Question 1

What distinguishes financial intermediaries from industrial firms?

Accepted Answer

A) FI balance sheets are almost totally comprised of financial assets while commercial firms hold substantial amounts of real assets. 
B) Industrial firms are the customers of FIs,but FIs cannot be customers of industrial firms. 
C) FIs deal exclusively in primary securities,but industrial firms specialize in secondary securities. 
D) Industrial firms produce real goods or services while FIs only produce money. 
A) FI balance sheets are almost totally comprised of financial assets while commercial firms hold substantial amounts of real assets. 
B) Industrial firms are the customers of FIs,but FIs cannot be customers of industrial firms. 
C) FIs deal exclusively in primary securities,but industrial firms specialize in secondary securities. 
D) Industrial firms produce real goods or services while FIs only produce money.

Question 2

Firms in industries that have low costs of entry tend to enjoy larger profits than firms in industries with high costs of entry.

Accepted Answer

A) True 
 B)False

Question 3

The following are protective mechanisms that have been developed by regulators to promote the safety and soundness of the banking system EXCEPT

Accepted Answer

A) encouraging banks to rely more on deposits rather than debt or capital as a cushion against failure. 
B) encouraging banks to limit lending to a single customer to no more than 10% of capital. 
C) the provision of deposit insurance. 
D) the periodic monitoring of banks. 
A) encouraging banks to rely more on deposits rather than debt or capital as a cushion against failure. 
B) encouraging banks to limit lending to a single customer to no more than 10% of capital. 
C) the provision of deposit insurance. 
D) the periodic monitoring of banks.

Question 4

The qualified thrift lender test is used to determine whether an institution is classified as a Savings Institution (Thrift).

Accepted Answer

A) True 
 B)False

Question 5

Commercial banks in the U.S.often are subject to more than one of four regulatory agencies.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following refers to the term "maturity intermediation"?

Accepted Answer

A) Creation of a secondary market mature enough to withstand volatility. 
B) Overcoming constraints to buying assets imposed by large minimum denomination size. 
C) Mismatching the maturities of assets and liabilities. 
D) Reducing information costs or imperfections between households and corporations. 
A) Creation of a secondary market mature enough to withstand volatility. 
B) Overcoming constraints to buying assets imposed by large minimum denomination size. 
C) Mismatching the maturities of assets and liabilities. 
D) Reducing information costs or imperfections between households and corporations.

Question 7

This broad class of loans constitutes the highest percentage of total assets for all U.S.commercial banks as of 2015.

Accepted Answer

A) Commercial and industrial. 
B) Commercial and residential real estate. 
C) Individual loans. 
D) Credit card debt. 
A) Commercial and industrial. 
B) Commercial and residential real estate. 
C) Individual loans. 
D) Credit card debt.

Question 8

The primary regulators of savings institutions are

Accepted Answer

A) the Federal Reserve and the FDIC. 
B) the Office of Thrift Supervision and the FDIC. 
C) the FDIC and the Office of the Comptroller of the Currency. 
D) the Office of Thrift Supervision and the Comptroller of the Currency. 
A) the Federal Reserve and the FDIC. 
B) the Office of Thrift Supervision and the FDIC. 
C) the FDIC and the Office of the Comptroller of the Currency. 
D) the Office of Thrift Supervision and the Comptroller of the Currency.

Question 9

The proportion of financial assets controlled by depository institutions has been increasing in recent years.

Accepted Answer

A) True 
 B)False

Question 10

The number of savings associations has been declining since 1990.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is NOT an off balance sheet activity for U.S.banks?

Accepted Answer

A) Derivative contracts. 
B) Loan commitments. 
C) Standby letters of credit. 
D) Trust services. 
A) Derivative contracts. 
B) Loan commitments. 
C) Standby letters of credit. 
D) Trust services.

Question 12

Savings associations and savings banks both are insured by insurance funds that are managed by the FDIC.

Accepted Answer

A) True 
 B)False

Question 13

Unlike commercial banks,credit unions may only be chartered in the state in which they operate.

Accepted Answer

A) True 
 B)False

Question 14

What is globalization?

Accepted Answer

A) The process that causes an FI to focus more intensely on their own domestic market. 
B) Acceptance of the Federal Reserve as the regulator of the world financial system. 
C) Usually refers to the initiation of GLOBEX,a new international financial communications and trading system. 
D) The evolution of markets and institutions so that geographic boundaries do not restrict financial transactions. 
A) The process that causes an FI to focus more intensely on their own domestic market. 
B) Acceptance of the Federal Reserve as the regulator of the world financial system. 
C) Usually refers to the initiation of GLOBEX,a new international financial communications and trading system. 
D) The evolution of markets and institutions so that geographic boundaries do not restrict financial transactions.

Question 15

For the following problems, choose among the following major banking laws.
-This legislation introduced risk based deposit insurance premiums.

Accepted Answer

A) The McFadden Act of 1927 
B) The Glass-Steagall Act of 1933 
C) The Depository Institutions Deregulation and Monetary Control Act (DIDMC
A)  of 1980 
D) The Garn-St Germain Depository Institutions Act (DI
A)  of 1982 
E) The Competitive Equality in Banking Act (CEB
A)  of 1987
F)The Financial Institutions Reform, Recovery, and Enforcement Act (FIRRE
A)  of 1989
G)The Federal Deposit Insurance Corporation Improvement Act (FDICI
A)  of 1991
H)The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
I)Financial Services Modernization Act of 1999 
A) The McFadden Act of 1927 
B) The Glass-Steagall Act of 1933 
C) The Depository Institutions Deregulation and Monetary Control Act (DIDMC
A)  of 1980 
D) The Garn-St Germain Depository Institutions Act (DI
A)  of 1982 
E) The Competitive Equality in Banking Act (CEB
A)  of 1987
F)The Financial Institutions Reform, Recovery, and Enforcement Act (FIRRE
A)  of 1989
G)The Federal Deposit Insurance Corporation Improvement Act (FDICI
A)  of 1991
H)The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
I)Financial Services Modernization Act of 1999

Question 16

What was the primary objective of the Bank Holding Company Act of 1956?

Accepted Answer

A) Permitted bank holding companies to acquire banks in other states. 
B) Restricted the banking and nonbanking acquisition activities of multibank holding companies. 
C) Regulated foreign bank branches and agencies in the United States. 
D) Bank holding companies were permitted to convert out-of-state subsidiary banks into branches of a single interstate bank. 
A) Permitted bank holding companies to acquire banks in other states. 
B) Restricted the banking and nonbanking acquisition activities of multibank holding companies. 
C) Regulated foreign bank branches and agencies in the United States. 
D) Bank holding companies were permitted to convert out-of-state subsidiary banks into branches of a single interstate bank.

Question 17

Prior to the financial crisis of 2008,the return on equity for small community banks had been larger than for large money center banks.

Accepted Answer

A) True 
 B)False

Question 18

The risk that the sale price of an asset will be less than the purchase price of an asset is called liquidity risk.

Accepted Answer

A) True 
 B)False

Question 19

The largest asset class on FDIC-insured savings institutions' balance sheet as of mid-2015 was

Accepted Answer

A) mortgage loans. 
B) cash. 
C) investment securities. 
D) deposits. 
E)  non-mortgage Loans. 
A) mortgage loans. 
B) cash. 
C) investment securities. 
D) deposits. 
E)  non-mortgage Loans.

Question 20

The two largest asset classes on credit unions' combined balance sheet as of June 30,2015 were

Accepted Answer

A) cash and investment. 
B) investment securities and share drafts. 
C) home mortgages and consumer loans. 
D) consumer loans and car loans. 
A) cash and investment. 
B) investment securities and share drafts. 
C) home mortgages and consumer loans. 
D) consumer loans and car loans.

Exam 2: Financial Services: Depository Institutions

What distinguishes financial intermediaries from industrial firms?

Firms in industries that have low costs of entry tend to enjoy larger profits than firms in industries with high costs of entry.

The following are protective mechanisms that have been developed by regulators to promote the safety and soundness of the banking system EXCEPT

The qualified thrift lender test is used to determine whether an institution is classified as a Savings Institution (Thrift).

Commercial banks in the U.S.often are subject to more than one of four regulatory agencies.

Which of the following refers to the term "maturity intermediation"?

This broad class of loans constitutes the highest percentage of total assets for all U.S.commercial banks as of 2015.

The primary regulators of savings institutions are

The proportion of financial assets controlled by depository institutions has been increasing in recent years.

The number of savings associations has been declining since 1990.

Which of the following is NOT an off balance sheet activity for U.S.banks?

Savings associations and savings banks both are insured by insurance funds that are managed by the FDIC.

Unlike commercial banks,credit unions may only be chartered in the state in which they operate.

What is globalization?

For the following problems, choose among the following major banking laws. -This legislation introduced risk based deposit insurance premiums.

What was the primary objective of the Bank Holding Company Act of 1956?

Prior to the financial crisis of 2008,the return on equity for small community banks had been larger than for large money center banks.

The risk that the sale price of an asset will be less than the purchase price of an asset is called liquidity risk.

The largest asset class on FDIC-insured savings institutions' balance sheet as of mid-2015 was

The two largest asset classes on credit unions' combined balance sheet as of June 30,2015 were

Why Are Financial Institutions Special

Financial Services: Finance Companies

Financial Services: Securities Firms and Investment Banks

Financial Services: Mutual Fund and Hedge Fund Companies

Financial Services: Insurance Companies

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

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

Filters