You have recently obtained a new position as a manager of an international accounting firm, Smith, Lindsey, and Lueders, CPA (SLL). SLL is primarily an auditing firm. Part of your duties will be to analyze the current state of accounting with an emphasis on the international environment. An additional responsibility is that you are in charge of training the new hires for the year. The advantage of having these two responsibilities is that you can use the information gained in your accounting analysis to train your new hires.
The new hires are interested in getting your thoughts on the collapse of the financial system in the United States in 2008. They ask about your understanding of American financial markets. You take a little time to research before you explain the following:
> Compare depository institutions' regulations and depository requirements to those of financial institutions.
> Discuss whether you believe these regulations and requirements are adequate for depository institutions and if financial markets need regulation.
The American Financial Markets
Depository institutions versus financial institutions
First, depository institutions, though they are also considered financial institutions, offer limited services though play an important role in the capital market. These institutions accept deposits from both individual and corporate clients, and then channel these monies into different lending activities.
Second, financial institutions play a broader role than a depository institution as they provide not only deposit and loan services to their clients, but also all other financial services including but not limited to underwriting the issuance of debt and equity securities. In other words, financial institutions provide a broader range of financial intermediation services compared to depository institutions where the financial intermediation being done is for depositors and borrowers only. However, both institutions act as financial intermediaries matching those who have excess funds and those who are in need of more.
Depository institutions versus financial institutions' regulations and requirements
Currently large approved deposit taking institutions are required to keep five days of liquidity, this means that for every dollar of deposit received, these depository institutions have to keep 20% in reserve - thus they can only lend ...
Contemporary accounting issues in the United States are examined.