Question 1

By converting to a bank holding company, an investment bank gains access to Federal Reserve lending facilities.

Accepted Answer

A) True 
 B)False

Question 2

The use of off-balance-sheet activities allows banks to practice regulatory tax-avoidance.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following observations concerning trust departments is true?

Accepted Answer

A) They are found only among smaller community banks. 
B) Only the largest banks have sufficient staff to offer trust services. 
C) They provide banking services to other banks. 
D) Pension fund assets are the largest category of assets managed by trust departments. 
E) They primarily handle assets for financially sophisticated investors. 
A) They are found only among smaller community banks. 
B) Only the largest banks have sufficient staff to offer trust services. 
C) They provide banking services to other banks. 
D) Pension fund assets are the largest category of assets managed by trust departments. 
E) They primarily handle assets for financially sophisticated investors.

Question 4

Which of the following is true of off-balance-sheet activities?

Accepted Answer

A) They involve generation of fees without exposure to any risk. 
B) They include contingent activities recorded in the current balance sheet. 
C) They invite regulatory costs and additional "taxes." 
D) They have both risk-reducing as well as risk-increasing attributes. 
E) The risk involved is best represented by notional or face value. 
A) They involve generation of fees without exposure to any risk. 
B) They include contingent activities recorded in the current balance sheet. 
C) They invite regulatory costs and additional "taxes." 
D) They have both risk-reducing as well as risk-increasing attributes. 
E) The risk involved is best represented by notional or face value.

Question 5

Choose among the following major banking laws.
-This law allows bank holding companies to convert out-of-state subsidiary banks into branches of a single interstate bank.

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 dual banking system in the U.S. refers to the operation and establishment of large regional as well as small community banks.

Accepted Answer

A) True 
 B)False

Question 7

Choose among the following major banking laws.
-This legislation separated commercial and investment banking.

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 8

The primary objective of the Reigle-Neal Act (1994) was to ease branching across state lines by banks.

Accepted Answer

A) True 
 B)False

Question 9

The largest asset class on U.S. commercial banks' balance sheet as of September 30, 2012 was

Accepted Answer

A) investment securities. 
B) commercial and industrial loans. 
C) real estate loans. 
D) cash. 
E) deposits. 
A) investment securities. 
B) commercial and industrial loans. 
C) real estate loans. 
D) cash. 
E) deposits.

Question 10

Which of the following FIs does not provide a business lending function?

Accepted Answer

A) Depository institutions. 
B) Insurance companies. 
C) Finance companies. 
D) Pension funds. 
E) Mutual funds. 
A) Depository institutions. 
B) Insurance companies. 
C) Finance companies. 
D) Pension funds. 
E) Mutual funds.

Question 11

Retail nontransaction savings and time deposits comprise the largest portion of deposits for commercial banks.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is the most important source of funds for savings institutions?

Accepted Answer

A) Borrowings from the Federal Home Loan Bank. 
B) Small time and savings deposits. 
C) Repurchase agreements. 
D) Direct federal fund borrowings. 
E) Negotiable certificates of deposit. 
A) Borrowings from the Federal Home Loan Bank. 
B) Small time and savings deposits. 
C) Repurchase agreements. 
D) Direct federal fund borrowings. 
E) Negotiable certificates of deposit.

Question 13

Because of the large amount of equity on a typical commercial bank balance sheet, credit risk is not a significant risk to bank managers.

Accepted Answer

A) True 
 B)False

Question 14

Most of the change in the number of commercial banks since 1990 has been due to bank failures.

Accepted Answer

A) True 
 B)False

Question 15

As of 2012, commercial banks with over $10 billion in assets constituted approximately ____ percent of the industry assets and numbered approximately _____.

Accepted Answer

A) 50; 310 
B) 60; 165 
C) 70; 525 
D) 80; 90 
E) 90; 440 
A) 50; 310 
B) 60; 165 
C) 70; 525 
D) 80; 90 
E) 90; 440

Question 16

The primary objective of the 1933 Glass-Steagall Act was to prevent commercial banks from competing directly with commercial insurance companies.

Accepted Answer

A) True 
 B)False

Exam 2: Financial Services: Depository Institutions

By converting to a bank holding company, an investment bank gains access to Federal Reserve lending facilities.

The use of off-balance-sheet activities allows banks to practice regulatory tax-avoidance.

Which of the following observations concerning trust departments is true?

Which of the following is true of off-balance-sheet activities?

Choose among the following major banking laws. -This law allows bank holding companies to convert out-of-state subsidiary banks into branches of a single interstate bank.

The dual banking system in the U.S. refers to the operation and establishment of large regional as well as small community banks.

Choose among the following major banking laws. -This legislation separated commercial and investment banking.

The primary objective of the Reigle-Neal Act (1994) was to ease branching across state lines by banks.

The largest asset class on U.S. commercial banks' balance sheet as of September 30, 2012 was

Which of the following FIs does not provide a business lending function?

Retail nontransaction savings and time deposits comprise the largest portion of deposits for commercial banks.

Which of the following is the most important source of funds for savings institutions?

Because of the large amount of equity on a typical commercial bank balance sheet, credit risk is not a significant risk to bank managers.

Most of the change in the number of commercial banks since 1990 has been due to bank failures.

As of 2012, commercial banks with over $10 billion in assets constituted approximately ____ percent of the industry assets and numbered approximately _____.

The primary objective of the 1933 Glass-Steagall Act was to prevent commercial banks from competing directly with commercial insurance companies.

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

As of 2012, commercial banks with over $10 billion in assets constituted approximately percent of the industry assets and numbered approximately _.