CRB flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

CET1 Capital

Common equity tier 1 capital is the highest-quality regulatory capital, mainly common stock and retained earnings less deductions such as goodwill and intangibles. Basel III requires a minimum CET1 ratio of 4.5% of risk-weighted assets.

Liquidity Coverage Ratio

The LCR requires banks to hold high-quality liquid assets sufficient to cover net cash outflows over a 30-day stress period. The minimum ratio is 100% for internationally active banks.

Suspicious Activity Report

A SAR is a confidential filing to FinCEN reporting suspicious transactions that may involve money laundering or other financial crimes. Filing institutions are protected by safe harbor and may not notify the subject.

CAMELS Rating

A supervisory rating system evaluating Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. Composite ratings range from 1 (best) to 5 (worst) and drive supervisory actions.

Disparate Impact

A fair lending theory holding that a facially neutral policy violates ECOA or the Fair Housing Act if it has a disproportionately adverse effect on a protected class without a business necessity justification.

Three Lines of Defense

A governance model: the first line (business units) owns and manages risk; the second line (risk and compliance) provides oversight; the third line (internal audit) provides independent assurance to the board.

Call Report

The quarterly FFIEC financial report filed by U.S. banks, including balance sheet, income statement, and detailed schedules. Regulators use it for off-site monitoring and peer analysis.

Net Stable Funding Ratio

NSFR = available stable funding ÷ required stable funding, with a minimum of 100%. It promotes resilience over a one-year horizon by limiting reliance on short-term wholesale funding.

Beneficial Ownership Rule

The CDD rule requires covered financial institutions to identify and verify beneficial owners owning 25% or more of a legal entity customer, plus one individual with significant control.

Prompt Corrective Action

A U.S. supervisory framework that mandates progressively stronger actions as a bank's capital falls through five categories, from well capitalized to critically undercapitalized, based on leverage and risk-based ratios.

Leverage Ratio

Tier 1 capital divided by total exposure (on- and off-balance-sheet). Basel sets a 3% minimum; the U.S. enhanced supplementary leverage ratio imposes stricter requirements on the largest banks.

Ability-to-Repay Rule

Regulation Z requires creditors to make a reasonable, good-faith determination that a consumer can repay a residential mortgage loan. Qualified Mortgages provide a safe harbor if specific underwriting criteria are met.

Currency Transaction Report

A CTR is filed with FinCEN for cash transactions exceeding $10,000 in a single business day. Multiple transactions are aggregated if the institution knows or has reason to know they are by or on behalf of the same person.

Expected Shortfall

The average loss beyond the VaR threshold at a given confidence level. Basel's FRTB replaces 99% VaR with 97.5% expected shortfall for market risk capital.

Output Floor

A Basel III final reform limiting the capital benefit from internal models by requiring risk-weighted assets to be at least 72.5% of the standardized approach calculation.

Countercyclical Capital Buffer

A macroprudential tool allowing national authorities to require additional CET1 capital of up to 2.5% of risk-weighted assets during periods of elevated credit growth, releaseable in a downturn.

Volcker Rule

Section 619 of Dodd-Frank restricts proprietary trading and certain relationships with hedge funds and private equity funds by banking entities, with compliance program requirements for larger institutions.

CECL

Current Expected Credit Losses (ASC 326) requires banks to estimate lifetime expected credit losses at loan origination, replacing the incurred-loss model and generally increasing allowances earlier in the credit cycle.

Debt Service Coverage Ratio

DSCR = net operating income ÷ total debt service. A ratio below 1.0 indicates the borrower cannot cover debt service from operations, signaling elevated default risk.

Loan-to-Value Ratio

LTV = loan amount ÷ appraised collateral value. Higher LTV means greater potential loss severity in default; combined LTV includes all liens on the property.

Community Reinvestment Act

The CRA requires banks to meet the credit needs of their entire assessment areas, including low- and moderate-income neighborhoods, evaluated under lending, investment, and service tests.

Home Mortgage Disclosure Act

HMDA, implemented by Regulation C, requires covered lenders to collect and report loan-level data on applications, originations, pricing, and borrower demographics, used to detect redlining and disparate treatment.

OFAC Sanctions

The Office of Foreign Assets Control administers U.S. economic sanctions. U.S. persons must block or reject transactions involving Specially Designated Nationals and report blocked property within 10 business days.

COSO Framework

The COSO Internal Control-Integrated Framework (2013) defines five components: control environment, risk assessment, control activities, information and communication, and monitoring activities.

Regulation O

Regulation O restricts extensions of credit by banks to their executive officers, directors, and principal shareholders, and to related interests, imposing limits and disclosure requirements.

Sarbanes-Oxley Section 404

SOX 404 requires management to assess and external auditors to attest to the effectiveness of internal control over financial reporting for accelerated filers, with disclosure of material weaknesses.

Cease-and-Desist Order

A formal enforcement action issued by a banking regulator requiring a bank or individual to stop unsafe or unsound practices and take corrective action; violations can lead to civil money penalties.

Stress Capital Buffer

The U.S. stress capital buffer integrates supervisory stress test results into the capital conservation buffer requirement for large banks, replacing the static 2.5% buffer under Basel III.

Value at Risk

VaR estimates the maximum loss over a given horizon at a specified confidence level. Limitations include non-normality, tail risk, and model risk; Basel FRTB replaces it with expected shortfall.

Redlining

A discriminatory practice of denying or limiting financial services to residents of certain neighborhoods based on race or ethnicity, violating the Fair Housing Act and ECOA; HMDA data help regulators detect it.

Total Loss-Absorbing Capacity

TLAC applies to global systemically important banks, requiring minimum loss-absorbing and recapitalization resources to ensure orderly resolution without taxpayer support.

FATF Recommendations

The Financial Action Task Force's 40 Recommendations set the international AML/CFT standard. Jurisdictions are assessed through mutual evaluations and may be placed on grey or black lists.