Exam 12: Capital Management

Total capital equals:

Under the current risk-based capital requirement, total capital as a percent of risk-adjusted assets must be at least:

Shareholders co-insure against bank losses by:

Normally, the market value of equity exceeds the book value of equity for commercial banks.

Under the Basel I capital rules, banks with abnormal risk levels must maintain capital in excess of the minimum requirements.

Capital requirements do NOT reduce the moral-hazard problem of deposit insurance.

The amount of paid-in capital in excess of par value realized by the bank upon the initial sale of stock is called:

The new capital rules take into account credit risk and interest rate risk.

When undercapitalized banks raised new capital in response to a uniform capital requirement in 1981, what other action(s) did they take which tended to offset the advantage of added capital?

Because deposit insurance may create incentives for a bank to take excessive risks at the expense of the insuring agency, there is a moral-hazard problem.

From a regulator's viewpoint, greater variability of bank earnings means:

The capital adequacy decision is a trade-off between the safety and soundness and the _____________ of the banking system.

Regulatory forbearance caused losses to increase with respect to failed depository institutions in the 1980s. An example of regulatory forbearance is:

Which of the following factor(s) can affect banks' debt-equity mix decision from the viewpoint of shareholders?

Which of the following statements is true about transaction costs in issuing debt securities when comparing banks and nonfinancial corporations?

The provision for loan losses, for accounting purposes, is classified as a (an):

Bank capital does NOT include which of the following?

In what section of the balance sheet are the loan-loss reserves carried?

The rate at which a bank can internally expand assets and still maintain its capital ratio is known as the:

Loan-loss reserves are counted in: