Question 1

As with other DIs, profits or return on assets (ROA) is the primary goal of credit union management.

Accepted Answer

A) True 
 B)False

Question 2

Small banks make proportionately larger amounts of real estate loans than large banks.

Accepted Answer

A) True 
 B)False

Question 3

In general, the banking industry performed at higher levels of profitability in the decade of the 1990s than the decade of the 1980s.

Accepted Answer

A) True 
 B)False

Question 4

Choose among the following major banking laws.
-This legislation replaced FSLIC with FDIC-SAIF.

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 of 1982 
E) The Competitive Equality in Banking Act of 1987
F)The Financial Institutions Reform, Recovery, and Enforcement Act 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 of 1982 
E) The Competitive Equality in Banking Act of 1987
F)The Financial Institutions Reform, Recovery, and Enforcement Act 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 5

Choose among the following major banking laws.
-This legislation introduced prompt corrective action requiring mandatory intervention by regulators when a bank's capital falls below certain levels.

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 of 1982 
E) The Competitive Equality in Banking Act of 1987
F)The Financial Institutions Reform, Recovery, and Enforcement Act 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 of 1982 
E) The Competitive Equality in Banking Act of 1987
F)The Financial Institutions Reform, Recovery, and Enforcement Act 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 6

The Riegle-Neal Act of 1994 removed many of the restriction on interstate banking that were originally imposed by the 1933 Glass Steagall Act.

Accepted Answer

A) True 
 B)False

Question 7

A major difference between banks and other nonfinancial firms is the low amount of leverage in commercial banks.

Accepted Answer

A) True 
 B)False

Question 8

The future viability of the savings association industry in traditional mortgage lending has been questioned because of

Accepted Answer

A) securitization practices of other FIs. 
B) the additional risk exposure of long-term mortgage lending. 
C) intense competition from other FIs. 
D) the liquidity risks associated with mortgage lending. 
E) All of the above. 
A) securitization practices of other FIs. 
B) the additional risk exposure of long-term mortgage lending. 
C) intense competition from other FIs. 
D) the liquidity risks associated with mortgage lending. 
E) All of the above.

Question 9

Compared to banks and savings institutions, credit unions are able to pay a higher rate on the deposits of members because

Accepted Answer

A) they intend to attract new members. 
B) they do not issue common stock. 
C) of their tax-exempt status. 
D) Regulation Q still applies to the industry. 
E) they are subject to the provisions of the Community Reinvestment Act. 
A) they intend to attract new members. 
B) they do not issue common stock. 
C) of their tax-exempt status. 
D) Regulation Q still applies to the industry. 
E) they are subject to the provisions of the Community Reinvestment Act.

Question 10

Which of the following identifies the primary function of the Office of the Comptroller of the Currency?

Accepted Answer

A) Manage the deposit insurance fund and carry out bank examinations. 
B) Regulate and examine bank holding companies as well as individual commercial banks. 
C) Charter national banks and approve their merger activity. 
D) Determine permissible activities for state chartered banks. 
E) Stand as the "lender of last resort" for troubled banks. 
A) Manage the deposit insurance fund and carry out bank examinations. 
B) Regulate and examine bank holding companies as well as individual commercial banks. 
C) Charter national banks and approve their merger activity. 
D) Determine permissible activities for state chartered banks. 
E) Stand as the "lender of last resort" for troubled banks.

Question 11

All banks with assets greater than $10 billion are considered money center banks.

Accepted Answer

A) True 
 B)False

Question 12

Negotiable certificates of deposits are differentiated from fixed time deposits by their negotiability and active trading in the secondary markets.

Accepted Answer

A) True 
 B)False

Question 13

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. 
E) the Federal Reserve 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. 
E) the Federal Reserve and the Comptroller of the Currency.

Question 14

The largest asset class on FDIC-insured savings institutions' balance sheet as of year-end 2012 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 15

The Federal Reserve System has regulatory supervision over all holding company banks whether they include national- or state-chartered banks.

Accepted Answer

A) True 
 B)False

Question 16

Regulatory forbearance refers to a policy of

Accepted Answer

A) allowing insolvent banks to continue to operate. 
B) foreclosing real estate properties in the event on non-payments of mortgages. 
C) strict regulation of banks, closing them down as soon as they are insolvent. 
D) rescheduling of all loans of a client in the event of non-payment. 
E) Answers B and C only. 
A) allowing insolvent banks to continue to operate. 
B) foreclosing real estate properties in the event on non-payments of mortgages. 
C) strict regulation of banks, closing them down as soon as they are insolvent. 
D) rescheduling of all loans of a client in the event of non-payment. 
E) Answers B and C only.

Question 17

The FIRREA Act of 1989 introduced the qualified thrift lender test (QLT), which set the percentage of assets required for qualification to be no less than

Accepted Answer

A) 50 percent. 
B) 55 percent. 
C) 60 percent. 
D) 65 percent. 
E) 68 percent. 
A) 50 percent. 
B) 55 percent. 
C) 60 percent. 
D) 65 percent. 
E) 68 percent.

Question 18

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

Accepted Answer

A) assets, because the DI's major asset is its client base. 
B) liabilities, because the customer may default on the loan. 
C) assets, because the DI earns servicing fees on the loan. 
D) liabilities, because the DI must transfer funds to the borrower at the initiation of the loan. 
E) assets, because DIs originate and monitor loan portfolios. 
A) assets, because the DI's major asset is its client base. 
B) liabilities, because the customer may default on the loan. 
C) assets, because the DI earns servicing fees on the loan. 
D) liabilities, because the DI must transfer funds to the borrower at the initiation of the loan. 
E) assets, because DIs originate and monitor loan portfolios.

Question 19

Money market mutual funds have attracted large amounts of retail savings and retail time deposits from commercial banks in recent years.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 2: Financial Services: Depository Institutions

As with other DIs, profits or return on assets (ROA) is the primary goal of credit union management.

Small banks make proportionately larger amounts of real estate loans than large banks.

In general, the banking industry performed at higher levels of profitability in the decade of the 1990s than the decade of the 1980s.

Choose among the following major banking laws. -This legislation replaced FSLIC with FDIC-SAIF.

Choose among the following major banking laws. -This legislation introduced prompt corrective action requiring mandatory intervention by regulators when a bank's capital falls below certain levels.

The Riegle-Neal Act of 1994 removed many of the restriction on interstate banking that were originally imposed by the 1933 Glass Steagall Act.

A major difference between banks and other nonfinancial firms is the low amount of leverage in commercial banks.

The future viability of the savings association industry in traditional mortgage lending has been questioned because of

Compared to banks and savings institutions, credit unions are able to pay a higher rate on the deposits of members because

Which of the following identifies the primary function of the Office of the Comptroller of the Currency?

All banks with assets greater than $10 billion are considered money center banks.

Negotiable certificates of deposits are differentiated from fixed time deposits by their negotiability and active trading in the secondary markets.

The primary regulators of savings institutions are

The largest asset class on FDIC-insured savings institutions' balance sheet as of year-end 2012 was

The Federal Reserve System has regulatory supervision over all holding company banks whether they include national- or state-chartered banks.

Regulatory forbearance refers to a policy of

The FIRREA Act of 1989 introduced the qualified thrift lender test (QLT), which set the percentage of assets required for qualification to be no less than

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

Money market mutual funds have attracted large amounts of retail savings and retail time deposits from commercial banks in recent years.

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

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