Exam 10: Banking and the Management of Financial Institutions

Off-balance sheet activities involving guarantees of securities and back-up credit lines

If,after a deposit outflow,a bank needs an additional $3 million to meet its reserve requirements,the bank can

For a given return on assets,the lower is bank capital,

________ may antagonize customers and thus can be a very costly way of acquiring funds to meet an unexpected deposit outflow.

A bank failure occurs whenever

From the standpoint of ________,specialization in lending is surprising but makes perfect sense when one considers the ________ problem.

Banks earn profits by selling ________ with attractive combinations of liquidity,risk,and return,and using the proceeds to buy ________ with a different set of characteristics.

Banks may borrow from or lend to another bank in the Federal Funds market. A loan of excess reserves from one bank to another bank is recorded as a(n)________ for the borrowing bank and a(n)________ for the lending bank.

Modern liability management has resulted in

A bank is insolvent when

-If interest rates rise by 5 percentage points,say from 10 to 15%,bank profits (measured using gap analysis)will

A bank will want to hold more excess reserves (everything else equal)when

Bank's make their profits primarily by issuing

The most important category of assets on a bank's balance sheet is

If a bank's liabilities are more sensitive to interest rate movements than are its assets,then

Bankers' concerns regarding the optimal mix of excess reserves,secondary reserves,borrowings from the Fed,and borrowings from other banks to deal with deposit outflows is an example of

When banks calculate the losses the institution would incur if an unusual combination of bad events happened,the bank is using the ________ approach.

When a lender refuses to make a loan,although borrowers are willing to pay the stated interest rate or even a higher rate,the bank is said to engage in

-If interest rates rise by 5 percentage points,say,from 10 to 15%,bank profits (measured using gap analysis)will

In recent years the interest paid on checkable and time deposits has accounted for around ________ of total bank operating expenses,while the costs involved in servicing accounts have been approximately ________ of operating expenses.