Question 1

Credit allocation regulations are typically designed to benefit customers as well as the financial institution that must implement the guidelines.

Accepted Answer

A) True 
 B)False

Question 2

The more costly it is to supervise the use of funds by a borrower,the less likely a saver will encounter agency costs.

Accepted Answer

A) True 
 B)False

Question 3

The passage of legislation to ensure that FIs are meeting the needs of their local communities is an example of entry regulation.

Accepted Answer

A) True 
 B)False

Question 4

Customer deposits are classified on a DI's balance sheet as

Accepted Answer

A) assets,because the DI uses deposit funds to earn profits. 
B) liabilities,because the DI uses deposits as a source of funds. 
C) assets,because customers view deposits as assets. 
D) liabilities,because the DI must meet reserve requirements on customer deposits. 
A) assets,because the DI uses deposit funds to earn profits. 
B) liabilities,because the DI uses deposits as a source of funds. 
C) assets,because customers view deposits as assets. 
D) liabilities,because the DI must meet reserve requirements on customer deposits.

Question 5

The efficiency with which FIs provide payment services directly benefits the economy.

Accepted Answer

A) True 
 B)False

Question 6

Money center banks rely more heavily on wholesale and borrowed funds as sources of liability funding than do community banks.

Accepted Answer

A) True 
 B)False

Question 7

In a world without FIs,households will be less willing to invest in corporate securities because they

Accepted Answer

A) are not able to monitor the activities of the corporation more closely than FIs. 
B) tend to prefer shorter,more liquid securities. 
C) are subject to price risk when corporate securities are sold. 
D) may not have enough funds to purchase corporate securities. 
E) All of the options. 
A) are not able to monitor the activities of the corporation more closely than FIs. 
B) tend to prefer shorter,more liquid securities. 
C) are subject to price risk when corporate securities are sold. 
D) may not have enough funds to purchase corporate securities. 
E) All of the options.

Question 8

The largest liability on U.S.commercial banks' combined balance sheet as of June 30.2015 was

Accepted Answer

A) investment securities. 
B) non-transaction accounts. 
C) transaction accounts. 
D) borrowings. 
E)  cash. 
A) investment securities. 
B) non-transaction accounts. 
C) transaction accounts. 
D) borrowings. 
E)  cash.

Question 9

The Financial Services Modernization Act of 1999 allows commercial banking activities and securities underwriting to operate simultaneously under the same ownership structure.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is true of secondary securities?

Accepted Answer

A) They include equities,bonds,and other debt claims. 
B) They are backed by the real assets of corporations issuing them. 
C) They are securities that back primary securities. 
D) They are securities issued by FIs. 
A) They include equities,bonds,and other debt claims. 
B) They are backed by the real assets of corporations issuing them. 
C) They are securities that back primary securities. 
D) They are securities issued by FIs.

Question 11

The primary reason for the decline of the S&L industry was the passage of legislation that gave commercial lending powers to the SL industry.

Accepted Answer

A) True 
 B)False

Question 12

Correspondent banking may involve

Accepted Answer

A) providing banking services to other banks facing shortage of staff. 
B) providing foreign exchange trading services to individuals. 
C) holding and managing assets for individuals or corporations. 
D) acting as transfer and disbursement agents for pension funds. 
A) providing banking services to other banks facing shortage of staff. 
B) providing foreign exchange trading services to individuals. 
C) holding and managing assets for individuals or corporations. 
D) acting as transfer and disbursement agents for pension funds.

Question 13

The housing bubble that began building in 2001 was primarily the result of

Accepted Answer

A) the availability of low-cost affordable homes. 
B) low interest rates and increased liquidity provided by the Federal Reserve. 
C) a change in income tax policy that favored home ownership. 
D) increased demand for U.S.real estate by international investors. 
A) the availability of low-cost affordable homes. 
B) low interest rates and increased liquidity provided by the Federal Reserve. 
C) a change in income tax policy that favored home ownership. 
D) increased demand for U.S.real estate by international investors.

Question 14

One of the primary reasons that investment banks were allowed to convert to bank holding companies during the recent financial crisis was recognition that

Accepted Answer

A) their operating activities were too risky and they needed the cushion of bank deposits to alleviate funding risks. 
B) the industry had acquired too much capital during the previous decade. 
C) bank holding companies needed the ability to underwrite new issues of corporate securities. 
D) it was the only way an investment bank could qualify for federal bailout funds. 
A) their operating activities were too risky and they needed the cushion of bank deposits to alleviate funding risks. 
B) the industry had acquired too much capital during the previous decade. 
C) bank holding companies needed the ability to underwrite new issues of corporate securities. 
D) it was the only way an investment bank could qualify for federal bailout funds.

Question 15

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

Accepted Answer

A) commercial paper. 
B) small time and savings deposits. 
C) repurchase agreements. 
D) FHLBB advances. 
E)  cash. 
A) commercial paper. 
B) small time and savings deposits. 
C) repurchase agreements. 
D) FHLBB advances. 
E)  cash.

Question 16

Prior to the most recent financial crisis,the risks faced by FIs have traditionally been measured and managed by

Accepted Answer

A) outside agencies such as Moody's or Standard and Poor's. 
B) functional risk area such as liquidity risks,price risk,or credit risk. 
C) designated regulatory agencies for the industries in which the FI operates. 
D) using enterprise risk management techniques. 
A) outside agencies such as Moody's or Standard and Poor's. 
B) functional risk area such as liquidity risks,price risk,or credit risk. 
C) designated regulatory agencies for the industries in which the FI operates. 
D) using enterprise risk management techniques.

Question 17

The credit union industry avoided much of the financial distress of the 1980s because of the short maturity and relatively lower credit risk of their assets.

Accepted Answer

A) True 
 B)False

Question 18

The ability of savers to transfer wealth between youth and old age and across generations is called maturity intermediation.

Accepted Answer

A) True 
 B)False

Question 19

Financial institutions act as intermediaries between suppliers and users of money.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is closely associated with credit allocation regulation?

Accepted Answer

A) Support the FI's lending to socially important sectors. 
B) Transmission of monetary policy from the Federal Reserve to the economy. 
C) Ensure the safety and soundness of the FI. 
D) Prevent discrimination in lending on the basis of age,race,sex,or income. 
A) Support the FI's lending to socially important sectors. 
B) Transmission of monetary policy from the Federal Reserve to the economy. 
C) Ensure the safety and soundness of the FI. 
D) Prevent discrimination in lending on the basis of age,race,sex,or income.

Exam 2: Financial Services: Depository Institutions

Credit allocation regulations are typically designed to benefit customers as well as the financial institution that must implement the guidelines.

The more costly it is to supervise the use of funds by a borrower,the less likely a saver will encounter agency costs.

The passage of legislation to ensure that FIs are meeting the needs of their local communities is an example of entry regulation.

Customer deposits are classified on a DI's balance sheet as

The efficiency with which FIs provide payment services directly benefits the economy.

Money center banks rely more heavily on wholesale and borrowed funds as sources of liability funding than do community banks.

In a world without FIs,households will be less willing to invest in corporate securities because they

The largest liability on U.S.commercial banks' combined balance sheet as of June 30.2015 was

The Financial Services Modernization Act of 1999 allows commercial banking activities and securities underwriting to operate simultaneously under the same ownership structure.

Which of the following is true of secondary securities?

The primary reason for the decline of the S&L industry was the passage of legislation that gave commercial lending powers to the SL industry.

Correspondent banking may involve

The housing bubble that began building in 2001 was primarily the result of

One of the primary reasons that investment banks were allowed to convert to bank holding companies during the recent financial crisis was recognition that

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

Prior to the most recent financial crisis,the risks faced by FIs have traditionally been measured and managed by

The credit union industry avoided much of the financial distress of the 1980s because of the short maturity and relatively lower credit risk of their assets.

The ability of savers to transfer wealth between youth and old age and across generations is called maturity intermediation.

Financial institutions act as intermediaries between suppliers and users of money.

Which of the following is closely associated with credit allocation regulation?

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