Question 1

Market value accounting would make the value of equity more closely approximate the book value of equity.

Accepted Answer

A) True 
 B)False  False

Question 2

Under Basel II, the internal ratings based (IRB) approach to measuring credit risk using the advanced method will be implemented at:

Accepted Answer

A)  the 10 largest banks 
B)  the smallest banks 
C)  foreign banks in the U.S. 
D)  the highest risk banks 
A)  the 10 largest banks 
B)  the smallest banks 
C)  foreign banks in the U.S. 
D)  the highest risk banks A

Question 3

Today, banks with assets more than $500 million can only expense actual loan losses from pre-tax income.

Accepted Answer

A) True 
 B)False  True

Question 4

Capital requirements balance safety and soundness considerations against the efficiency and competitiveness of the banking system.

Accepted Answer

A) True 
 B)False

Question 5

To calculate market-risk equivalent assets, it is necessary to multiple the risk estimates by:

Accepted Answer

A)  a scaling factor 
B)  the capital ratio 
C)  risk-adjusted assets 
D)  none of the above 
A)  a scaling factor 
B)  the capital ratio 
C)  risk-adjusted assets 
D)  none of the above

Question 6

Under Basel II, which of the following is NOT one of the three pillars:

Accepted Answer

A)  minimum capital requirements 
B)  supervisory review process 
C)  market discipline 
D)  deposit insurance protection 
A)  minimum capital requirements 
B)  supervisory review process 
C)  market discipline 
D)  deposit insurance protection

Question 7

Subordinated notes and debentures issued by banks are higher in priority of claims in the event of bank failure than deposit accounts.

Accepted Answer

A) True 
 B)False

Question 8

New capital rules under Basel I and II:

Accepted Answer

A)  incorporate off-balance sheet activities 
B)  do not penalize banks for holding low-risk, liquid assets 
C)  increase the consistency of rules applied to large banks around the world 
D)  all of the above 
A)  incorporate off-balance sheet activities 
B)  do not penalize banks for holding low-risk, liquid assets 
C)  increase the consistency of rules applied to large banks around the world 
D)  all of the above

Question 9

In what section of the balance sheet is the provision for loan losses included?

Accepted Answer

A)  long-term assets 
B)  short-term assets 
C)  long-term liabilities 
D)  none of the above 
A)  long-term assets 
B)  short-term assets 
C)  long-term liabilities 
D)  none of the above

Question 10

Tax gains on debt interest deductions from taxes increase as debt is increased by a bank, and these gains are offset by increasing regulatory costs as debt increases and equity decreases in the capital structure of a bank.

Accepted Answer

A) True 
 B)False

Question 11

When a distressed bank situation arises, which of the following is most closely associated with the FDIC's method of disposition wherein the bank is merged with a healthy bank?

Accepted Answer

A)  depositor payoff 
B)  purchase and assumption 
C)  reorganization 
D)  provision of financial aid 
A)  depositor payoff 
B)  purchase and assumption 
C)  reorganization 
D)  provision of financial aid

Question 12

A standby letter of credit is an example of a(an):

Accepted Answer

A)  on-balance sheet item 
B)  depreciable item 
C)  tax-free item 
D)  off-balance sheet item 
A)  on-balance sheet item 
B)  depreciable item 
C)  tax-free item 
D)  off-balance sheet item

Question 13

Historical evidence on bank failures in the U.S. has proven that small banks are more risky than large banks and, therefore, should have higher capital requirements than large banks.

Accepted Answer

A) True 
 B)False

Question 14

The Form for Analyzing Bank Capital (FABC) was used by the _________ in the 1950s.

Accepted Answer

A)  OCC 
B)  Federal Reserve Board 
C)  FDIC 
D)  all of the above 
A)  OCC 
B)  Federal Reserve Board 
C)  FDIC 
D)  all of the above

Question 15

Which of the following risks are employed in market risk capital requirements?

Accepted Answer

A)  general market risk 
B)  credit risk 
C)  specific risk 
D)  a and c 
E)  a, b, and c 
A)  general market risk 
B)  credit risk 
C)  specific risk 
D)  a and c 
E)  a, b, and c

Question 16

Record bank failures in the 1980s and early 1990s were due to:

Accepted Answer

A)  interest rate risk 
B)  high and volatile interest rates 
C)  local and regional economic declines 
D)  deregulation 
E)  all of the above 
A)  interest rate risk 
B)  high and volatile interest rates 
C)  local and regional economic declines 
D)  deregulation 
E)  all of the above

Question 17

Which of the following statements is NOT true about the trends in bank equity capital?

Accepted Answer

A)  Since 1984 equity capital ratios in the banking industry as a whole have gradually declined. 
B)  When the growth rate of equity capital increases, the growth rate of total assets will decrease. 
C)  As asset size decreases, equity capital ratios rise. 
D)  Equity capital for most banks exceeds the new risk-based capital requirements. 
A)  Since 1984 equity capital ratios in the banking industry as a whole have gradually declined. 
B)  When the growth rate of equity capital increases, the growth rate of total assets will decrease. 
C)  As asset size decreases, equity capital ratios rise. 
D)  Equity capital for most banks exceeds the new risk-based capital requirements.

Question 18

For failed banks, long-term debt serves the role of absorbing unexpected operating losses.

Accepted Answer

A) True 
 B)False

Question 19

Under Basel I, risk-based capital requirements do NOT consider:

Accepted Answer

A)  credit risk 
B)  interest rate risk 
C)  liquidity risk 
D)  b and c 
E)  a, b, and c 
A)  credit risk 
B)  interest rate risk 
C)  liquidity risk 
D)  b and c 
E)  a, b, and c

Question 20

Under risk-based capital requirements, off-balance sheet items must be converted to:

Accepted Answer

A)  credit equivalent amounts 
B)  on-balance sheet amounts 
C)  risk-adjusted amounts 
D)  forward amounts 
A)  credit equivalent amounts 
B)  on-balance sheet amounts 
C)  risk-adjusted amounts 
D)  forward amounts

Market value accounting would make the value of equity more closely approximate the book value of equity.

Under Basel II, the internal ratings based (IRB) approach to measuring credit risk using the advanced method will be implemented at:

Today, banks with assets more than $500 million can only expense actual loan losses from pre-tax income.

Capital requirements balance safety and soundness considerations against the efficiency and competitiveness of the banking system.

To calculate market-risk equivalent assets, it is necessary to multiple the risk estimates by:

Under Basel II, which of the following is NOT one of the three pillars:

Subordinated notes and debentures issued by banks are higher in priority of claims in the event of bank failure than deposit accounts.

New capital rules under Basel I and II:

In what section of the balance sheet is the provision for loan losses included?

Tax gains on debt interest deductions from taxes increase as debt is increased by a bank, and these gains are offset by increasing regulatory costs as debt increases and equity decreases in the capital structure of a bank.

When a distressed bank situation arises, which of the following is most closely associated with the FDIC's method of disposition wherein the bank is merged with a healthy bank?

A standby letter of credit is an example of a(an):

Historical evidence on bank failures in the U.S. has proven that small banks are more risky than large banks and, therefore, should have higher capital requirements than large banks.

The Form for Analyzing Bank Capital (FABC) was used by the _________ in the 1950s.

Which of the following risks are employed in market risk capital requirements?

Record bank failures in the 1980s and early 1990s were due to:

Which of the following statements is NOT true about the trends in bank equity capital?

For failed banks, long-term debt serves the role of absorbing unexpected operating losses.

Under Basel I, risk-based capital requirements do NOT consider:

Under risk-based capital requirements, off-balance sheet items must be converted to:

Functions and Forms of Banking

The Bank Regulatory Environment

Evaluating Bank Performance

Bank Valuation

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Investment Management

Credit Evaluation Process

Commercial and Industrial Lending

Real Estate and Consumer Lending

Liquidity Management

Managing Liabilities

Off-Balance Sheet Activities

Securities, Investment Insurance Products

Other Financial Services

Electronic Banking

Global Financial Services

Filters

Exam 12: Capital Management

Market value accounting would make the value of equity more closely approximate the book value of equity.

Under Basel II, the internal ratings based (IRB) approach to measuring credit risk using the advanced method will be implemented at:

Today, banks with assets more than $500 million can only expense actual loan losses from pre-tax income.

Capital requirements balance safety and soundness considerations against the efficiency and competitiveness of the banking system.

To calculate market-risk equivalent assets, it is necessary to multiple the risk estimates by:

Under Basel II, which of the following is NOT one of the three pillars:

Subordinated notes and debentures issued by banks are higher in priority of claims in the event of bank failure than deposit accounts.

New capital rules under Basel I and II:

In what section of the balance sheet is the provision for loan losses included?

Tax gains on debt interest deductions from taxes increase as debt is increased by a bank, and these gains are offset by increasing regulatory costs as debt increases and equity decreases in the capital structure of a bank.

When a distressed bank situation arises, which of the following is most closely associated with the FDIC's method of disposition wherein the bank is merged with a healthy bank?

A standby letter of credit is an example of a(an):

Historical evidence on bank failures in the U.S. has proven that small banks are more risky than large banks and, therefore, should have higher capital requirements than large banks.

The Form for Analyzing Bank Capital (FABC) was used by the _________ in the 1950s.

Which of the following risks are employed in market risk capital requirements?

Record bank failures in the 1980s and early 1990s were due to:

Which of the following statements is NOT true about the trends in bank equity capital?

For failed banks, long-term debt serves the role of absorbing unexpected operating losses.

Under Basel I, risk-based capital requirements do NOT consider:

Under risk-based capital requirements, off-balance sheet items must be converted to:

Functions and Forms of Banking

The Bank Regulatory Environment

Evaluating Bank Performance

Bank Valuation

An Overview of Assetliability Management Alm

Techniques of Assetliability Management: Futures, Options, and Swaps

Investment Management

Credit Evaluation Process

Commercial and Industrial Lending

Real Estate and Consumer Lending

Liquidity Management

Managing Liabilities

Off-Balance Sheet Activities

Securities, Investment Insurance Products

Other Financial Services

Electronic Banking

Global Financial Services

Filters