Exam 19: Deposit Insurance and Other Liability Guarantees

Subordinate debt (SD)has been proposed as a means of increasing the degree of overall market discipline at a depository institution.Which of the following objectives is considered to be achievable when attempting to increase market discipline?

The use of subordinated debt as a replacement for common stock has been proposed as a method of increasing stockholder discipline.

Contagious runs on bank deposits are directed at FIs,whether they are failing or healthy.

The employment of deposit brokers allows individual depositors to receive deposit insurance coverage on total asset balances well in excess of $250,000 at any given bank.

Discount window loans from the Federal Reserve are used as

The deposit insurance programs of the National Credit Union Administration (NCUA)is modeled after the programs offered by the FDIC.

A major cause of the FSLIC insolvency in the 1980s was the dramatic rise in interest rates in 1979-82 that created extensive duration mismatches of assets and liabilities in the savings and loan industry.

What does a high proportion of brokered deposits indicate?

What was the objective of the FDIC Improvement Act (FDICIA)of 1991?

The FIRREA prohibited all insured financial institutions from accepting brokered deposits or paying interest rates that are significantly higher than existing market rates.

The following table shows the market value balance sheet of a failed bank ($ millions): Assets 400 Insured Deposits \2 00 Urinsured Deposits \4 00 What is the market value of capital?

A major reason for the deterioration of the deposit insurance funds in the 1980s was the downturn in the technology,manufacturing,and real estate industries.

After nearly failing,the FDIC's Bank Insurance Fund (BIF)achieved record levels of reserves during the 1990s.

Access to the discount window of the Federal Reserve is unlikely to deter bank runs because

Explicit deposit insurance premiums applied by regulators can involve restricting and more closely monitoring the risky activities of banks.

The introduction of prompt corrective action capital zones by FDICIA was an attempt to place greater decision-making power at the discretion of regulators rather than on objective,measurable rules.

The costs to the bank of borrowing at the discount window do NOT include

During the 1980s,which of the following was NOT a change in the financial environment that had an inverse impact on U.S.banks and thrifts?

Which of the following contributed the least to the collapse of the FSLIC/FDIC deposit insurance funds?

Which the following statements about the Pension Benefit Guarantee Corporation (PBGC)is FALSE?