Question 1

The realization of revenue synergies from the acquisition of a bank may come

Accepted Answer

A) from expansion into less than fully competitive markets. 
B) from acquiring a bank in a growing market. 
C) through diversification of asset and liability mixes between the two banks. 
D) All of the above. 
E) Answers B and C only. 
A) from expansion into less than fully competitive markets. 
B) from acquiring a bank in a growing market. 
C) through diversification of asset and liability mixes between the two banks. 
D) All of the above. 
E) Answers B and C only.

Question 2

The purpose of the Foreign Bank Supervision Enhancement Act of 1991 was to extend federal authority over foreign banking organizations in the U.S.

Accepted Answer

A) True 
 B)False

Question 3

A foreign bank subsidiary in the U.S. is restricted to using only funds borrowed on the wholesale and money markets.

Accepted Answer

A) True 
 B)False

Question 4

The required monitoring and surveillance efforts of several regulatory bodies in the case of large holding companies with multi-subsidiaries may actually decrease the efficiency of regulatory oversight.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following has proven to be strong competition for bank deposit and transaction account products?

Accepted Answer

A) Commercial paper market. 
B) Money market mutual funds. 
C) Finance company business credit. 
D) Hedge funds. 
E) None of the above. 
A) Commercial paper market. 
B) Money market mutual funds. 
C) Finance company business credit. 
D) Hedge funds. 
E) None of the above.

Question 6

The Financial Services Modernization Act of 1999

Accepted Answer

A) stipulates that a financial services holding company that engages in commercial banking, investment banking, and insurance activities will be functionally regulated. 
B) allows bank holding companies to open insurance underwriting affiliates. 
C) requires banks that underwrite and sell insurance to operate under the same set of state regulations as insurance companies. 
D) All of the above. 
E) Answers A and B only. 
A) stipulates that a financial services holding company that engages in commercial banking, investment banking, and insurance activities will be functionally regulated. 
B) allows bank holding companies to open insurance underwriting affiliates. 
C) requires banks that underwrite and sell insurance to operate under the same set of state regulations as insurance companies. 
D) All of the above. 
E) Answers A and B only.

Question 7

Which of the following is not a feature of the Foreign Bank Supervision Enhancement Act?

Accepted Answer

A) The Federal Reserve has the power to close a foreign bank if it is engaged in unsafe and unsound banking practice. 
B) The Federal Reserve has the responsibility to examine each subsidiary, branch, agency, or representative office at least once each year. 
C) The Fed's approval is necessary to establish a subsidiary, branch, agency or representative office in the U.S. 
D) Only foreign subsidiaries with access to FDIC insurance can take retail deposits under $100,000. 
E) After December 19, 1992, state-licensed agencies and branches could not engage in any activity no permitted to a federal branch. 
A) The Federal Reserve has the power to close a foreign bank if it is engaged in unsafe and unsound banking practice. 
B) The Federal Reserve has the responsibility to examine each subsidiary, branch, agency, or representative office at least once each year. 
C) The Fed's approval is necessary to establish a subsidiary, branch, agency or representative office in the U.S. 
D) Only foreign subsidiaries with access to FDIC insurance can take retail deposits under $100,000. 
E) After December 19, 1992, state-licensed agencies and branches could not engage in any activity no permitted to a federal branch.

Question 8

According to economists, this is the main reason for underpricing of new issues.

Accepted Answer

A) Lack of competition among existing investment banks. 
B) Entry of banks into the investment banking sector. 
C) Monopoly power of the existing investment banks. 
D) Mismatch of demand and supply of securities. 
E) Risk premium for information advantage possessed by issuers. 
A) Lack of competition among existing investment banks. 
B) Entry of banks into the investment banking sector. 
C) Monopoly power of the existing investment banks. 
D) Mismatch of demand and supply of securities. 
E) Risk premium for information advantage possessed by issuers.

Question 9

Offices of foreign banks may be examined by the Federal Reserve under the FBSEA of 1991.

Accepted Answer

A) True 
 B)False

Question 10

The first state in the U.S. to allow out of state acquisitions was

Accepted Answer

A) New York. 
B) California. 
C) Florida. 
D) Maine. 
E) Alaska. 
A) New York. 
B) California. 
C) Florida. 
D) Maine. 
E) Alaska.

Question 11

Identify the fundamental regulatory philosophy underlying the International Banking Act.

Accepted Answer

A) Too big to fail. 
B) National treatment. 
C) Reciprocal arrangement. 
D) X efficiencies. 
E) Unit banks. 
A) Too big to fail. 
B) National treatment. 
C) Reciprocal arrangement. 
D) X efficiencies. 
E) Unit banks.

Question 12

The use of the Herfindahl-Hirschman Index (HHI) to measure bank concentration has been criticized because

Accepted Answer

A) ascertaining whether the relevant geographic scope of the market should be regional, national, or city is becoming increasingly difficult to determine. 
B) the index was originally designed for nonfinancial competition. 
C) separating financial markets into banks, thrifts, and insurance companies is becoming increasingly difficult to justify. 
D) All of the above. 
E) Answers A and C only. 
A) ascertaining whether the relevant geographic scope of the market should be regional, national, or city is becoming increasingly difficult to determine. 
B) the index was originally designed for nonfinancial competition. 
C) separating financial markets into banks, thrifts, and insurance companies is becoming increasingly difficult to justify. 
D) All of the above. 
E) Answers A and C only.

Question 13

Chinese walls are barriers within organizations that limit the flow of confidential information between departments of business areas.

Accepted Answer

A) True 
 B)False

Question 14

Identify the action taken by OCC and the Federal Reserve in 1997, to expand the permitted activities of bank holding companies.

Accepted Answer

A) Repealed the Glass-Steagall barriers between commercial banking and investment banking. 
B) Allowed commercial banks to acquire directly existing investment banks. 
C) Allowed investment banks to offer banking products. 
D) Allowed investment banks to offer deposit products. 
E) All of the above. 
A) Repealed the Glass-Steagall barriers between commercial banking and investment banking. 
B) Allowed commercial banks to acquire directly existing investment banks. 
C) Allowed investment banks to offer banking products. 
D) Allowed investment banks to offer deposit products. 
E) All of the above.

Question 15

The International Banking Act of 1978 attempted to provide a level playing field for domestic and foreign banks in U.S. banking markets.

Accepted Answer

A) True 
 B)False

Question 16

Concern about bank solvency has been used to justify product segmentation on the grounds of

Accepted Answer

A) safety and soundness issues. 
B) economy of scale and scope issues. 
C) conflict of interest issues. 
D) deposit insurance issues. 
E) regulatory oversight issues. 
A) safety and soundness issues. 
B) economy of scale and scope issues. 
C) conflict of interest issues. 
D) deposit insurance issues. 
E) regulatory oversight issues.

Question 17

A level _____ of the Herfindahl-Hirschman Index (HHI) is considered to reflect a highly concentrated market.

Accepted Answer

A) above 1,000 
B) above 10,000 
C) between 1,000 and 1,500 
D) above 1,800 
E) below 1,000 
A) above 1,000 
B) above 10,000 
C) between 1,000 and 1,500 
D) above 1,800 
E) below 1,000

Question 18

The Financial Services Modernization Act of 1999 has provided for more standardized relationships among financial service sectors and commerce.

Accepted Answer

A) True 
 B)False

Question 19

One result of the FBSEA was the increase in the regulatory burden of foreign banks in the U.S.

Accepted Answer

A) True 
 B)False

Question 20

How could insurance companies get around the restrictive provisions imposed by the bank holding company act of 1956?

Accepted Answer

A) Through the organizational mechanism of establishing nonbank bank subsidiaries. 
B) By opening federally chartered thrifts. 
C) By offering credit-related life, accident, health, or unemployment loans. 
D) By buying a full-service bank and then divesting its demand deposits or commercial loans. 
E) Answers A and D only. 
A) Through the organizational mechanism of establishing nonbank bank subsidiaries. 
B) By opening federally chartered thrifts. 
C) By offering credit-related life, accident, health, or unemployment loans. 
D) By buying a full-service bank and then divesting its demand deposits or commercial loans. 
E) Answers A and D only.

Exam 21: Product and Geographic Expansion

The realization of revenue synergies from the acquisition of a bank may come

The purpose of the Foreign Bank Supervision Enhancement Act of 1991 was to extend federal authority over foreign banking organizations in the U.S.

A foreign bank subsidiary in the U.S. is restricted to using only funds borrowed on the wholesale and money markets.

The required monitoring and surveillance efforts of several regulatory bodies in the case of large holding companies with multi-subsidiaries may actually decrease the efficiency of regulatory oversight.

Which of the following has proven to be strong competition for bank deposit and transaction account products?

The Financial Services Modernization Act of 1999

Which of the following is not a feature of the Foreign Bank Supervision Enhancement Act?

According to economists, this is the main reason for underpricing of new issues.

Offices of foreign banks may be examined by the Federal Reserve under the FBSEA of 1991.

The first state in the U.S. to allow out of state acquisitions was

Identify the fundamental regulatory philosophy underlying the International Banking Act.

The use of the Herfindahl-Hirschman Index (HHI) to measure bank concentration has been criticized because

Chinese walls are barriers within organizations that limit the flow of confidential information between departments of business areas.

Identify the action taken by OCC and the Federal Reserve in 1997, to expand the permitted activities of bank holding companies.

The International Banking Act of 1978 attempted to provide a level playing field for domestic and foreign banks in U.S. banking markets.

Concern about bank solvency has been used to justify product segmentation on the grounds of

A level _____ of the Herfindahl-Hirschman Index (HHI) is considered to reflect a highly concentrated market.

The Financial Services Modernization Act of 1999 has provided for more standardized relationships among financial service sectors and commerce.

One result of the FBSEA was the increase in the regulatory burden of foreign banks in the U.S.

How could insurance companies get around the restrictive provisions imposed by the bank holding company act of 1956?

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Brokerage and Investment Banking

Financial Services: Mutual Funds and Hedge Funds

Financial Services: Insurance

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

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters