Exam 22: Product and Geographic Expansion

Activities of nonfinancial service firms that perform banking services are referred to as nonbanking.

Economies of scope opportunities seem to be available in the financial services industry, but economies of scale opportunities do not seem to exist.

An investment bank may take a big loss when underwriting an issue on a firm commitment basis because

These interstate banking laws allowed an out-of-state bank to acquire an in-state target bank even if the acquirer's home state did not give banks from the target's state similar acquisition powers.

Which of the following is a disadvantage of international expansion?

The Financial Services Modernization Act of 1999 allows bank holding companies to open insurance underwriting affiliates.

U.S.financial institutions have expanded abroad in recent years, although their foreign counterparts have been prohibited from expanding into the U.S.

In the banking environment, economic and legal firewalls often have been designed to separate the risks of investment bank affiliate activities from commercial banks.

The following three FIs dominate a local market and their total assets are given below. Institution Asset Size Bank A \5 0 million Bank B \6 0 million Bank C \9 0 million If Bank C agrees to be purchased by Banks A and B, what proportion of assets of Bank C should be taken by Banks A and B, respectively in order to have equal post-merger assets?

The required monitoring and surveillance efforts of several regulatory bodies in the case of large holding companies with multi-subsidiaries may actually decrease the efficiency of regulatory oversight.

In order to achieve a more stable revenue stream in a merger, the asset and liability portfolios of the two institutions should have similar credit, interest rate, and liquidity characteristics.

Concern about potential abuses of fiduciary responsibility has been used to justify product segmentation on the grounds of

Which of the following was not an operating characteristic of foreign banks operating in the U.S.prior to the International Banking Act of 1978?

Under the Financial Services Modernization Act of 1999, commercial banks can own and actively manage nonfinancial corporations.

What is the market share of Bank 1? Bank Asset Size 1 \1 00 million 2 \2 00 million 3 \5 00 million

This legislation restricts insurance companies from owning or being affiliated with full service banks.

The following three FIs dominate a local market and their total assets are given below. Institution Asset Size Bank A \5 0 million Bank B \6 0 million Bank C \9 0 million What is the Herfindahl-Hirschman Index (HHI) for the local market?

Issues involved in the diversification of product offerings include the following EXCEPT

Which of the following describes a firm commitment underwriting?

The specialized nature in which credit intermediation is performed by shadow banks makes the process less cost efficient than if done by traditional banks.