A bank's installment loan portfolio is usually comprised of a large number ofsmall loans, each scheduled to be amortized over a specific period. Mostinstallment loans are made directly for consumer purchases, but business loansgranted for the purchase of heavy equipment or industrial vehicles, such astractor-trailers or buses, may also be included. In addition, the department maygrant indirect loans for the purchase of consumer goods.

Effective internal controls are the foundation of safe and sound banking. Aproperly designed and consistently enforced system of operational andfinancial internal control helps a bank's board of directors and managementsafeguard the bank's resources, produce reliable financial reports, andcomply with laws and regulations. Effective internal control also reduces thepossibility of significant errors and irregularities and assists in their timelydetection when they do occur.

This section discusses money market investments and securities purchased bythe bank for its own account. Securities purchased primarily for resale tocustomers, i.e., trading account securities, are discussed in a separate sectionof this handbook.

For purposes of this booklet, investment management is defined as thebusiness of managing or providing advice on investment portfolios orindividual assets for compensation. Investment management is one of thefinancial service industry's primary product offerings and generatesconsiderable revenue. National banks are significant providers of investmentmanagement services, and for many it is a key strategic line of business.

The acceptance and management of financial risk is inherent to the business of banking and banks' roles as financial intermediaries. To meet the demands of their customers and communities and to execute business strategies, banks, make loans, purchase securities, and take deposits with different maturities and interest rates.

This booklet explains the philosophy and methods of the Office of the Comptroller of the Currency (OCC) for supervising the largest and most complex national banks. These banks include large banks as designated by the Senior Deputy Comptroller for Large Bank Supervision in Washington, D.C. and may include midsize banks at the discretion of the Deputy Comptroller for Midsize and Credit Card Banks. This guidance also pertains to foreign-owned U.S. branches and agencies, and international operations of both midsize and large banks.1 When reviewing the international operations of national banks,...

A lease is an agreement allowing one party to use another's property, plant, or equipment for a stated period of time in exchange for consideration. Leases have become more prevalent as businesses and consumers look for alternatives to finance the acquisition of fixed assets.

Leveraged lending is a type of corporate finance used for mergers and acquisitions, business recapitalization and refinancing, equity buyouts, and business or product line build-outs and expansions. It is used to increase shareholder returns and to monetize perceived "enterprise value" or other intangibles. In this type of transaction, debt is commonly used as an alternative to equity when financing business expansions and acquisitions. It can serve to support business growth and increase returns to investors by financing business operations that generate incremental profits against a fixed...

Lending is the principal business activity for most commercial banks. The loan portfolio is typically the largest asset and the predominant source of revenue. As such, it is one of the greets sources of risk to a banks safety and soundness. Whether due to lax credit standards, poor portfolio risk manage, or weakness in the economy, loan portfolio problems have historically been the major cause of bank losses and failures.

Merchant processing is the settlement of electronic payment transactions formerchants. Merchant processing activities involve gathering salesinformation from the merchant, obtaining authorization for the transaction, collecting funds from the card-issuing bank, and reimbursing the merchant. The processing of sales transactions for merchants by banks does not directlyaffect the bank's balance sheet except through settlement accounts andreserve balances. However, merchant processing can create significant off-balance-sheet contingent liabilities that may result in losses to the bank