Question 1

The Financial Reform Act (Wall Street Reform and Consumer Protection Act or Dodd-Frank Act) of 2010:

Accepted Answer

A)  ended the system of risk-based insurance premiums. 
B)  set requirements for the Deposit Insurance Fund's reserves. 
C)  raised the limit for insured deposits to $750,000 per depositor. 
D)  allowed large insurance companies such as American International Group to compete with the FDIC to insure bank deposits. 
A)  ended the system of risk-based insurance premiums. 
B)  set requirements for the Deposit Insurance Fund's reserves. 
C)  raised the limit for insured deposits to $750,000 per depositor. 
D)  allowed large insurance companies such as American International Group to compete with the FDIC to insure bank deposits.

Question 2

The Financial Services Modernization Act of 1999

Accepted Answer

A)  gave banks and other financial service firms less freedom to merge. 
B)  allowed financial institutions to offer a diversified set of financial services. 
C)  offered very few benefits to a financial institution's clients. 
D)  increased the reliance of financial institutions on the demand for the single service they offer. 
A)  gave banks and other financial service firms less freedom to merge. 
B)  allowed financial institutions to offer a diversified set of financial services. 
C)  offered very few benefits to a financial institution's clients. 
D)  increased the reliance of financial institutions on the demand for the single service they offer.

Question 3

National banks are regulated by ____, and state banks are regulated by ____.

Accepted Answer

A)  the Comptroller of the Currency; their state agency 
B)  the Comptroller of the Currency; the Comptroller of the Currency 
C)  their state agency; their state agency 
D)  their state agency; the Comptroller of the Currency 
A)  the Comptroller of the Currency; their state agency 
B)  the Comptroller of the Currency; the Comptroller of the Currency 
C)  their state agency; their state agency 
D)  their state agency; the Comptroller of the Currency

Question 4

The Volcker rule, named for a former Fed chair:

Accepted Answer

A)  is intended to increase the powers of the Fed. 
B)  states that the U.S. government will rescue certain large banks if necessary to reduce systemic risk in the financial system. 
C)  sets limits on banks' proprietary trading. 
D)  requires all banks to undergo annual stress tests. 
A)  is intended to increase the powers of the Fed. 
B)  states that the U.S. government will rescue certain large banks if necessary to reduce systemic risk in the financial system. 
C)  sets limits on banks' proprietary trading. 
D)  requires all banks to undergo annual stress tests.

Question 5

The Garn-St Germain Act of 1982

Accepted Answer

A)  permitted depository institutions to offer money market deposit accounts. 
B)  prevented depository institutions from acquiring problem institutions across geographic boundaries. 
C)  required the Fed to explicitly charge depository institutions for its services. 
D)  allowed the Fed to provide check clearing to depository institutions at no charge. 
A)  permitted depository institutions to offer money market deposit accounts. 
B)  prevented depository institutions from acquiring problem institutions across geographic boundaries. 
C)  required the Fed to explicitly charge depository institutions for its services. 
D)  allowed the Fed to provide check clearing to depository institutions at no charge.

Question 6

Regulators put much emphasis on a bank's sensitivity to interest rate movements, since many banks have liabilities that are repriced more frequently than their assets and are adversely affectedby rising interest rates.

Accepted Answer

A) True 
 B)False

Question 7

Shareholders and managers of banks may prefer that banks be required to hold higher levels of capital because this would allow for higher share prices for the banks and larger bonuses for bankmanagers.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is an "off-balance-sheet commitment"?

Accepted Answer

A)  long-term debt 
B)  additional paid-in capital 
C)  notes payable 
D)  letters of credit backing commercial paper issued by firms 
A)  long-term debt 
B)  additional paid-in capital 
C)  notes payable 
D)  letters of credit backing commercial paper issued by firms

Question 9

The fee banks pay to the FDIC for deposit insurance is now

Accepted Answer

A)  a fixed dollar amount for all banks. 
B)  a fixed percentage of the bank's deposits for all banks. 
C)  a fixed percentage of the bank's loan volume for all banks. 
D)  based on the risk of the bank 
A)  a fixed dollar amount for all banks. 
B)  a fixed percentage of the bank's deposits for all banks. 
C)  a fixed percentage of the bank's loan volume for all banks. 
D)  based on the risk of the bank

Question 10

The Sarbanes-Oxley Act (SOX) was enacted in 2002 in order to ensure a more transparent process for reporting on a firm's productivity and the financial condition.

Accepted Answer

A) True 
 B)False

Question 11

In making loans to a single customer, commercial banks ____ restricted to a maximum percentage of their capital, and they ____ allowed to use borrowed or deposited funds to purchase common stock.

Accepted Answer

A)  are; are 
B)  are; are not 
C)  are not; are 
D)  are not; are not 
A)  are; are 
B)  are; are not 
C)  are not; are 
D)  are not; are not

Question 12

During the credit crisis, banks argued that they should be allowed to use fair value accounting in valuing their assets for purposes of meeting capital requirements.

Accepted Answer

A) True 
 B)False

Question 13

The Depository Institutions Deregulation and Monetary Control Act of 1980 allowed banks to set their own

Accepted Answer

A)  reserve requirements. 
B)  capital ratios. 
C)  interest rates on savings deposits. 
D)  corporate loan interest rates. 
A)  reserve requirements. 
B)  capital ratios. 
C)  interest rates on savings deposits. 
D)  corporate loan interest rates.

Question 14

Which of the following is not a specific criterion that regulators use to monitor banks?

Accepted Answer

A)  capital adequacy 
B)  dollar value of fixed assets 
C)  asset quality 
D)  earnings 
E)  sensitivity to financial market conditions 
A)  capital adequacy 
B)  dollar value of fixed assets 
C)  asset quality 
D)  earnings 
E)  sensitivity to financial market conditions

Question 15

The key reason for regulatory examinations (such as CAMELS ratings) is to

Accepted Answer

A)  rate past performance 
B)  detect problems of a bank in time to correct them. 
C)  check for embezzlement. 
D)  monitor reserve requirements. 
A)  rate past performance 
B)  detect problems of a bank in time to correct them. 
C)  check for embezzlement. 
D)  monitor reserve requirements.

Question 16

When the Federal Reserve conducts stress tests of banks, it may examine the U.S. operations of foreign-based banks as well as U.S. banks.

Accepted Answer

A) True 
 B)False

Question 17

____ is not a rating criterion used by bank regulators.

Accepted Answer

A)  Capital adequacy 
B)  Savings deposit volume 
C)  Asset quality 
D)  Management 
E)  Liquidity 
A)  Capital adequacy 
B)  Savings deposit volume 
C)  Asset quality 
D)  Management 
E)  Liquidity

Question 18

During the credit crisis, the U.S. government purchased the common stock of the largest banks in order to inject funds into the banks and cushion their losses.

Accepted Answer

A) True 
 B)False

Question 19

The provision of a letter of credit by a bank to back commercial paper issued by a corporation is an example of an off-balance sheet commitment.

Accepted Answer

A) True 
 B)False

Question 20

Deposit insurance now covers all bank deposits without any limit.

Accepted Answer

A) True 
 B)False

Exam 18: Bank Regulation

The Financial Reform Act (Wall Street Reform and Consumer Protection Act or Dodd-Frank Act) of 2010:

The Financial Services Modernization Act of 1999

National banks are regulated by ____, and state banks are regulated by ____.

The Volcker rule, named for a former Fed chair:

The Garn-St Germain Act of 1982

Regulators put much emphasis on a bank's sensitivity to interest rate movements, since many banks have liabilities that are repriced more frequently than their assets and are adversely affectedby rising interest rates.

Shareholders and managers of banks may prefer that banks be required to hold higher levels of capital because this would allow for higher share prices for the banks and larger bonuses for bankmanagers.

Which of the following is an "off-balance-sheet commitment"?

The fee banks pay to the FDIC for deposit insurance is now

The Sarbanes-Oxley Act (SOX) was enacted in 2002 in order to ensure a more transparent process for reporting on a firm's productivity and the financial condition.

In making loans to a single customer, commercial banks ____ restricted to a maximum percentage of their capital, and they ____ allowed to use borrowed or deposited funds to purchase common stock.

During the credit crisis, banks argued that they should be allowed to use fair value accounting in valuing their assets for purposes of meeting capital requirements.

The Depository Institutions Deregulation and Monetary Control Act of 1980 allowed banks to set their own

Which of the following is not a specific criterion that regulators use to monitor banks?

The key reason for regulatory examinations (such as CAMELS ratings) is to

When the Federal Reserve conducts stress tests of banks, it may examine the U.S. operations of foreign-based banks as well as U.S. banks.

____ is not a rating criterion used by bank regulators.

During the credit crisis, the U.S. government purchased the common stock of the largest banks in order to inject funds into the banks and cushion their losses.

The provision of a letter of credit by a bank to back commercial paper issued by a corporation is an example of an off-balance sheet commitment.

Deposit insurance now covers all bank deposits without any limit.

Role of Financial Markets and Institutions

Determination of Interest Rates

Structure of Interest Rates

Functions of the Fed

Monetary Policy

Money Markets

Bond Markets

Bond Valuation and Risk

Mortgage Markets

Stock Offerings and Investor Monitoring

Stock Valuation and Risk

Market Microstructure and Strategies

Financial Futures Markets

Options Markets

Swap Markets

Foreign Exchange Derivative Markets

Commercial Bank Operations

Bank Management

Bank Performance

Thrift Operations

Finance Company Operations

Mutual Fund Operations

Securities Operations

Insurance Operations

Pension Fund Operations

Filters

National banks are regulated by , and state banks are regulated by .

In making loans to a single customer, commercial banks restricted to a maximum percentage of their capital, and they allowed to use borrowed or deposited funds to purchase common stock.