Question 1

Banking reform possibilities include ________.

Accepted Answer

A) coinsurance 
B) bank mergers 
C) reduced capitalization requirements 
D) reducing the scope of deposit insurance 
A) coinsurance 
B) bank mergers 
C) reduced capitalization requirements 
D) reducing the scope of deposit insurance

Question 2

The contagion effect refers to the fact that ________.

Accepted Answer

A) deposit insurance has eliminated the problem of bank failures 
B) bank runs involve only sound banks 
C) bank runs involve only insolvent banks 
D) the failure of one bank can hasten the failure of other banks 
A) deposit insurance has eliminated the problem of bank failures 
B) bank runs involve only sound banks 
C) bank runs involve only insolvent banks 
D) the failure of one bank can hasten the failure of other banks

Question 3

What are the provisions under the October 15, 1999 Opting-Out By-law?

Accepted Answer

According to the By-law, Schedule III ba

Question 4

Deposit insurance is only one type of government safety net. All of the following are types of government support for troubled financial institutions except ________.

Accepted Answer

A) forgiving tax debt 
B) lending from the central bank 
C) lending directly from the government's treasury department 
D) nationalizing and guaranteeing that all creditors will be repaid their loans in full 
A) forgiving tax debt 
B) lending from the central bank 
C) lending directly from the government's treasury department 
D) nationalizing and guaranteeing that all creditors will be repaid their loans in full

Question 5

The CDIC does not insure ________.

Accepted Answer

A) savings and chequing accounts 
B) term deposits with a maturity of less than 5 years 
C) money orders and drafts 
D) mutual funds 
A) savings and chequing accounts 
B) term deposits with a maturity of less than 5 years 
C) money orders and drafts 
D) mutual funds

Question 6

As in the United States, an important factor in the banking crises in Latin America was the ________.

Accepted Answer

A) financial liberalization that occurred in the 1980s 
B) decline in real interest rates that occurred in the 1980s 
C) high inflation that occurred in the 1980s 
D) sluggish economic growth that occurred in the 1980s 
A) financial liberalization that occurred in the 1980s 
B) decline in real interest rates that occurred in the 1980s 
C) high inflation that occurred in the 1980s 
D) sluggish economic growth that occurred in the 1980s

Question 7

What are the three pillars that Basel 2 is based on?

Accepted Answer

Pillar 1 links capital requirements for

Question 8

The chartering process is especially designed to deal with the ________ problem, and regular bank examinations help to reduce the ________ problem.

Accepted Answer

A) adverse selection; adverse selection 
B) adverse selection; moral hazard 
C) moral hazard; adverse selection 
D) moral hazard; moral hazard 
A) adverse selection; adverse selection 
B) adverse selection; moral hazard 
C) moral hazard; adverse selection 
D) moral hazard; moral hazard

Question 9

The Bank of Credit and Commerce International (BCCI)operated in ________ countries prior to its collapse.

Accepted Answer

A) 70 
B) 5 
C) 50 
A) 70 
B) 5 
C) 50

Question 10

Off-balance-sheet activities ________.

Accepted Answer

A) generate fee income with no increase in risk 
B) increase bank risk but do not increase income 
C) generate fee income but increase a bank's risk 
D) generate fee income and reduce risk 
A) generate fee income with no increase in risk 
B) increase bank risk but do not increase income 
C) generate fee income but increase a bank's risk 
D) generate fee income and reduce risk

Question 11

The 2011 premium rate (as a percentage of insured deposits)for member institutions in risk category 4 was ________.

Accepted Answer

A) 1/36 of 1 percent 
B) 1/18 of 1 percent 
C) 1/9 of 1 percent 
D) 2/9 of 1 percent 
A) 1/36 of 1 percent 
B) 1/18 of 1 percent 
C) 1/9 of 1 percent 
D) 2/9 of 1 percent

Question 12

To prevent bank runs and the consequent bank failures, the Canada established the ________ to provide deposit insurance.

Accepted Answer

A) CDIC 
B) OSC 
C) Bank of Canada 
D) ATM 
A) CDIC 
B) OSC 
C) Bank of Canada 
D) ATM

Question 13

Because banks engage in regulatory arbitrage, the Basel Accord on risk-based capital requirements may result in ________.

Accepted Answer

A) reduced risk taking by banks 
B) reduced supervision of banks by regulators 
C) increased fraudulent behavior by banks 
D) increased risk taking by banks 
A) reduced risk taking by banks 
B) reduced supervision of banks by regulators 
C) increased fraudulent behavior by banks 
D) increased risk taking by banks

Question 14

The Basel Accord requires banks to hold as capital an amount that is at least ________ of their risk-weighted assets.

Accepted Answer

A) 10 percent 
B) 8 percent 
C) 5 percent 
D) 3 percent 
A) 10 percent 
B) 8 percent 
C) 5 percent 
D) 3 percent

Question 15

Consumer protection legislation includes legislation to ________.

Accepted Answer

A) require banks to make loans to everyone who applies 
B) reduce the amount of interest that bank's can charge on loans 
C) require banks to make periodic reports to the Better Business Bureau 
D) reduce discrimination in credit markets 
A) require banks to make loans to everyone who applies 
B) reduce the amount of interest that bank's can charge on loans 
C) require banks to make periodic reports to the Better Business Bureau 
D) reduce discrimination in credit markets

Question 16

The Inspector General of Banks was the predecessor of the ________.

Accepted Answer

A) Office of the Superintendent of Financial Institutions 
B) Office of Regulatory Forbearance 
C) Canadian Commercial Regulatory Committee 
D) Basel Committee 
A) Office of the Superintendent of Financial Institutions 
B) Office of Regulatory Forbearance 
C) Canadian Commercial Regulatory Committee 
D) Basel Committee

Question 17

The too-big-to-fail policy ________.

Accepted Answer

A) reduces moral hazard problems 
B) puts large banks at a competitive disadvantage in attracting large deposits 
C) treats large depositors of small banks inequitably when compared to depositors of large banks 
D) allows small banks to take on more risk than large banks 
A) reduces moral hazard problems 
B) puts large banks at a competitive disadvantage in attracting large deposits 
C) treats large depositors of small banks inequitably when compared to depositors of large banks 
D) allows small banks to take on more risk than large banks

Question 18

The Differential Premiums By-law came into effect for the premium year beginning ________.

Accepted Answer

A) May 1, 1999 
B) January 1, 1999 
C) May 31, 1999 
D) December 31, 1999 
A) May 1, 1999 
B) January 1, 1999 
C) May 31, 1999 
D) December 31, 1999

Question 19

A common element in all of the banking crisis episodes in different countries is ________.

Accepted Answer

A) the existence of a government safety net 
B) deposit insurance 
C) increased regulation 
D) lack of competition 
A) the existence of a government safety net 
B) deposit insurance 
C) increased regulation 
D) lack of competition

Question 20

The primary rationale for deposit insurance is ________.

Accepted Answer

A) protecting depositors from bank insolvency 
B) increasing creditworthiness of subprime mortgages 
C) increasing barriers to entry in the banking industry to promote financial stability 
D) altering risk profiles of both banks and depositors 
A) protecting depositors from bank insolvency 
B) increasing creditworthiness of subprime mortgages 
C) increasing barriers to entry in the banking industry to promote financial stability 
D) altering risk profiles of both banks and depositors

Exam 10: Economic Analysis of Financial Regulation

Banking reform possibilities include ________.

The contagion effect refers to the fact that ________.

What are the provisions under the October 15, 1999 Opting-Out By-law?

Deposit insurance is only one type of government safety net. All of the following are types of government support for troubled financial institutions except ________.

The CDIC does not insure ________.

As in the United States, an important factor in the banking crises in Latin America was the ________.

What are the three pillars that Basel 2 is based on?

The chartering process is especially designed to deal with the ________ problem, and regular bank examinations help to reduce the ________ problem.

The Bank of Credit and Commerce International (BCCI)operated in ________ countries prior to its collapse.

Off-balance-sheet activities ________.

The 2011 premium rate (as a percentage of insured deposits)for member institutions in risk category 4 was ________.

To prevent bank runs and the consequent bank failures, the Canada established the ________ to provide deposit insurance.

Because banks engage in regulatory arbitrage, the Basel Accord on risk-based capital requirements may result in ________.

The Basel Accord requires banks to hold as capital an amount that is at least ________ of their risk-weighted assets.

Consumer protection legislation includes legislation to ________.

The Inspector General of Banks was the predecessor of the ________.

The too-big-to-fail policy ________.

The Differential Premiums By-law came into effect for the premium year beginning ________.

A common element in all of the banking crisis episodes in different countries is ________.

The primary rationale for deposit insurance is ________.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Banking Industry: Structure and Competition

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

The chartering process is especially designed to deal with the problem, and regular bank examinations help to reduce the problem.