A) stems from the positive correlation in FI returns. B) results when interest rate risk increases credit risk and liquidity risk exposures. C) occurs when liquidity risk problems at bad banks damages well-run banks. D) occurs when a computer virus infects the computerized electronics payments systems Fedwire and CHIPS. E) is completely eliminated by government provided deposit insurance against bank runs. A) stems from the positive correlation in FI returns. B) results when interest rate risk increases credit risk and liquidity risk exposures. C) occurs when liquidity risk problems at bad banks damages well-run banks. D) occurs when a computer virus infects the computerized electronics payments systems Fedwire and CHIPS. E) is completely eliminated by government provided deposit insurance against bank runs.

The following market value balance sheet of a failed bank ($ millions) \[\begin{array} { | l | l | l | l | } \hline \text { Assets } & 400 & \text { Insured Deposits } & \$ 200 \\ \hline & & \text { Uninsured Deposits } & \$ 400 \\ \hline \end{array}\] -If the insured depositor transfer resolution method is utilized, what is the cost to uninsured depositors of bank failure resolution?

A) $0. B) -$200 million. C) $67 million. D) $133 million. E) $200 million. A) $0. B) -$200 million. C) $67 million. D) $133 million. E) $200 million.

Exam 19: Deposit Insurance and Other Liability Guarantees

The policy of forbearance practiced by the FSLIC in the late 1980s allowed many commercial banks to remain open even in the face of continuing losses and insolvency.

(True/False)

4.7/5

(74)

Question 81

The 1993 Depositor Protection legislation gives equal claim to the value of liquidated assets less the amount of insured deposits to foreign uninsured depositors, domestic uninsured depositors, and the FDIC.

(True/False)

5.0/5

(81)

Question 82

The contagion effect

(Multiple Choice)

4.9/5

(75)

Question 83

All of the following are associated with contagious runs EXCEPT

(Multiple Choice)

4.8/5

(80)

Question 84

The cost of insolvency of an FI to the FDIC is offset in part by the deposit insurance premiums paid by the bank.

(True/False)

4.9/5

(86)

Question 85

The adverse effects of a contagious run include the restrictions on the ability of individuals to transfer wealth through time and a negative impact on the level or rate of savings.

(True/False)

4.9/5

(80)

Question 86

The following market value balance sheet of a failed bank ($ millions) Assets 400 Insured Deposits \ 200 Uninsured Deposits \ 400 -If the insured depositor transfer resolution method is utilized, what is the cost to uninsured depositors of bank failure resolution?

(Multiple Choice)

4.9/5

(68)

Question 87

A run on a bank is not necessarily a bad occurrence.

(True/False)

4.8/5

(91)

Question 88

Moral hazard provides an incentive for bank owners to accept greater asset risks because they have less to lose, and potentially more to gain.

(True/False)

5.0/5

(83)

Question 89

The Designated Reserve Ratio is a rule that stipulates that highly-rated DIs would not pay deposit insurance premiums if this ratio was above 1.25 percent.

(True/False)

4.9/5

(73)

Question 90

From January 2008 to December 2009, there were a total of FDIC insured bank failures, which cost the FDIC approximately billion to resolve.

(Multiple Choice)

4.8/5

(81)

Question 91

The National Credit Union Administration (NCUA) is an independent federal agency that insures credit union deposits.

(True/False)

4.8/5

(71)

Question 92

The use of the option pricing model to determine the actuarially fair premium for deposit insurance indicates that the cost of the insurance should rely on both the asset quality and level of leverage of the DI.

(True/False)

4.8/5

(78)

Question 93

The FDICIA of 1991 strengthened the role of regulators to monitor bank asset quality by the following measures EXCEPT

(Multiple Choice)

4.9/5

(70)

Question 94

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

(Multiple Choice)

4.7/5

(71)

Question 95

The Federal safety net to protect the integrity of the payments system consists of deposit insurance and social welfare.

(True/False)

4.8/5

(79)

Question 96

The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) required the FDIC to establish risk-based premiums for deposit insurance coverage at banks.

(True/False)

4.9/5

(72)

Question 97

Which of the following is a drawback of charging flat deposit insurance premiums?

(Multiple Choice)

4.8/5

(78)

Question 98

As a result of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), the deposit insurance fund for the savings and loan industry has been combined with the deposit insurance fund for the commercial banking industry.

(True/False)

5.0/5

(71)

Question 99

Pricing insurance premiums in an actuarially fair manner involves assessing the risk-taking profile of the financial institution.

(True/False)

4.9/5

(88)

Question 100

Showing 81 - 100 of 105

Exam 19: Deposit Insurance and Other Liability Guarantees

The policy of forbearance practiced by the FSLIC in the late 1980s allowed many commercial banks to remain open even in the face of continuing losses and insolvency.

The 1993 Depositor Protection legislation gives equal claim to the value of liquidated assets less the amount of insured deposits to foreign uninsured depositors, domestic uninsured depositors, and the FDIC.

The contagion effect

All of the following are associated with contagious runs EXCEPT

The cost of insolvency of an FI to the FDIC is offset in part by the deposit insurance premiums paid by the bank.

The adverse effects of a contagious run include the restrictions on the ability of individuals to transfer wealth through time and a negative impact on the level or rate of savings.

The following market value balance sheet of a failed bank ($ millions) Assets 400 Insured Deposits \ 200 Uninsured Deposits \ 400 -If the insured depositor transfer resolution method is utilized, what is the cost to uninsured depositors of bank failure resolution?

A run on a bank is not necessarily a bad occurrence.

Moral hazard provides an incentive for bank owners to accept greater asset risks because they have less to lose, and potentially more to gain.

The Designated Reserve Ratio is a rule that stipulates that highly-rated DIs would not pay deposit insurance premiums if this ratio was above 1.25 percent.

From January 2008 to December 2009, there were a total of ____ FDIC insured bank failures, which cost the FDIC approximately ____ billion to resolve.

The National Credit Union Administration (NCUA) is an independent federal agency that insures credit union deposits.

The use of the option pricing model to determine the actuarially fair premium for deposit insurance indicates that the cost of the insurance should rely on both the asset quality and level of leverage of the DI.

The FDICIA of 1991 strengthened the role of regulators to monitor bank asset quality by the following measures EXCEPT

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

The Federal safety net to protect the integrity of the payments system consists of deposit insurance and social welfare.

The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) required the FDIC to establish risk-based premiums for deposit insurance coverage at banks.

Which of the following is a drawback of charging flat deposit insurance premiums?

As a result of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), the deposit insurance fund for the savings and loan industry has been combined with the deposit insurance fund for the commercial banking industry.

Pricing insurance premiums in an actuarially fair manner involves assessing the risk-taking profile of the financial institution.

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

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters

From January 2008 to December 2009, there were a total of FDIC insured bank failures, which cost the FDIC approximately billion to resolve.