Question 1

Commercial banks in the U.S. often are subject to several of the four regulatory agencies.

Accepted Answer

A) True 
 B)False

Question 2

A consumer lending function is performed by each of the following FIs EXCEPT

Accepted Answer

A) mutual funds. 
B) finance companies. 
C) pension funds. 
D) depository institutions. 
E) insurance companies. 
A) mutual funds. 
B) finance companies. 
C) pension funds. 
D) depository institutions. 
E) insurance companies.

Question 3

By late 2012, the number of commercial banks in the U.S. was approximately

Accepted Answer

A) 2,200. 
B) 4,680. 
C) 6,170. 
D) 8,100. 
E) 12,700. 
A) 2,200. 
B) 4,680. 
C) 6,170. 
D) 8,100. 
E) 12,700.

Question 4

The primary objective of the 1927 McFadden Act was to restrict interstate bank branching.

Accepted Answer

A) True 
 B)False

Question 5

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. 
E) When-issued securities. 
A) Derivative contracts. 
B) Loan commitments. 
C) Standby letters of credit. 
D) Trust services. 
E) When-issued securities.

Question 6

Which of the following observations concerning credit unions is NOT true?

Accepted Answer

A) They invest heavily in corporate securities. 
B) Member loans constitute a majority of their total assets. 
C) They tend to invest more of their assets in U.S.Treasuries than other DIs. 
D) They engage in off-balance-sheet activities. 
E) They focus more on providing services and less on profitability. 
A) They invest heavily in corporate securities. 
B) Member loans constitute a majority of their total assets. 
C) They tend to invest more of their assets in U.S.Treasuries than other DIs. 
D) They engage in off-balance-sheet activities. 
E) They focus more on providing services and less on profitability.

Question 7

Commercial banks that have invested in Internet and mobile banking services and products have significantly outperformed those banks that have chosen to avoid these markets.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

These organizations were originated to avoid the legal definition of a bank.

Accepted Answer

A) Money center banks. 
B) Savings associations. 
C) Nonbank banks. 
D) Financial services holding companies. 
E) Savings banks. 
A) Money center banks. 
B) Savings associations. 
C) Nonbank banks. 
D) Financial services holding companies. 
E) Savings banks.

Question 10

Which of the following currently manages the insurance funds for both commercial banks and savings institutions?

Accepted Answer

A) FDIC. 
B) FSLIC. 
C) OCC. 
D) FRS. 
E) State authorities. 
A) FDIC. 
B) FSLIC. 
C) OCC. 
D) FRS. 
E) State authorities.

Question 11

Money center banks are considered to be any bank which

Accepted Answer

A) has corporate headquarters in either New York City, Chicago, San Francisco, Atlanta, Dallas, or Charlotte. 
B) is a net supplier of funds on the interbank market. 
C) relies almost entirely on nondeposit and borrowed funds as sources of liabilities. 
D) does not participate in foreign currency markets. 
E) is not characterized by any of the above. 
A) has corporate headquarters in either New York City, Chicago, San Francisco, Atlanta, Dallas, or Charlotte. 
B) is a net supplier of funds on the interbank market. 
C) relies almost entirely on nondeposit and borrowed funds as sources of liabilities. 
D) does not participate in foreign currency markets. 
E) is not characterized by any of the above.

Question 12

By late 2012, the number of branches of existing commercial banks in the U.S. approximated ________, which was a(an) _________ from 1985.

Accepted Answer

A) 83,000; increase 
B) 43,000; increase 
C) 68,000; decrease 
D) 103,000; decrease 
E) 72,000; increase 
A) 83,000; increase 
B) 43,000; increase 
C) 68,000; decrease 
D) 103,000; decrease 
E) 72,000; increase

Question 13

According to the American Bankers Association, the tax-exempt status of credit unions is the equivalent of a $1 billion per-year subsidy to the industry.

Accepted Answer

A) True 
 B)False

Question 14

Holdings of U.S. Treasury securities are classified on a DI's balance sheet as

Accepted Answer

A) assets, because U.S.Treasury securities are default risk-free. 
B) liabilities, because the DI must pay cash in order to acquire the securities. 
C) assets, because securities holdings represent a use of funds for investment. 
D) liabilities, because the Treasury securities must be pledged as collateral against discount window borrowing. 
E) assets, because the market for U.S.Treasury securities is the most liquid in the world. 
A) assets, because U.S.Treasury securities are default risk-free. 
B) liabilities, because the DI must pay cash in order to acquire the securities. 
C) assets, because securities holdings represent a use of funds for investment. 
D) liabilities, because the Treasury securities must be pledged as collateral against discount window borrowing. 
E) assets, because the market for U.S.Treasury securities is the most liquid in the world.

Question 15

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 16

The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.

Accepted Answer

A) True 
 B)False

Question 17

Traditionally, the percentage of depository institutions' assets funded by some form of liability is approximately

Accepted Answer

A) 50 percent. 
B) 75 percent. 
C) 85 percent. 
D) 90 percent. 
E) 40 percent. 
A) 50 percent. 
B) 75 percent. 
C) 85 percent. 
D) 90 percent. 
E) 40 percent.

Question 18

A significant advantage for credit unions in competing with commercial banks is the tax-exempt status that has been granted to credit unions.

Accepted Answer

A) True 
 B)False

Question 19

Compared to the average commercial bank, credit unions tend to have higher overhead expenses per dollar of assets.

Accepted Answer

A) True 
 B)False

Question 20

The growth in off-balance-sheet activities during the decade of the 1990s was due, in large part, to the use of derivative contracts.

Accepted Answer

A) True 
 B)False

Exam 2: Financial Services: Depository Institutions

Commercial banks in the U.S. often are subject to several of the four regulatory agencies.

A consumer lending function is performed by each of the following FIs EXCEPT

By late 2012, the number of commercial banks in the U.S. was approximately

The primary objective of the 1927 McFadden Act was to restrict interstate bank branching.

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

Which of the following observations concerning credit unions is NOT true?

Commercial banks that have invested in Internet and mobile banking services and products have significantly outperformed those banks that have chosen to avoid these markets.

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

These organizations were originated to avoid the legal definition of a bank.

Which of the following currently manages the insurance funds for both commercial banks and savings institutions?

Money center banks are considered to be any bank which

By late 2012, the number of branches of existing commercial banks in the U.S. approximated ________, which was a(an) _________ from 1985.

According to the American Bankers Association, the tax-exempt status of credit unions is the equivalent of a $1 billion per-year subsidy to the industry.

Holdings of U.S. Treasury securities are classified on a DI's balance sheet as

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

The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.

Traditionally, the percentage of depository institutions' assets funded by some form of liability is approximately

A significant advantage for credit unions in competing with commercial banks is the tax-exempt status that has been granted to credit unions.

Compared to the average commercial bank, credit unions tend to have higher overhead expenses per dollar of assets.

The growth in off-balance-sheet activities during the decade of the 1990s was due, in large part, to the use of derivative contracts.

Why Are Financial Institutions Special

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

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters

By late 2012, the number of branches of existing commercial banks in the U.S. approximated , which was a(an) _ from 1985.