Suppliers of funds (Savers and/or Investors) have the option of purchasing financial assets such as stocks and bonds directly in the market place – or they can use the services of a financial intermediary such as a Commercial Bank.

Suppliers of funds (Savers and/or Investors) have the option of purchasing financial assets such as stocks and bonds directly in the market place – or they can use the services of a financial intermediary such as a Commercial Bank. Describe how the financial intermediary is an “asset transformer.” Discuss the important benefits provided to these suppliers of funds when using a financial intermediary such as a Commercial Bank. Discuss the major disadvantages for suppliers of funds in using a financial intermediary? We distinguish commercial banks by total asset size. At one extreme, there are the very largest commercial banks with over $500 Billion in total assets and which include the Too Big to Fail banks. At the other extreme, there are the smaller commercial banks known as community banks with under $100 Million in total assets. Discuss the major differences found in the very largest commercial banks that are not found in the smaller ones.

Core Deposits are different from Purchased Funds. Itemize these differences and summarize the advantages and disadvantages of these different sources of funds to the Commercial Bank a) Explain why most banks maintain a high percentage of their total assets as loans and leases? b) Explain the purpose of the Allowance for Loan Losses account. Why is this account is often the focus or auditors and regulators?

Among the many laws enacted that affect commercial bank, two important ones are the Financial Services Modernization Act (FSMA or Gramm-Leach-Bliley) and the The Wall Street Reform and Consumer Protection Act (Dodd-Frank Act, DFA). What were the circumstances that led to these laws being passed? Summarize the arguments both for and against making changes to these two Acts What are the major differences and similarities in these laws from major banking Acts passed from the 1980 through 1991? a) Describe the major advantages credit unions have as compared to commercial banks. b) Describe the major disadvantages credit unions have as compared to commercial banks.

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