Question 1

Unit banking states are states that do not allow interstate branch banking but allow the creation of intrastate branch banks.

Accepted Answer

A) True 
 B)False

Question 2

The 1993 Basel Agreement explicitly incorporated the different credit risks of assets into capital adequacy measures.

Accepted Answer

A) True 
 B)False

Question 3

What changes to foreign bank operations in the United States have been brought about by the Foreign Bank Supervision and Enhancement Act of 1991?

Accepted Answer

-Entry: Foreign banks must now have the

Question 4

(a)What are the mandatory Prompt Corrective Action (PCA)Provisions for an undercapitalized bank? Explain why these provisions are required.
(b)Why does one of the mandatory PCA Provisions for a critically undercapitalized bank include appointing a receiver/conservator within 90 days?

Accepted Answer

(a)The mandatory PCA provisions for an u

Question 5

Cite one law or regulation per each of the following categories:

Accepted Answer

Safety and Soundness Regulation Monetary

Question 6

A financial intermediary that can engage in a broad range of financial service activities is termed a universal FI.

Accepted Answer

A) True 
 B)False

Question 7

The FDIC is required to establish a plan to restore the DIF if the reserve ratio falls below ________ of insured deposits.

Accepted Answer

A) 1.00 percent 
B) 1.15 percent 
C) 1.50 percent 
D) 1.75 percent 
E) 2.00 percent 
A) 1.00 percent 
B) 1.15 percent 
C) 1.50 percent 
D) 1.75 percent 
E) 2.00 percent

Question 8

Tier II (supplementary)capital includes which of the following?
I. Allowance for loan and lease losses,up to 1.25 percent of risk-weighted assets
II. Subordinated debt with original maturity of at least 5 years
III. Common stock and retained earnings
IV. Nontransaction deposits

Accepted Answer

A) II and III only 
B) I and IV only 
C) I and II only 
D) I,II,and III only 
E) I,III,and IV only 
A) II and III only 
B) I and IV only 
C) I and II only 
D) I,II,and III only 
E) I,III,and IV only

Question 9

The term disintermediation refers to

Accepted Answer

A) the policy of not closing insolvent institutions in hopes that they can eventually turn around their performance. 
B) the withdrawal of deposits from depository institutions that are reinvested in other types of intermediaries. 
C) the policy of regulating the minimum rate of return institutions can pay on deposits. 
D) chartering restrictions that limit the ability of new banks to enter into a local market. 
E) the policy of not allowing banks to grow by creating a de novo branch outside their traditional market area. 
A) the policy of not closing insolvent institutions in hopes that they can eventually turn around their performance. 
B) the withdrawal of deposits from depository institutions that are reinvested in other types of intermediaries. 
C) the policy of regulating the minimum rate of return institutions can pay on deposits. 
D) chartering restrictions that limit the ability of new banks to enter into a local market. 
E) the policy of not allowing banks to grow by creating a de novo branch outside their traditional market area.

Question 10

Which act allowed the establishment of full-service financial institutions in the United States?

Accepted Answer

A) Riegle-Neal Act 
B) Financial Services Modernization Act 
C) USA Patriot Act 
D) Foreign Bank Supervision Enhancement Act 
E) Foreign Banking Activity Powers Enforcement Act 
A) Riegle-Neal Act 
B) Financial Services Modernization Act 
C) USA Patriot Act 
D) Foreign Bank Supervision Enhancement Act 
E) Foreign Banking Activity Powers Enforcement Act

Question 11

Major provisions of the Financial Services Modernization Act of 1999 include all of the following except

Accepted Answer

A) allowing bank holding companies to open insurance underwriting affiliates and vice versa. 
B) allowing bank holding companies to open or merge with investment banks. 
C) creating one regulator to oversee all activities of financial service firms. 
D) All of these choices are correct. 
E) None of these options are correct. 
A) allowing bank holding companies to open insurance underwriting affiliates and vice versa. 
B) allowing bank holding companies to open or merge with investment banks. 
C) creating one regulator to oversee all activities of financial service firms. 
D) All of these choices are correct. 
E) None of these options are correct.

Question 12

Banks are generally prohibited from making loans exceeding more than 15 percent of their own equity capital to any one company or borrower.

Accepted Answer

A) True 
 B)False

Question 13

The average daily net transaction accounts of a local bank during the most recent reserve computation period is $589 million. The amount of average daily reserves at the Fed during the reserve maintenance period is $73.31 million,and the average daily vault cash corresponding to the maintenance period is $8.36 million. What is the average daily reserve balance required to be held by the bank during the maintenance period and is this bank in compliance with reserve requirements?

Accepted Answer

A) $42.37 million; yes 
B) $46.79 million; yes 
C) $55.14 million; no 
D) $60.83 million; no 
E) $62.11 million; no 
A) $42.37 million; yes 
B) $46.79 million; yes 
C) $55.14 million; no 
D) $60.83 million; no 
E) $62.11 million; no

Question 14

The average daily net transaction accounts of a local bank during the most recent reserve computation period is $687 million. The amount of average daily reserves at the Fed during the reserve maintenance period is $35.23 million,and the average daily vault cash corresponding to the maintenance period is $12.74 million. Is this bank in compliance with reserve requirements?

Accepted Answer

A) Yes,the bank has excess daily reserves of $2.45 million. 
B) Yes,the bank has excess daily reserves of $11.71 million. 
C) No,the bank is short on daily reserves by $12.56 million. 
D) No,the bank is short on daily reserves by $4.36 million. 
E) No,the bank is short on daily reserves by $9.17 million. 
A) Yes,the bank has excess daily reserves of $2.45 million. 
B) Yes,the bank has excess daily reserves of $11.71 million. 
C) No,the bank is short on daily reserves by $12.56 million. 
D) No,the bank is short on daily reserves by $4.36 million. 
E) No,the bank is short on daily reserves by $9.17 million.

Question 15

FBSEA Act of 1991 extended federal regulatory authority over foreign banking organizations in the United States.

Accepted Answer

A) True 
 B)False

Question 16

(a)A bank has risk-weighted assets of $175 and equity of $12.5. If regulators require a minimum risk-weighted capital ratio of 5 percent given the current level of equity,how many new assets with a 100 percent risk weight can the bank add? How many with a 50 percent risk weight?
(b)If the bank had 20 percent more equity,how many new assets with a 100 percent risk weight could the bank add? How many with a 50 percent risk weight? How does having more equity affect a bank's ability to grow? How is this growth affected by the riskiness of the bank's assets?

Accepted Answer

(a)100 percent risk weight [$175 + New A

Question 17

How do risk-based deposit insurance premiums and risk-based capital requirements help reduce the moral hazard problem of deposit insurance? (Hint: Moral hazard means that because of deposit insurance,banks may take on excessive amounts of risk.)

Accepted Answer

Both force bank managers to be cognizant

Question 18

A Bank has the following balance sheet (in millions),with the risk weights in parentheses.
   
In addition,the bank has $30 million in commercial direct-credit substitute standby letters of credit to a public corporation and $30 million in 10-year FX forward contracts that are in the money by $2 million.
A) What are the risk-adjusted on-balance-sheet assets of the bank as defined under the Basel III?
B) What are the common equity Tier I (CET1)risk-based capital ratio,Tier I risk-based capital ratio,and the total risk-based capital ratio?
C) Disregarding the capital conservation buffer,does the bank have sufficient capital to meet the Basel requirements?

Accepted Answer

a. Risk-adjusted on-balance-sheet assets

Question 19

Among other things,the Financial Institutions Reform,Recovery,and Enforcement Act stipulated the creation of the

Accepted Answer

A) FDIC. 
B) OTS. 
C) OCC. 
D) Warren Commission. 
E) CRA. 
A) FDIC. 
B) OTS. 
C) OCC. 
D) Warren Commission. 
E) CRA.

Question 20

To be classified as an adequately capitalized bank,the bank must have a leverage ratio of at least ________ percent,Tier I capital to credit risk-adjusted asset ratio of at least ________ percent and a total capital to credit risk-adjusted assets ratio of at least ________ percent,and does not meet the definition of a well-capitalized bank.

Accepted Answer

A) 4; 6; 8 
B) 5; 6; 10 
C) 3; 3; 8 
D) 4; 8; 4 
E) 4; 6; 10 
A) 4; 6; 8 
B) 5; 6; 10 
C) 3; 3; 8 
D) 4; 8; 4 
E) 4; 6; 10

Unit banking states are states that do not allow interstate branch banking but allow the creation of intrastate branch banks.

The 1993 Basel Agreement explicitly incorporated the different credit risks of assets into capital adequacy measures.

What changes to foreign bank operations in the United States have been brought about by the Foreign Bank Supervision and Enhancement Act of 1991?

(a)What are the mandatory Prompt Corrective Action (PCA)Provisions for an undercapitalized bank? Explain why these provisions are required. (b)Why does one of the mandatory PCA Provisions for a critically undercapitalized bank include appointing a receiver/conservator within 90 days?

Cite one law or regulation per each of the following categories:

A financial intermediary that can engage in a broad range of financial service activities is termed a universal FI.

The FDIC is required to establish a plan to restore the DIF if the reserve ratio falls below ________ of insured deposits.

Tier II (supplementary)capital includes which of the following? I. Allowance for loan and lease losses,up to 1.25 percent of risk-weighted assets II. Subordinated debt with original maturity of at least 5 years III. Common stock and retained earnings IV. Nontransaction deposits

The term disintermediation refers to

Which act allowed the establishment of full-service financial institutions in the United States?

Major provisions of the Financial Services Modernization Act of 1999 include all of the following except

Banks are generally prohibited from making loans exceeding more than 15 percent of their own equity capital to any one company or borrower.

FBSEA Act of 1991 extended federal regulatory authority over foreign banking organizations in the United States.

How do risk-based deposit insurance premiums and risk-based capital requirements help reduce the moral hazard problem of deposit insurance? (Hint: Moral hazard means that because of deposit insurance,banks may take on excessive amounts of risk.)

Among other things,the Financial Institutions Reform,Recovery,and Enforcement Act stipulated the creation of the

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, monetary Policy, and Interest Rates

Money Markets

Bond Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Commercial Banks Financial Statements and Analysis

Other Lending Institutions: Savings Institutions, credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

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Exam 13: Regulation of Commercial Banks

Unit banking states are states that do not allow interstate branch banking but allow the creation of intrastate branch banks.

The 1993 Basel Agreement explicitly incorporated the different credit risks of assets into capital adequacy measures.

What changes to foreign bank operations in the United States have been brought about by the Foreign Bank Supervision and Enhancement Act of 1991?

(a)What are the mandatory Prompt Corrective Action (PCA)Provisions for an undercapitalized bank? Explain why these provisions are required. (b)Why does one of the mandatory PCA Provisions for a critically undercapitalized bank include appointing a receiver/conservator within 90 days?

Cite one law or regulation per each of the following categories:

A financial intermediary that can engage in a broad range of financial service activities is termed a universal FI.

The FDIC is required to establish a plan to restore the DIF if the reserve ratio falls below ________ of insured deposits.

Tier II (supplementary)capital includes which of the following? I. Allowance for loan and lease losses,up to 1.25 percent of risk-weighted assets II. Subordinated debt with original maturity of at least 5 years III. Common stock and retained earnings IV. Nontransaction deposits

The term disintermediation refers to

Which act allowed the establishment of full-service financial institutions in the United States?

Major provisions of the Financial Services Modernization Act of 1999 include all of the following except

Banks are generally prohibited from making loans exceeding more than 15 percent of their own equity capital to any one company or borrower.

FBSEA Act of 1991 extended federal regulatory authority over foreign banking organizations in the United States.

How do risk-based deposit insurance premiums and risk-based capital requirements help reduce the moral hazard problem of deposit insurance? (Hint: Moral hazard means that because of deposit insurance,banks may take on excessive amounts of risk.)

Among other things,the Financial Institutions Reform,Recovery,and Enforcement Act stipulated the creation of the

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, monetary Policy, and Interest Rates

Money Markets

Bond Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Commercial Banks Financial Statements and Analysis

Other Lending Institutions: Savings Institutions, credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters