DOCSLIB.ORG

The Use of Checks and Other Noncash Payment Instruments in the United States

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Use of Checks and Other Noncash Payment Instruments in the United States The Use of Checks and Other Noncash Payment Instruments in the United States. Geoffrey R. Gerdes and Jack K. Walton II, of the Taken together, the data show that an estimated Board's Division of Reserve Bank Operations and 32.8 billion checks were paid in the United States Payment Systems, prepared this article. Thomas in 1979, 49.5 billion in 1995, and 42.5 billion in Guerin andAmin Rokni provided research assistance. 2000 (chart 1). The exact year in which check use peaked is unknown, but it appears that the number Over the past several decades, the payments industry paid began to decline sometime in the mid-1990s. By has undergone significant change. New electronic 2000, retail electronic payments had gained consider- payment instruments have been introduced, and the able ground. Nonetheless, checks remained the pre- means for making electronic payments have become dominant type of retail noncash payment. Checks increasingly available for use in everyday commerce. also continued to account for a large proportion of Further, the adaptation of technology has driven the total value of retail noncash payments in 2000, down the costs of processing electronic payments though the real value of total checks paid had relative to check payments. Partial statistics and anec- declined since 1979. dotal evidence suggest that consumers and businesses are increasingly using electronic payments. Neverthe- less, the paper check continues to be the most com- OVERALL TRENDS IN THE USE OF CHECKS. monly used type of noncash payment instrument In the United States, most noncash payments are in the U.S. economy. Checks' share in noncash pay- made using checks, credit cards, debit cards, and the ments has been declining, however, and recent evi- dence suggests that the total number of checks paid electronic payment system called the automated has been declining as well. clearinghouse (ACH)—collectively referred to as retail noncash payments. Consumers, businesses, To shed light on the use of checks and other noncash payment instruments in the United States, [note: 1]. The term check refers to a demand draft drawn on or payable the Federal Reserve recently sponsored three related through or at a depository institution or a federal, state, or local surveys collectively referred to as the Retail Pay- government entity, including cashiers and certified checks, travelers checks, money orders, and rebate checks. The ACH is an electronic ments Research Project. The survey data were used payments network that enables the processing of credit and debit to estimate the number and value of payments made payments, such as payroll and prearranged bill payments, between in 2000 using checks and several types of electronic depository institutions. [end of note.] payment instruments as well as to study the character- istics of individual checks paid in 2000. The magni- Chart 1. Number of check and retail electronic payment tude and diversity of the samples also enabled a transactions, selected years. [bar graph plotting four data: retail ACH, credit card, comparison of check use across type and size of billion.Indebit 1979 card, Incheck 1995, and was check. check about was 33 about billion, 49 creditbillion, card debit about card 5 debitabout card32 billion.billion, about Incredit 9 2000,billion, card check credit about was card10 about billion, about 42 16retail billion, billion, ACH depository institution and across geographic regions. retail ACH about 5 billion.] In addition, the data provided a basis for looking at changes in noncash payments since 1979, when the Federal Reserve collected data on checks for an analysis of the check-clearing system, and since 1995, when the Federal Reserve collected data on checks for a report to the Congress on funds availabil- ity and check fraud. The surveys are described in detail in the appendix. NOTE. Darrel Parke and Samuel Slowinski, of the Board's Division of Research and Statistics, provided valuable assistance with the production and interpretation of the statistical estimates. [end of note.] Table 1. Number and value of retail noncash payments, 2000 and acceptability of alternatives to cash influenced the proportion of payments made with retail noncash Number:Number: Value:Value: instruments. From 1979 to 2000, the number of retail Type of payment Billions of Percent of Trillions of Percent of noncash payments grew approximately 3 percent a payments total dollars total year, about the same as the rate of growth of real Check 42.5 59.5 39.3 84.4 GDP. Hence, both the number of retail noncash pay- Retail electronic payments 28.9 40.5 7.3 15.6 ments and the amount of economic output roughly Debit card 8.3 11.6 .3 .7 Credit card: doubled over the period. Over the same period, the General-purpose 12.3 17.2 1.1 2.3 number of households increased from 78.8 million to 2.7 3.8 .2 .3 Credit card:Private-label Retail ACH 5.6 7.9 5.7 12.2 105.5 million, for an annual rate of growth of almost Total 71.5 100.0 46.6 100.0 1.5 percent. NOTE. In this and subsequent tables, components may not sum to totals, and The growth in retail noncash payments leading up calculations may not yield averages and percentages shown, because of to the mid-1990s may have resulted from a general rounding. Note increase in payments1 about check: Include, an sincreas checks paied biyn depositorthe numbey institutionsr o,f U.S. Treasury checks, and postal money orders. households with checking accounts, and the replace- Note 2about General purpose creditmen cards:t of some cash payments by noncash payment Includes co-branded credit cards, charge cards, co-branded charge cards, secured credit cards, travel and entertainment cards, commercial cards, and new alternatives. About 9.2 billion more retail electronic payment technologies that route transactions through the card associations' networks. payments were made in 1995 than in 1979. The Note number of checks 3 about privateals label credit cards: Includeo ross retailee considerablr cards, oil company ovey cardsr th, third-parte y fleet cards, and cards issued by third-party receivable owners. Note period. In fact, abou4 on retail ACH:t Exclude 16.7s billioACH transactionn mores classifiecheckd sa s wercash concentratioe n and disburse- ment, which, for purposes of this study, are not considered payments. paid in 1995. However, the number of checks paid as a share of all retail noncash payments declined, from and government entities made about 71.5 billion 85.7 percent to 77.1 percent. retail noncash payments in 2000 (table 1). The total The decline in the number of checks as a share of value of these payments was about $46.6 trillion, retail noncash payments continued over the period approximately four and three-fourths times U.S. gross 1995 to 2000, and the number of checks paid declined domestic product (GDP) for that year. Checks were as well, from an estimated 49.5 billion in 1995 to the predominant type of retail noncash payment, 42.5 billion in 2000. (In comparison, the annual accounting for 59.5 percent of these payments by number of electronic payments increased 14.2 billion number. By comparison, checks constituted 85.7 per- over the period.) Whether the number of checks paid cent of retail noncash payments in 1979 (table 2). in nearby years was higher or lower than in 1995 is Although the number of check payments increased unknown. However, these estimates suggest that the from 1979 to 2000, the number of checks as a share number of checks paid peaked during the mid-1990s. of retail noncash payments declined about 26 percent- age points. [note: 2]. The proportion of households without a checking account fell Growth in overall economic activity and popula- from 18.7 percent in 1989 to 13.2 percent in 1998. See Arthur B. tion led to a general growth in payments, including Kennickell, Martha Starr-McCluer, and Brian J. Surette, ''Recent Changes in U.S. Family Finances: Results from the 1998 Survey of cash payments, between 1979 and 2000. Such factors Consumer Finances,'' Federal Reserve Bulletin, vol. 86 (January as technological change and increased availability 2000), pp. 1-29. [end of note.] Table 2. Number and rate of growth of retail noncash payments, selected years Number (billions): NumberNumbe r(billions): (billions) : GrowtGrowthh (percent(percent, annua, l Growth (percent annual Type of payment rate): 1979-2000 1979 1995 2000 annua; rate): 1995-2000 rate): 1979-95 Check 32.8 49.5 42.5 2.6 -3.0 1.2 Retail electronic payments 5.5 14.7 28.9 6.3 14.6 na 8.2 na Debit card .0 1.4 8.3 41.8 Credit card General-purpose 1.5 7.8 12.3 10.9 9.5 10.5 Private-label 3.8 2.6 2.7 -2.3 .9 -1.6 Retail ACH .2 2.8 5.6 19.0 15.1 18.0 Total 38.3 64.2 71.5 3.3 2.2 3.0 NOTE. See table 1, notes 1-4. SOURCES. Federal Reserve; National Automated Clearing House Association; Nilson Report, selected issues; and ATM & Debit News, EFT Data Book, 2002 edition. The apparent decline in the number of checks paid Table 3. Number and value of checks paid, between 1995 and 2000 was likely not driven by a by type of institution, selected years change in the general level of economic activity. Memo: Value Transaction Both years were part of an economic expansion that Number Year and type of institution (trillions deposits (billions) began in the early 1990s and peaked in March 2001 of dollars) (billions (according to the National Bureau of Economic of dollars) Research), and spending by consumers and busi- 1979: nesses, which make the predominant number of pay- Commercial banks 31.4 n.a.
Load more

Recommended publications
  • Bank Capital Requirements
    May 10, 2019 Bank Capital Requirements Federal Reserve, OCC and FDIC Propose Amendments to the Supplementary Leverage Ratio Requirements for Custodial Banking Organizations SUMMARY Last week, the Federal Reserve, OCC and FDIC published a joint notice of proposed rulemaking in the Federal Register to implement Section 402 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”), which would modify the supplementary leverage ratio (“SLR”) in their regulatory capital rules to exclude certain funds of custodial banking organizations deposited with certain central banks.1 A banking organization would be considered a custodial banking organization if it is a U.S. top-tier depository institution holding company with a ratio of assets under custody (“AUC”)-to-total assets of at least 30 to 1, or a subsidiary depository institution of any such holding company. Under the proposal, a custodial banking organization would exclude deposits placed at a Federal Reserve Bank, the European Central Bank and certain other central banks from its “total leverage exposure” (the denominator of the SLR), subject to a limit on the amount of deposits that could be excluded calculated as the amount of deposit liabilities of the custodial banking organization that are linked to fiduciary or custody and safekeeping accounts. Comments on the proposal are due by July 1, 2019. BACKGROUND The generally applicable leverage requirements of the agencies’ regulatory capital rules provide that all banking organizations must meet a minimum leverage ratio of 4 percent, measured as the ratio of tier 1 capital to average total consolidated assets. Since January 1, 2018, advanced approaches banking organizations have also been required to maintain an SLR of at least 3 percent.2 The SLR measures tier 1 capital relative to “total leverage exposure,” which includes on-balance-sheet assets (such as deposits New York Washington, D.C.
    [Show full text]
  • Letter Agreement for Depository Institutions Eligible to Receive International Cash Services
    Form last modified January 2016 Form of Letter Agreement for Depository Institutions eligible to receive International Cash Services [LETTERHEAD OF ADMINISTRATIVE RESERVE BANK] [DATE] [NAME OF DI ELIGIBLE TO RECEIVE INTERNATIONAL CASH SERVICES]1 [STREET ADDRESS] [CITY, STATE, ZIP] Attention: [NAME], [TITLE] Ladies and Gentlemen: This letter agreement (this “Agreement”) sets forth the agreement of [NAME OF DI], a depository institution [chartered][organized] under the laws of [U.S. STATE OR COUNTRY] with its principal office located at [ADDRESS] (the “Depository Institution”) [and a U.S. [branch/agency] authorized pursuant to Regulation K (Part 211 of Title 12 of the United States Code of Federal Regulations) located at [ADDRESS] (the “U.S. Branch/Agency”)] to the terms and conditions governing the withdrawal of U.S. dollar banknotes from and the deposit of U.S. dollar banknotes to a Federal Reserve Bank in connection with cross-border currency activity. The Depository Institution acknowledges that the Federal Reserve Bank of [CITY] (the “Reserve Bank”) is the [Depository Institution’s][U.S. Branch/Agency’s] Administrative Reserve Bank. For purposes of this Agreement, the following terms shall have the following meanings: “Administrative Reserve Bank” has the meaning specified in the Reserve Bank’s Operating Circular No. 1, as it may be amended from time to time. “Federal Reserve Prohibition” means any prohibition on U.S. dollar banknote trading with a particular individual or entity, or with individuals or entities in a particular jurisdiction, that is communicated by the Reserve Bank in writing upon ten (10) days’ prior written notice to the Depository Institution [and its U.S.
    [Show full text]
  • GAO-14-110, Highlights, U.S. CURRENCY: Coin Inventory
    October 2013 U.S. CURRENCY Coin Inventory Management Needs Better Performance Information Highlights of GAO-14-110, a report to congressional requesters Why GAO Did This Study What GAO Found Efficiently managing the circulating In 2009, the Federal Reserve centralized coin management across the 12 coin inventory helps ensure that Reserve Banks, established national inventory targets to track and measure the enough coins are available to meet coin inventory, and in 2011 established a contract with armored carriers that public demand while avoiding store Reserve Bank coins in their facilities. However, according to Federal unnecessary production and storage Reserve data, from 2008 to 2012, total annual Reserve Bank coin management costs. The Federal Reserve fulfills the costs increased by 69 percent and at individual Reserve Banks increased at coin demand of the nation’s depository rates ranging from 36 percent to 116 percent. The Federal Reserve’s current institutions (e.g., commercial banks strategic plan calls for using financial resources efficiently and effectively and and credit unions) by managing monitoring costs to improve cost-effectiveness. However, the agency does not Reserve Bank inventory and ordering monitor coin management costs by each Reserve Bank—instead focusing on new coins from the U.S. Mint. GAO was asked to review this approach. combined national coin and note costs—thus missing potential opportunities to This report examines (1) how the improve the cost-effectiveness of coin-related operations across Reserve Banks. Federal Reserve manages the circulating coin inventory and the In managing the circulating coin inventory, the Federal Reserve followed two of related costs, (2) the extent to which five key practices GAO identified and partially followed three.
    [Show full text]
  • Introduction to Depository Institutions
    Introduction to Depository Institutions Advanced Level Millions of people use financial services offered by depository institutions on a daily basis to help them manage their money. Commercial banks, credit unions, and savings banks are all examples of depository institutions. Many types of companies offer financial services to consumers. But, depository institutions are special in that they accept deposits from consumers and the safety of those deposits is often guaranteed by the government. The range of valuable services tied to deposit accounts (online banking, checking accounts and debit cards, bill payment services, automatic savings transfers) makes depository institutions an important component to a financial plan. Types of Depository Institutions Commercial banks and credit unions are the most commonly used depository institutions. Although both types of institutions offer a range of “banking” services, they are actually quite different in terms of their ownership structure and the types of consumers they serve. Commercial banks are for‐profit depository businesses that offer financial services to both consumers and other businesses. Banks are usually the largest depository institutions and offer the widest variety of services to customers. Credit unions are depository institutions that offer many banking services. But, unlike banks, they are owned by their customers, who are usually called members. A credit union has membership qualifications that require its members share a common bond such as the same employer, the geographic area in which they live or membership in an organization. Credit unions are non‐profit organizations exempt from federal income tax. This feature often allows them to pay higher interest rates on deposits, charge lower interest rates on loans and charge lower fees, compared to banks and other depository institutions.
    [Show full text]
  • Regulation CC
    Consumer Affairs Laws and Regulations Regulation CC Introduction The Expedited Funds Availability Act (EFA) was enacted in August 1987 and became effective in Septem- ber 1988. The Check Clearing for the 21st Century Act (Check 21) was enacted October 28, 2003 with an effective date of October 28, 2004. Regulation CC (12 C.F.R. Part 229) issued by the Board of Governors of the Federal Reserve System implements the EFA act in Subparts A through C and Check 21 in Subpart D. Regulation CC sets forth the requirements that depository institutions make funds deposited into transaction accounts available according to specified time schedules and that they disclose their funds availability poli- cies to their customers. The regulation also establishes rules designed to speed the collection and return of unpaid checks. The Check 21 section of the regulation describes requirements that affect banks that create or receive substitute checks, including consumer disclosures and expedited recredit procedures. Regulation CC contains four subparts: • Subpart A – Defines terms and provides for administrative enforcement. • Subpart B – Specifies availability schedules or time frames within which banks must make funds avail- able for withdrawal. It also includes rules regarding exceptions to the schedules, disclosure of funds availability policies, and payment of interest. • Subpart C – Sets forth rules concerning the expeditious return of checks, the responsibilities of paying and returning banks, authorization of direct returns, notification of nonpayment of large-dollar returns by the paying bank, check-indorsement standards, and other related changes to the check collection system. • Subpart D – Contains provisions concerning requirements a substitute check must meet to be the legal equivalent of an original check; bank duties, warranties, and indemnities associated with substitute checks; expedited recredit procedures for consumers and banks; and consumer disclosures regarding sub- stitute checks.
    [Show full text]
  • Warehouse Banking∗
    WAREHOUSE BANKING∗ Jason Roderick Donaldson Giorgia Piacentino Anjan Thakor Washington University in St. Louis September 21, 2016 Abstract We develop a theory of banking that explains why banks started out as commodities warehouses. We show that warehouses become banks because their superior storage technology allows them to enforce the repayment of loans most effectively. Further, interbank markets emerge endogenously to support this enforcement mechanism. Even though warehouses store deposits of real goods, they make loans by writing new “fake” warehouse receipts, rather than by taking deposits out of storage. Our theory helps to explain how modern banks create funding liquidity and why they combine warehousing (custody and deposit-taking), lending, and private money creation within the same institutions. It also casts light on a number of contemporary regulatory policies. ∗For their helpful comments, we thank Franklin Allen, Vladimir Asriyan, Ulf Axelson, Juliane Begenau, Philip Bond, Liam Brunt, Mike Burkart, Doug Diamond, Leo Ferraris, Colm Friel, Nicolae Gârleanu, Anand Goel, Itay Goldstein, Charles Goodhart, Denis Gromb, Chao Gu, Charles Kahn, Bill Keaton, Peter Koudijs, Arvind Krishnamurthy, Yaron Leitner, Ben Lester, Andrey Malenko, Nadya Malenko, Ernst Maug, Martin Oehmke, Clemens Otto, George Pennacchi, Uday Rajan, Adriano Rampini, Daniel Sanches, Tano Santos, Joel Shapiro, Carolyn Sissoko, Janis Skrastins, Javier Suarez, Neng Wang, Lucy White, Andrew Winton, Randy Wright, Tanju Yorulmazer and seminar participants at the 6th Bank of Portugal Conference on Financial Intermediation, the 2015 Colorado Finance Summit, the 2015 Summer Symposium at Gerzensee, the 2015 European Winter Finance Conference, the 2015 IDC Summer Finance Conference, the IMF, the 10th Jackson Hole Finance Conference, the 2016 LBS Financial Intermediation Conference, the 7th Conference on Money, Banking, and Asset Markets at UW-Madison, the 2016 Mitsui Finance Symposium at the University of Michigan, the 2015 Summer Money Workshop at the St.
    [Show full text]
  • Remittance Transfer Rule Interviews: Questions for Depository Institutions, Credit Unions, Broker Dealers
    1700 G Street, N.W., Washington, DC 20552 REMITTANCE TRANSFER RULE INTERVIEWS: QUESTIONS FOR DEPOSITORY INSTITUTIONS, CREDIT UNIONS, BROKER DEALERS This document is an overview of the type of questions that we would like to ask regarding the temporary exception in the Remittance Transfer Rule. First, there is an overview of the temporary exception. Below that overview are the questions that we will use in our discussions with you. We may not cover every question; however, we hope this list will serve as a useful guide for the types of topics that we would like to cover. OVERVIEW OF THE TEMPORARY EXCEPTION The Remittance Transfer Rule requires regulated institutions to provide disclosures to remittance senders containing information about the price of the transfer, including fees and exchange rates. Generally, all disclosed amounts must be exact. However, the rule contains several exceptions that allow providers to estimate the applicable exchange rate, back-end fees and taxes, and total funds to be received. Some of these exceptions are permanent. The focus of this interview is a temporary exception for insured depository institutions and credit unions.1 The exception is described in section 1005.32(a) of Regulation E. It is currently set to expire on July 21, 2015. For the temporary exception to apply, the provider must meet the following criteria. • Insured institution. The provider must be an insured depository institution or credit union, or an uninsured U.S. branch or agency of a foreign depository institution. • Account-based transfers. The remittance transfer must be sent from the sender’s account with the provider.
    [Show full text]
  • Supplementary Leverage Ratio Final Rule
    November 19, 2019 MEMORANDUM TO: Board of Directors FROM: Doreen R. Eberley, Director SUBJECT: Regulatory Capital Rule: Revisions to the Supplementary Leverage Ratio to Exclude Certain Central Bank Deposits of Banking Organizations Predominantly Engaged in Custody, Safekeeping and Asset Servicing Activities Summary: Staff are presenting for approval of the Federal Deposit Insurance Corporation (FDIC) Board of Directors (FDIC Board) a request to publish the attached interagency final rule (final rule) to amend the regulatory capital rule of the FDIC, the Office of the Comptroller of the Currency (OCC), and the Board of Governors of the Federal Reserve System (FRB) (collectively, the agencies) to exclude from the supplementary leverage ratio certain central bank deposits of custodial banks, in accordance with section 402 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA)(section 402). Section 402 defines a custodial bank as any depository institution holding company predominantly engaged in custody, safekeeping, and asset servicing activities, including any insured depository institution (IDI) subsidiary of such a holding company. Recommendation: FDIC staff are requesting the FDIC Board approve the interagency final rule and authorize its publication in the Federal Register with an effective date of April 1, 2020. Discussion: Concur: Nicholas J. Podsiadly General Counsel I. Background A. Custody Banks and the Current Leverage Capital Requirements Certain banking organizations offer fiduciary, custody, safekeeping, and asset servicing services. Fiduciary and custody clients often maintain cash deposits at the banking organization in connection with these services. These cash deposits fluctuate depending on the activities of the clients. For example, deposit balances generally increase during periods when customers sell securities.
    [Show full text]
  • Investor Guide to Minority Depository Institutions Regulated by the Office of Thrift Supervision
    FOR ILLUSTRATION PURPOSES ONLY In Partnership with the Office of Thrift Supervision and the OTS Minority Depository Institutions Advisory Committee Investor Guide to Minority Depository Institutions Regulated by the Office of Thrift Supervision Prepared by National Community Investment Fund Chicago, Illinois DISCLAIMER: THIS REPORT SETS FORTH INFORMATION REGARDING A NUMBER OF COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS, THEIR SOCIAL MISSIONS AND VARIOUS METRICS BY WHICH TO MEASURE THEIR SUCCESS IN SATISFYING THEIR SOCIAL MISSIONS. READERS OF THIS REPORT ARE CAUTIONED THAT THIS REPORT HAS NOT BEEN PREPARED WITH ANY PARTICULAR READER IN MIND AND EACH READER SHOULD REVIEW THIS REPORT CAREFULLY AND THEREAFTER MAKE ITS OWN DECISION AS TO WHETHER AN INVESTMENT IN DEBT OR EQUITY SECURITIES OR DEPOSITS OF COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS OR ANY PARTICULAR COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION IS APPROPRIATE FOR IT. [legal disclosures and disclaimers to be added] 1 Page intentionally left blank 2 Table of Contents Introduction Foreword............................................................................................................................. 5 Background on Minority Depository Institutions............................................................... 6 Primer on Social Performance MetricsSM and the Model CDBI Framework..................... 7 Minority Depository Institution Profiles Advance Bank, Baltimore, MD .......................................................................................... 9 Broadway
    [Show full text]
  • National Credit Union Administration Minority Depository Institutions Annual Report
    CONGRESSIONAL REPORT 2014 National Credit Union Administration Minority Depository Institutions Annual Report Plain Plain Writing Writing Act Act of of2010 2010 Compliance Compliance Report Report Report to Congress May 21, 2012 2 Minority Depository Institutions Congressional Report ● 2014 Table of Contents Executive Summary .......................................................................................... 1 Minority Depository Institution Preservation Program ...................................... 3 Minority Depository (Credit Union) Institutions ............................................... 4 . Geographic Concentrations of Minority Depository Institutions ............ 5 . Composition of Minority Depository Institutions ................................... 6 . Key Financial Indicators ........................................................................ 7 Actions to Preserve Minority Depository Institutions ........................................ 13 . Preserving the Number of Minority Depository Institutions ................... 13 . Preserving the Character of Minority Depository Institutions ................. 14 . Providing Technical Assistance to Prevent Insolvency of Minority Depository Institutions .......................................................................... 15 . Promoting the Creation of Minority Despository Institutions ................. 16 . Providing Training, Technical Assistance, and Educational Program ..... 16 Conclusion .......................................................................................................
    [Show full text]
  • Chapter 5 Banking and Interest Rates
    Personal Finance, 6e (Madura) Chapter 5 Banking and Interest Rates 5.1 Types of Financial Institutions 1) Bank fees for use of an automated teller machine (ATM) do not need to be considered when choosing a bank since fees are set by the federal government and are the same for all banks. Answer: FALSE Diff: 1 Question Status: Revised 2) Bank ATM charges may be substantial if you make many transactions monthly and use out- of-network machines. Answer: TRUE Diff: 1 Question Status: Previous edition 3) Depository institutions are financial institutions that accept deposits (that are insured up to a maximum level) from individuals or firms and provide loans. Answer: TRUE Diff: 1 Question Status: Previous edition 4) An example of a depository financial institution is an insurance company. Answer: FALSE Diff: 2 Question Status: Previous edition 5) Deposits in commercial banks that are members of the FDIC, are insured up to a maximum of $50,000 per account. Answer: FALSE Diff: 1 Question Status: Revised 6) Savings institutions differ from commercial banks in that they tend to focus less on providing commercial loans. Answer: TRUE Diff: 2 Question Status: Previous edition 7) Credit unions are nonprofit depository institutions that serve members who have a common affiliation (such as the same employer or same community). Answer: TRUE Diff: 2 Question Status: Previous edition 1 Copyright © 2017 Pearson Education, Inc. 8) Introductory high interest rates paid by financial institutions for new accounts are usually a good deal and you should therefore take advantage of them without question. Answer: FALSE Diff: 1 Question Status: Previous edition 9) Nondepository institutions are financial institutions that provide various financial services, but their deposits are not federally insured.
    [Show full text]
  • Schedule Rc-A – Cash and Balances Due from Depository Institutions
    FFIEC 031 and 041 RC-A - CASH AND DUE FROM SCHEDULE RC-A – CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS General Instructions Schedule RC-A is to be completed by banks with foreign offices or with $300 million or more in total assets. On the FFIEC 031, this schedule has two columns for banks with foreign offices to report detail on "Cash and balances due from depository institutions." In column A report amounts for the fully consolidated bank, and in column B report amounts for domestic offices only. See the Glossary entry for "domestic office" for the definition of this term. Refer to the General Instructions section of this book for a detailed discussion of consolidation. On the FFIEC 041, this schedule has a single column for banks with $300 million or more in total assets to report detail on "Cash and balances due from depository institutions." For purposes of these reports, deposit accounts "due from" other depository institutions that are overdrawn are to be reported as other borrowings with a remaining maturity of one year or less in Schedule RC-M, item 5.b.(1), except overdrawn "due from" accounts arising in connection with checks or drafts drawn by the reporting bank and drawn on, or payable at or through, another depository institution either on a zero-balance account or on an account that is not routinely maintained with sufficient balances to cover checks or drafts drawn in the normal course of business during the period until the amount of the checks or drafts is remitted to the other depository institution (in which case, report the funds received or held in connection with such checks or drafts as deposits in Schedule RC-E until the funds are remitted).
    [Show full text]