Question 1

The growth in off-balance-sheet activities during the decade of the 1990s was due, in large part, to the use of derivative contracts.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following currently manages the insurance fund for banks and some credit unions?

Accepted Answer

A) CDIC. 
B) FDIC. 
C) OSFI. 
D) FSB. 
E) Provincial and territorial governments. 
A) CDIC. 
B) FDIC. 
C) OSFI. 
D) FSB. 
E) Provincial and territorial governments. A

Question 3

Money market mutual funds have attracted large amounts of retail savings and retail time deposits from commercial banks in recent years.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following identifies the primary function of OSFI?

Accepted Answer

A) Manage the deposit insurance fund and carry out bank examinations. 
B) Regulate and examine banks. 
C) Charter national banks and approve their merger activity. 
D) Determine permissible activities for chartered banks. 
E) Stand as the "lender of last resort" for troubled banks. 
A) Manage the deposit insurance fund and carry out bank examinations. 
B) Regulate and examine banks. 
C) Charter national banks and approve their merger activity. 
D) Determine permissible activities for chartered banks. 
E) Stand as the "lender of last resort" for troubled banks.

Question 5

The primary regulators of Canadian banks are

Accepted Answer

A) the Federal Reserve and CDIC. 
B) OSFI and CDIC. 
C) CDIC and the Bank of Canada. 
D) the Bank of Canada and the Canadian Payments Association. 
E) OSFI and the Bank of Canada. 
A) the Federal Reserve and CDIC. 
B) OSFI and CDIC. 
C) CDIC and the Bank of Canada. 
D) the Bank of Canada and the Canadian Payments Association. 
E) OSFI and the Bank of Canada.

Question 6

In general, the banking industry performed at higher levels of profitability in the decade of the 1990s than the decade of the 1980s.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is true of off-balance-sheet activities?

Accepted Answer

A) They involve generation of fees without exposure to any risk. 
B) They include contingent activities recorded in the current balance sheet. 
C) They invite regulatory costs and additional "taxes." 
D) They have both risk-reducing as well as risk-increasing attributes. 
E) The risk involved is best represented by notional or face value. 
A) They involve generation of fees without exposure to any risk. 
B) They include contingent activities recorded in the current balance sheet. 
C) They invite regulatory costs and additional "taxes." 
D) They have both risk-reducing as well as risk-increasing attributes. 
E) The risk involved is best represented by notional or face value.

Question 8

Retail deposits comprise the largest portion of deposits for Canadian banks.

Accepted Answer

A) True 
 B)False

Question 9

The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.

Accepted Answer

A) True 
 B)False

Question 10

Compared to the average large Canadian bank, credit unions tend to have higher overhead expenses per dollar of assets.

Accepted Answer

A) True 
 B)False

Question 11

Because of the large amount of equity on a typical commercial bank balance sheet, credit risk is not a significant risk to bank managers.

Accepted Answer

A) True 
 B)False

Question 12

Customer loans are classified on a DTI's balance sheet as

Accepted Answer

A) assets, because the DTI's major asset is its client base. 
B) liabilities, because the customer may default on the loan. 
C) assets, because the DTI earns servicing fees on the loan. 
D) liabilities, because the DTI must transfer funds to the borrower at the initiation of the loan. 
E) assets, because DTIs originate and monitor loan portfolios. 
A) assets, because the DTI's major asset is its client base. 
B) liabilities, because the customer may default on the loan. 
C) assets, because the DTI earns servicing fees on the loan. 
D) liabilities, because the DTI must transfer funds to the borrower at the initiation of the loan. 
E) assets, because DTIs originate and monitor loan portfolios.

Question 13

A significant disadvantage for credit unions in competing with commercial banks is the severe restriction in the variety of products and services that they can offer.

Accepted Answer

A) True 
 B)False

Question 14

Large Canadian banks are often primary dealers in the market for Canadian government securities.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following FIs does not currently provide a payment function for their customers?

Accepted Answer

A) Deposit-taking institutions. 
B) Insurance companies. 
C) Finance companies. 
D) Pension funds. 
E) Mutual funds. 
A) Deposit-taking institutions. 
B) Insurance companies. 
C) Finance companies. 
D) Pension funds. 
E) Mutual funds.

Question 16

Which of the following FIs does not provide a business lending function?

Accepted Answer

A) Deposit-taking institutions. 
B) Insurance companies. 
C) Finance companies. 
D) Pension funds. 
E) Mutual funds. 
A) Deposit-taking institutions. 
B) Insurance companies. 
C) Finance companies. 
D) Pension funds. 
E) Mutual funds.

Question 17

Regulatory forbearance refers to a policy of

Accepted Answer

A) allowing insolvent banks to continue to operate. 
B) foreclosing real estate properties in the event on non-payments of mortgages. 
C) strict regulation of banks, closing them down as soon as they are insolvent. 
D) rescheduling of all loans of a client in the event of non-payment. 
E) foreclosing real estate properties in the event of non-payments of mortgages, and allowing insolvent banks to continue to operate. 
A) allowing insolvent banks to continue to operate. 
B) foreclosing real estate properties in the event on non-payments of mortgages. 
C) strict regulation of banks, closing them down as soon as they are insolvent. 
D) rescheduling of all loans of a client in the event of non-payment. 
E) foreclosing real estate properties in the event of non-payments of mortgages, and allowing insolvent banks to continue to operate.

Question 18

Since 1990, commercial banks decreased the proportion of business loans and increased the proportion of mortgages in their portfolios.

Accepted Answer

A) True 
 B)False

Question 19

The movement of an off-balance-sheet asset or liability to an on-balance-sheet item is dependent on the occurrence of a contingent event.

Accepted Answer

A) True 
 B)False

Question 20

This broad class of loans constitutes the highest percentage of total assets for all banks in 2013.

Accepted Answer

A) Business loans. 
B) Commercial and residential real estate loans. 
C) Consumer loans. 
D) Credit card debt. 
E) Less developed country loans. 
A) Business loans. 
B) Commercial and residential real estate loans. 
C) Consumer loans. 
D) Credit card debt. 
E) Less developed country loans.

Exam 2: Deposit-Taking Institutions

The growth in off-balance-sheet activities during the decade of the 1990s was due, in large part, to the use of derivative contracts.

Which of the following currently manages the insurance fund for banks and some credit unions?

Money market mutual funds have attracted large amounts of retail savings and retail time deposits from commercial banks in recent years.

Which of the following identifies the primary function of OSFI?

The primary regulators of Canadian banks are

In general, the banking industry performed at higher levels of profitability in the decade of the 1990s than the decade of the 1980s.

Which of the following is true of off-balance-sheet activities?

Retail deposits comprise the largest portion of deposits for Canadian banks.

The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.

Compared to the average large Canadian bank, credit unions tend to have higher overhead expenses per dollar of assets.

Because of the large amount of equity on a typical commercial bank balance sheet, credit risk is not a significant risk to bank managers.

Customer loans are classified on a DTI's balance sheet as

A significant disadvantage for credit unions in competing with commercial banks is the severe restriction in the variety of products and services that they can offer.

Large Canadian banks are often primary dealers in the market for Canadian government securities.

Which of the following FIs does not currently provide a payment function for their customers?

Which of the following FIs does not provide a business lending function?

Regulatory forbearance refers to a policy of

Since 1990, commercial banks decreased the proportion of business loans and increased the proportion of mortgages in their portfolios.

The movement of an off-balance-sheet asset or liability to an on-balance-sheet item is dependent on the occurrence of a contingent event.

This broad class of loans constitutes the highest percentage of total assets for all banks in 2013.

Why Are Financial Institutions Special

Finance Companies

Securities, Brokerage, and Investment Banking

Mutual Funds, Hedge Funds, and Pension Funds

Insurance Companies

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loans

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization Index

Filters