval from the Bangko Sentral ng Pilipinas (BSP) to issue Negotiable Certificates of Time Deposit (NCTDs).
Commercial Loans
- Commercial loans are often backed by collateral, typically in the form of land or other real estate assets.
- Identifying the purpose of a loan is one of the primary factors considered during the lending process.
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Description
Test your knowledge on the role and operations of financial institutions. This quiz covers topics like client capacity, banking runs, and loan services provided by banks. Assess your understanding of key financial concepts and relationships.
