Money, Banking, and Financial Markets Practice Test: Banking and the Management of Financial Institutions — Flashcards

Banking is the management of financial systems, while finance is the management of money. Banks are financial institutions that accept deposits, pay interest, clear checks, make loans, and act as intermediaries in financial transactions. They are a major source of financing for private capital investment in a country. 

Risk management is an important part of banking, as it involves assessing potential risks involved in any given transaction or investment. Banks face risks from every angle, including changing customer behaviors, fraud, uncertain markets, and regulatory compliance. 

Some risks associated with the banking industry include:
Credit risk: The probability of a financial loss
Liability management: The practice by banks of maintaining a balance between the maturities of their assets and their liabilities in order to maintain liquidity and to facilitate lending while also maintaining healthy balance sheets 

Here are some other banking terms:
Retail or commercial banks: A banking financial institution that acts as a middleman between the suppliers of funds or the depositors and the borrowers
Credit union: A financial institution similar to a commercial bank that is created, owned, and operated by its members
Investment banking: A branch of banking and finance that helps businesses, other corporations, and individuals raise capital