Question 1

Discuss the four layers of regulation designed to preserve the safety and soundness of DIs.

Accepted Answer

*Lending limits require diversification.

Question 2

Which act allowed the establishment of full-service financial institutions in the United States?

Accepted Answer

A) Riegle-Neal Act 
B) Financial Services Modernization Act 
C) USA Patriot Act 
D) Foreign Bank Supervision Enhancement Act 
E) Foreign Banking Activity Powers Enforcement Act 
A) Riegle-Neal Act 
B) Financial Services Modernization Act 
C) USA Patriot Act 
D) Foreign Bank Supervision Enhancement Act 
E) Foreign Banking Activity Powers Enforcement Act

Question 3

The Financial Services Modernization Act allowed bank holding companies to open insurance underwriting affiliates and allowed insurance companies to open banks.

Accepted Answer

A) True 
 B)False

Question 4

A financial service holding company operates a nationally chartered bank,an insurance firm,a securities firm,and a federal savings bank. Who is the primary regulator for this company?
 Explain.

Accepted Answer

Under the FSMA of 1999,financial conglom

Question 5

The Financial Services Modernization Act first allowed Section 20 affiliates.

Accepted Answer

A) True 
 B)False

Question 6

U.S. depository institutions may be subject to as many as ______________ separate regulators.

Accepted Answer

A) four 
B) five 
C) six 
D) seven 
E) eight 
A) four 
B) five 
C) six 
D) seven 
E) eight

Question 7

Recent regulation such as the Riegle-Neal Act of 1994 has removed some of the federal banking laws that formerly constrained profitable opportunities for commercial banks. The Riegle-Neal Act removes the major restrictions on banks' ability to _________________.

Accepted Answer

A) diversify geographically 
B) diversify their product line 
C) engage in securities underwriting 
D) engage in insurance underwriting 
E) engage in loan brokerage 
A) diversify geographically 
B) diversify their product line 
C) engage in securities underwriting 
D) engage in insurance underwriting 
E) engage in loan brokerage

Question 8

To be classified as an adequately capitalized bank,the bank must have a leverage ratio of at least ____________ percent,Tier I capital to risk-adjusted asset ratio of at least ______________ percent and a total risk-based capital ratio of at least __________ percent,and does not meet the definition of a well-capitalized bank.

Accepted Answer

A) 4; 4; 8 
B) 5; 6; 10 
C) 3; 3; 8 
D) 4; 8; 4 
E) 4; 6; 10 
A) 4; 4; 8 
B) 5; 6; 10 
C) 3; 3; 8 
D) 4; 8; 4 
E) 4; 6; 10

Question 9

The _______________________ introduced the prompt corrective action policy that requires federal intervention when a bank's capital falls below certain minimums.

Accepted Answer

A) Federal Deposit Insurance Corporation Improvement Act 
B) Financial Services Modernization Act 
C) USA Patriot Act 
D) Foreign Bank Supervision Enhancement Act 
E) Foreign Banking Activity Powers Enforcement Act 
A) Federal Deposit Insurance Corporation Improvement Act 
B) Financial Services Modernization Act 
C) USA Patriot Act 
D) Foreign Bank Supervision Enhancement Act 
E) Foreign Banking Activity Powers Enforcement Act

Question 10

Why were the FIRREA of 1989 and the FDICIA of 1991 passed?
 What were their major provisions?
 How did these laws differ from earlier acts of the 1980s?

Accepted Answer

These two important laws were passed to

Question 11

Unit banking states are states that do not allow interstate branch banking but allow the creation of intrastate branch banks.

Accepted Answer

A) True 
 B)False

Question 12

(a)What are the mandatory Prompt Corrective Action (PCA)Provisions for an undercapitalized bank?
 Explain why these provisions are required.
(b)Why does one of the mandatory PCA Provisions for a critically undercapitalized bank include appointing a receiver/conservator within 90 days?

Accepted Answer

(a)The mandatory PCA provisions for an u

Question 13

Tier I (core)capital includes at least some part of which of the following?
I. Common stockholders' equity
II. Retained earnings
III. Subordinated debt
IV. Allowance for loan and lease losses

Accepted Answer

A) I only 
B) I and II only 
C) I and IV only 
D) II and III only 
E) I,II,III,and IV 
A) I only 
B) I and II only 
C) I and IV only 
D) II and III only 
E) I,II,III,and IV

Question 14

Cite one law or regulation per each of the following categories:
Safety and Soundness Regulation
Monetary Policy Regulation
Credit Allocation Regulation
Consumer Protection Regulation
Investor Protection Regulation

Accepted Answer

Safety and Soundness Regulation: Many an

Question 15

The reduction in deposit funds cost to an individual bank brought about by government insurance is an example of the

Accepted Answer

A) social benefit of regulation. 
B) private cost of regulation to DIs. 
C) private benefits of regulation to DIs. 
D) net regulatory burden. 
E) none of the options 
A) social benefit of regulation. 
B) private cost of regulation to DIs. 
C) private benefits of regulation to DIs. 
D) net regulatory burden. 
E) none of the options

Question 16

Which act led to interstate banking in the United States?

Accepted Answer

A) Glass-Steagall Act 
B) DIDMCA 
C) McFadden Act 
D) Riegle-Neal Act 
E) Financial Services Modernization Act 
A) Glass-Steagall Act 
B) DIDMCA 
C) McFadden Act 
D) Riegle-Neal Act 
E) Financial Services Modernization Act

Question 17

Tier II (supplementary)capital includes which of the following?
I. Allowance for loan and lease losses,up to 1.25 percent of risk-weighted assets
II. Subordinated debt not maturing within five years (max amount = 50 percent of Tier 1 capital)
III. Common stock and retained earnings
IV. Nontransaction deposits

Accepted Answer

A) II and III only 
B) I and IV only 
C) I and II only 
D) I,II,and III only 
E) I,III,and IV only 
A) II and III only 
B) I and IV only 
C) I and II only 
D) I,II,and III only 
E) I,III,and IV only

Question 18

The FDIC is required to collect additional insurance premiums from insured institutions if the BIF reserves fall below ________________ of insured deposits.

Accepted Answer

A) 1.00 percent 
B) 1.15 percent 
C) 1.50 percent 
D) 1.75 percent 
E) 2.00 percent 
A) 1.00 percent 
B) 1.15 percent 
C) 1.50 percent 
D) 1.75 percent 
E) 2.00 percent

Question 19

The Investment Company Act of 1940 and the Securities Acts of 1933 and 1934 are examples of investor protection regulations.

Accepted Answer

A) True 
 B)False

Question 20

The Glass-Steagall Act came about due to concerns about excessive risk taking at banks and conflicts of interest between commercial and investment banking activities.

Accepted Answer

A) True 
 B)False

Exam 13: Regulation of Commercial Banks

Discuss the four layers of regulation designed to preserve the safety and soundness of DIs.

Which act allowed the establishment of full-service financial institutions in the United States?

The Financial Services Modernization Act allowed bank holding companies to open insurance underwriting affiliates and allowed insurance companies to open banks.

A financial service holding company operates a nationally chartered bank,an insurance firm,a securities firm,and a federal savings bank. Who is the primary regulator for this company? Explain.

The Financial Services Modernization Act first allowed Section 20 affiliates.

U.S. depository institutions may be subject to as many as ______________ separate regulators.

Recent regulation such as the Riegle-Neal Act of 1994 has removed some of the federal banking laws that formerly constrained profitable opportunities for commercial banks. The Riegle-Neal Act removes the major restrictions on banks' ability to _________________.

The _______________________ introduced the prompt corrective action policy that requires federal intervention when a bank's capital falls below certain minimums.

Why were the FIRREA of 1989 and the FDICIA of 1991 passed? What were their major provisions? How did these laws differ from earlier acts of the 1980s?

Unit banking states are states that do not allow interstate branch banking but allow the creation of intrastate branch banks.

(a)What are the mandatory Prompt Corrective Action (PCA)Provisions for an undercapitalized bank? Explain why these provisions are required. (b)Why does one of the mandatory PCA Provisions for a critically undercapitalized bank include appointing a receiver/conservator within 90 days?

Tier I (core)capital includes at least some part of which of the following? I. Common stockholders' equity II. Retained earnings III. Subordinated debt IV. Allowance for loan and lease losses

Cite one law or regulation per each of the following categories: Safety and Soundness Regulation Monetary Policy Regulation Credit Allocation Regulation Consumer Protection Regulation Investor Protection Regulation

The reduction in deposit funds cost to an individual bank brought about by government insurance is an example of the

Which act led to interstate banking in the United States?

The FDIC is required to collect additional insurance premiums from insured institutions if the BIF reserves fall below ________________ of insured deposits.

The Investment Company Act of 1940 and the Securities Acts of 1933 and 1934 are examples of investor protection regulations.

The Glass-Steagall Act came about due to concerns about excessive risk taking at banks and conflicts of interest between commercial and investment banking activities.

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, Monetary Policy, and Interest Rates

Money Markets

Bond Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Commercial Banks Financial Statements and Analysis

Other Lending Institutions: Savings Institutions, Credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters