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Definition of Money center banks

Money Center Banks Image 1

Money center banks

banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds.



Related Terms:

activity center

a segment of the production or service
process for which management wants to separately report
the costs of the activities performed


At-the-money

An option is at-the-money if the strike price of the option is equal to the market price of the
underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at-the-money.


Call money rate

Also called the broker loan rate , the interest rate that banks charge brokers to finance
margin loans to investors. The broker charges the investor the call money rate plus a service charge.


Commodities Exchange Center (CEC)

The location of five New York futures exchanges: Commodity
Exchange, Inc. (COMEX), the New York Mercantile exchange (NYMEX), the New York Cotton Exchange,
the Coffee, Sugar and Cocoa exchange (CSC), and the New York futures exchange (NYFE). common size
statement A statement in which all items are expressed as a percentage of a base figure, useful for purposes of
analyzing trends and the changing relationship between financial statement items. For example, all items in
each year's income statement could be presented as a percentage of net sales.


Consortium banks

A merchant banking subsidiary set up by several banks that may or may not be of the
same nationality. Consortium banks are common in the Euromarket and are active in loan syndication.



cost center

a responsibility center in which the manager has
the authority to incur costs and is evaluated on the basis
of how well costs are controlled


Distribution center

A branch warehouse containing finished goods and service
items intended for distribution directly to customers.


Money Center Banks Image 2

Federal Home Loan Banks

The institutions that regulate and lend to savings and loan associations. The
Federal Home Loan banks play a role analogous to that played by the Federal Reserve banks vis-à-vis
member commercial banks.


Federal Reserve Banks

The twelve district banks in the Federal Reserve System.


Fiat Money

Fiat money is paper currency made legal tender by law or fiat. It is not backed by gold or silver and is not necessarily redeemable in coin. This practice has had widespread use for about the last 70 years. If governments produce too much of it, there is a loss of confidence. Even so, governments print it routinely when they need it. The value of fiat money is dependent upon the performance of the economy of the country which issued it. Canada's currency falls into this category.


High-Powered Money

See money base.


Hot money

money that moves across country borders in response to interest rate differences and that moves
away when the interest rate differential disappears.


In-the-money

A put option that has a strike price higher than the underlying futures price, or a call option
with a strike price lower than the underlying futures price. For example, if the March COMEX silver futures
contract is trading at $6 an ounce, a March call with a strike price of $5.50 would be considered in-the-money
by $0.50 an ounce.
Related: put.


investment center

a responsibility center in which the manager
is responsible for generating revenues and planning
and controlling expenses and has the authority to acquire,
dispose of, and use plant assets to earn the highest rate
of return feasible on those assets within the confines and
to the support of the organization’s goals


Money

Any item that serves as a medium of exchange, a store of value, and a unit of account. See medium of exchange.


Money base

Composed of currency and coins outside the banking system plus liabilities to the deposit money banks.


Money Center Banks Image 3

Money Base

Cash plus deposits of the commercial banks with the central bank.


Money Laundering

This is the process by which "dirty money" generated by criminal activities is converted through legitimate businesses into assets that cannot be easily traced back to their illegal origins.



Money management

Related: Investment management.


Money manager

Related: Investment manager.


Money market

money markets are for borrowing and lending money for three years or less. The securities in
a money market can be U.S.government bonds, treasury bills and commercial paper from banks and
companies.


Money Market

A market that specializes in trading short-term, low-risk, very liquid
debt securities


money market

Market for short-term financial assets.


Money Market

A financial market in which short-term (maturity of less than a year) debt instruments such as bonds are traded.


Money Market

Financial market in which funds are borrowed or lent for short periods. (The money market is distinguished from the capital market, which is the market for long term funds.)


Money market demand account

An account that pays interest based on short-term interest rates.


Money market fund

A mutual fund that invests only in short term securities, such as bankers' acceptances,
commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at
$1. 00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities
and/or the fund may have private insurance protection.


Money Center Banks Image 4

money market fund

A type of mutual fund that invests primarily in short-term debt securities maturing in one year or less. These include treasury bills, bankers’ acceptances, commercial paper, discount notes and guaranteed investment certficates.



Money market hedge

The use of borrowing and lending transactions in foreign currencies to lock in the
home currency value of a foreign currency transaction.


Money market notes

Publicly traded issues that may be collateralized by mortgages and MBSs.


Money Multiplier

Change in the money supply per change in the money base.


money order

A guaranteed form of payment in amounts up to and including $5,000. You might request a money order in order to pay for tuition fees at a university or a college, or for a magazine subscription.


Money purchase plan

A defined benefit contribution plan in which the participant contributes some part and
the firm contributes at the same or a different rate. Also called and individual account plan.


Money Rate of Interest

See interest rate, nominal.


Money rate of return

Annual money return as a percentage of asset value.


Money supply

M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits.
M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits.
M3: M-2 plus large time deposits and term repos.
L: M-3 plus other liquid assets.


Neutrality of Money

The doctrine that the money supply affects only the price level, with no long-run impact on real variables.


New money

In a Treasury auction, the amount by which the par value of the securities offered exceeds that of
those maturing.


Out-of-the-money option

A call option is out-of-the-money if the strike price is greater than the market price
of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of
the underlying security.


Precautionary demand (for money)

The need to meet unexpected or extraordinary contingencies with a
buffer stock of cash.


Printing Money

Sale of bonds by the government to the central bank.


profit center

a responsibility center in which managers are responsible for generating revenues and planning and controlling all expenses


Profit center

An entity within a corporation against which both revenues and costs are
recorded. This results in a separate financial statement for each such entity, which
reveals a net profit or loss, as well as a return on any assets used by the entity.


pseudo microprofit center

a center for which a surrogate
of market value must be used to measure output revenue


Quantity Theory of Money

Theory that velocity is constant, and so a change in money supply will change nominal income by the same percentage. Formalized by the equation Mv = PQ.


real microprofit center

a center whose output has a market value


Real Money Supply

money supply expressed in base-year dollars, calculated by dividing the money supply by a price index.


Reinvoicing center

A central financial subsidiary used by an MNC to reduce transaction exposure by having
all home country exports billed in the home currency and then reinvoiced to each operating affililate in that
affiliate's local currency. It can also be used as a netting center.


responsibility center

a cost object under the control of a manager


revenue center

a responsibility center for which a manager is accountable only for the generation of revenues and has no control over setting selling prices, or budgeting or incurring costs


Speculative demand (for money)

The need for cash to take advantage of investment opportunities that may arise.


Time value of money

The idea that a dollar today is worth more than a dollar in the future, because the dollar
received today can earn interest up until the time the future dollar is received.


Transaction demand (for money)

The need to accommodate a firm's expected cash transactions.



 

 

 

 

 

 

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