Question 1

World Bank research on the effects of deposit insurance concludes that

Accepted Answer

A) adoption of deposit insurance will promote stability and efficiency in the banking systems of emerging-market economies. 
B) adoption of explicit government deposit insurance is associated with a higher incidence of banking crises. 
C) adoption of deposit insurance has the greatest benefits in countries that have weaker institutional environments. 
D) none of the above are true. 
A) adoption of deposit insurance will promote stability and efficiency in the banking systems of emerging-market economies. 
B) adoption of explicit government deposit insurance is associated with a higher incidence of banking crises. 
C) adoption of deposit insurance has the greatest benefits in countries that have weaker institutional environments. 
D) none of the above are true.

Question 2

Probably the most important feature of FDICIA is its prompt corrective action provisions which require the FDIC to intervene earlier and more vigorously when a bank gets into trouble.

Accepted Answer

A) True 
 B)False

Question 3

Regular bank examinations and restrictions on asset holdings indirectly help to reduce the ________ problem because, given fewer opportunities to take on risk, risk-prone entrepreneurs will be discouraged from entering the banking industry.

Accepted Answer

A) moral hazard 
B) adverse selection 
C) ex post shirking 
D) post-contractual opportunism 
A) moral hazard 
B) adverse selection 
C) ex post shirking 
D) post-contractual opportunism

Question 4

How has bank regulation in the United States changed since the late 1980s? What accounts for these changes?

Accepted Answer

Bank regulation in the United States has

Question 5

The Dodd-Frank legislation of 2010 finally resolved the status of GSEs such as Freddie Mac.

Accepted Answer

A) True 
 B)False

Question 6

Moral hazard is an important consequence of insurance arrangements because the existence of insurance

Accepted Answer

A) provides increased incentives for risk taking. 
B) impedes efficient risk taking. 
C) causes the private cost of the insured activity to increase. 
D) does both A and B of the above. 
E) does both B and C of the above. 
A) provides increased incentives for risk taking. 
B) impedes efficient risk taking. 
C) causes the private cost of the insured activity to increase. 
D) does both A and B of the above. 
E) does both B and C of the above.

Question 7

Regulators attempt to reduce the riskiness of banks' asset portfolios by

Accepted Answer

A) limiting the amount of loans in particular categories or to individual borrowers. 
B) prohibiting banks from holding risky assets such as common stocks. 
C) establishing a minimum interest rate floor that banks can earn on certain assets. 
D) doing all of the above. 
E) doing only A and B of the above. 
A) limiting the amount of loans in particular categories or to individual borrowers. 
B) prohibiting banks from holding risky assets such as common stocks. 
C) establishing a minimum interest rate floor that banks can earn on certain assets. 
D) doing all of the above. 
E) doing only A and B of the above.

Question 8

In an effort to control the use of derivatives by financial institutions, the Dodd-Frank legislation of 2010 requires ________.

Accepted Answer

A) standardized derivatives products 
B) over-the-counter trading (instead of exchange trading)of derivatives products 
C) an increase in counterparty risk 
D) all of the above 
A) standardized derivatives products 
B) over-the-counter trading (instead of exchange trading)of derivatives products 
C) an increase in counterparty risk 
D) all of the above

Question 9

During the boom years of the 1920s, bank failures were quite

Accepted Answer

A) uncommon, averaging less than 30 per year. 
B) uncommon, averaging less than 100 per year. 
C) common, averaging about 600 per year. 
D) common, averaging about 2,000 per year. 
A) uncommon, averaging less than 30 per year. 
B) uncommon, averaging less than 100 per year. 
C) common, averaging about 600 per year. 
D) common, averaging about 2,000 per year.

Question 10

To be classified as a well-capitalized bank, a bank's leverage ratio must exceed 8 percent.

Accepted Answer

A) True 
 B)False

Question 11

According to some economists, Congress made a mistake when it passed the FDICIA of not requiring the FDIC to assess risk-based insurance premiums.

Accepted Answer

A) True 
 B)False

Question 12

The existence of deposit insurance can increase the likelihood that depositors will need deposit protection, as banks with deposit insurance

Accepted Answer

A) are likely to take on greater risks than they otherwise would. 
B) are likely to be too conservative, reducing the probability of turning a profit. 
C) are likely to regard deposits as an unattractive source of funds due to depositors' demands for safety. 
D) are placed at a competitive disadvantage in acquiring funds. 
A) are likely to take on greater risks than they otherwise would. 
B) are likely to be too conservative, reducing the probability of turning a profit. 
C) are likely to regard deposits as an unattractive source of funds due to depositors' demands for safety. 
D) are placed at a competitive disadvantage in acquiring funds.

Question 13

Describe 2 of the 5 different categories of regulation found in the Dodd-Frank legislation of 2010.

Accepted Answer

Two of the five different categories of

World Bank research on the effects of deposit insurance concludes that

Probably the most important feature of FDICIA is its prompt corrective action provisions which require the FDIC to intervene earlier and more vigorously when a bank gets into trouble.

Regular bank examinations and restrictions on asset holdings indirectly help to reduce the ________ problem because, given fewer opportunities to take on risk, risk-prone entrepreneurs will be discouraged from entering the banking industry.

How has bank regulation in the United States changed since the late 1980s? What accounts for these changes?

The Dodd-Frank legislation of 2010 finally resolved the status of GSEs such as Freddie Mac.

Moral hazard is an important consequence of insurance arrangements because the existence of insurance

Regulators attempt to reduce the riskiness of banks' asset portfolios by

In an effort to control the use of derivatives by financial institutions, the Dodd-Frank legislation of 2010 requires ________.

During the boom years of the 1920s, bank failures were quite

To be classified as a well-capitalized bank, a bank's leverage ratio must exceed 8 percent.

According to some economists, Congress made a mistake when it passed the FDICIA of not requiring the FDIC to assess risk-based insurance premiums.

The existence of deposit insurance can increase the likelihood that depositors will need deposit protection, as banks with deposit insurance

Describe 2 of the 5 different categories of regulation found in the Dodd-Frank legislation of 2010.

Why Study Financial Markets and Institutions

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation

Why Do Interest Rates Change

How Do Risk and Term Structure Affect Interest Rates

Are Financial Markets Efficient

Why Do Financial Institutions Exist

Why Do Financial Crises Occur and Why Are They so Damaging to the Economy

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging With Financial Derivatives

Savings Associations and Credit Unions

Finance Companies

Filters

Exam 18: Financial Regulation

World Bank research on the effects of deposit insurance concludes that

Probably the most important feature of FDICIA is its prompt corrective action provisions which require the FDIC to intervene earlier and more vigorously when a bank gets into trouble.

Regular bank examinations and restrictions on asset holdings indirectly help to reduce the ________ problem because, given fewer opportunities to take on risk, risk-prone entrepreneurs will be discouraged from entering the banking industry.

How has bank regulation in the United States changed since the late 1980s? What accounts for these changes?

The Dodd-Frank legislation of 2010 finally resolved the status of GSEs such as Freddie Mac.

Moral hazard is an important consequence of insurance arrangements because the existence of insurance

Regulators attempt to reduce the riskiness of banks' asset portfolios by

In an effort to control the use of derivatives by financial institutions, the Dodd-Frank legislation of 2010 requires ________.

During the boom years of the 1920s, bank failures were quite

To be classified as a well-capitalized bank, a bank's leverage ratio must exceed 8 percent.

According to some economists, Congress made a mistake when it passed the FDICIA of not requiring the FDIC to assess risk-based insurance premiums.

The existence of deposit insurance can increase the likelihood that depositors will need deposit protection, as banks with deposit insurance

Describe 2 of the 5 different categories of regulation found in the Dodd-Frank legislation of 2010.

Why Study Financial Markets and Institutions

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation

Why Do Interest Rates Change

How Do Risk and Term Structure Affect Interest Rates

Are Financial Markets Efficient

Why Do Financial Institutions Exist

Why Do Financial Crises Occur and Why Are They so Damaging to the Economy

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging With Financial Derivatives

Savings Associations and Credit Unions

Finance Companies

Filters