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Banking
Q:
When the Federal Reserve increases the discount rate, it generally causes other interest rates to decrease.
Q:
When the Federal Reserve buys T-bills through its open market operations, it causes the growth of bank deposits and loans to decrease.
Q:
The moral hazard problem of banks is caused by the fixed insurance premiums paid by banks which make them accept greater risk.
Q:
The term "regulatory dialectic" refers to the dual system of banking regulation in the United States and selected other countries where both the federal or central government and local governments regulate banks.
Q:
The 1994 Federal Interstate Banking bill does not limit the percentage of statewide or nationwide deposits that an interstate banking firm is allowed to control.
Q:
Under the terms of the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act, adequately capitalized and managed bank holding companies can acquire a bank anywhere inside the United States.
Q:
The federal law that states individuals and families cannot be denied a loan merely because of their age, sex, race, national origin, or religious affiliation is known as the Competitive Equality in Banking Act.
Q:
The Truth in Lending (or Consumer Credit Protection) Act was passed by the U.S. Congress to outlaw discrimination in providing bank services to the public.
Q:
National banks cannot merge without the prior approval of the Comptroller of the Currency.
Q:
The Bank Merger Act and its amendments require that Bank Holding Companies be under the jurisdiction of the Federal Reserve.
Q:
The Federal Reserve changes reserve requirements frequently because the effect of these changes is small.
Q:
Government-sponsored deposit insurance typically encourages individual depositors to monitor their banks' behavior in accepting risk.
Q:
In the United States, fixed fees charged for deposit insurance, regardless of how risky a bank is, led to a problem known as moral hazard.
Q:
Federal Reserve Act authorized the creation of the Federal Deposit Insurance Corporation.
Q:
The _________________________ proposes various regulations applying to the financial markets to combat the recent credit crisis. This "bail-out" bill granted the US Treasury the means to purchase troubled loans, allowed the FDIC to temporarily increase deposit insurance, and permitted the government to inject additional capital into the banking system.
Q:
The _____________________________________ was created by the National Bank Act and is part of the Treasury Department. It is the primary regulator of national banks.
Q:
The _____________________ makes it faster and less costly for banks to clear checks. It allows for banks to electronically send check images instead of shipping paper checks across the country.
Q:
The ___________________________________ makes it easier for victims of identity theft to file a theft report with the Federal Trade Commission and allows the public to apply for a free credit report once a year from the national credit bureaus.
Q:
Federal Credit Unions are regulated and examined by _________________________________.
Q:
The main regulators of insurance companies are ____________________________.
Q:
The _____________________________ is the center of authority and decision making within the Federal Reserve. It consists of seven members appointed by the president for terms not exceeding 14 years.
Q:
One of the main roles of the Federal Reserve today is ________________. They have three tools that they use today to carry out this role: open market operations, the discount rate, and legal reserve requirements.
Q:
The central bank of the new European Union is known as the ______________________.
Q:
The _________________ requires selected financial institutions to report suspicious activity in customer accounts to the Treasury Department.
Q:
The federal bank regulatory agency which examines the most banks is the _____________.
Q:
Customers of financial-service companies may _____________________ of having their private information shared with a third party, such as a telemarketer. However, in order to do this, they must tell the financial-services company in writing that they do not want their personal information shared with outside parties.
Q:
The ___________________________ allows well-managed and well-capitalized banking companies with satisfactory CRA ratings to affiliate with insurance companies and securities firms either through a financial holding company or through a subsidiary firm owned by a bank.
Q:
The __________________________ allows adequately capitalized and managed bank holding companies to acquire banks anywhere in the United States. However, no one bank can control more than 30 percent of the deposits in any one state (unless the state waives this restriction) or more than 10 percent of the deposits across the country.
Q:
The __________________________ brought bank holding companies under the jurisdiction of the Federal Reserve.
Q:
The _________________________ was passed during the Great Depression. It separated investment and commercial banks and created the FDIC.
Q:
The first major federal banking law in the U.S. was the _________________________. This law was passed during the Civil War and set up a system for chartering new national banks through the OCC.
Q:
One tool that the Federal Reserve uses to control the money supply is ________________. The Federal Reserve will change the interest rate they charge for short-term loans when they are using this tool of monetary policy.
Q:
In 1980, the __________________________ was passed, which lifted U.S government ceilings on deposit interest rates in favor of free-market interest rates.
Q:
The policy of FDIC to levy fixed insurance premiums regardless of the risk involved, led to a/an _____________ problem among banks. The fixed premiums encouraged banks to accept greater risk.
Q:
The McFadden Act and the Douglas amendment which prevented banks from crossing state lines were later repealed by the _______________________________.
Q:
The __________________________ was created in 1913 in response to a series of economic depressions and failures. Its principal role is to serve as the lender of last resort and to stabilize the financial markets.
Q:
The ________________________ is the law that states that a bank must get federal approval in order to combine with another bank.
Q:
The _____________________ was created as part of the Glass-Steagall Act. In the beginning it insured deposits up to $2,500.
Q:
Which of the following are the implied motivators of reforms that have taken place in the banking sector since the credit crisis of 2007-2009?
A. Increased liquidity
B. Increased dominance of the largest financial firms
C. Increased disclosure of credit charges and other consumer expenses
D. Increased number of bank branches
E. Increased speed of innovation and invention
Q:
Which of the following activities do the banks perform as dealers in arranging for risk protection for customers from third parties?
A. Hedging services
B. Merchant banking services
C. Investment banking services
D. Mutual funds services
E. Security underwriting services
Q:
Which one of the following nonbank financial-service institutions sell shares to the public representing an interest in a professionally managed pool of stocks, bonds, and other securities?
A. Security brokers and dealers
B. Investment banks
C. Finance companies
D. Mutual funds
E. Hedge funds
Q:
Which of the following reasons leads to an implication that traditional banking is dying?
A. Decrease in number of branches
B. Increased restructuring of loans
C. Degradation of market share
D. Reduction of public trust and confidence in the system.
E. Increase in risky arbitrage services
Q:
Which of the following is an example of a commercial bank?
A. State and local government retirement funds
B. Foreign banking offices in the United States
C. Finance and mortgage companies
D. Property/casualty and other insurers
E. Mutual funds
Q:
During the financial crisis of 2007-2009, the collapse of Lehman Brothers and the bailout of Bear Stearns reaffirmed the importance of the fundamental principle of:
A. superior management.
B. globalization.
C. government bailout.
D. regulatory arbitrage.
E. public trust and confidence in the system.
Q:
Which of the following is not a purpose of bank regulation?
A. Guarantee minimal profitability of the banking system
B. Provide monetary stability
C. Ensure safety and soundness of banks
D. Provide competitive financial system
E. Protect consumers from abuses of banks
Q:
Which of the following is considered a depository financial institution?
A. Mortgage company
B. Private pension funds
C. Savings and Loan associations
D. Money market funds
E. Insurance company
Q:
The principal functions and services offered by many financial-service firms today include:
A. lending and investing money.
B. making payments on behalf of customers to facilitate their purchases of goods and services.
C. managing and protecting customers' cash and other property.
D. assisting customers in raising and investing funds profitably.
E. All of the above.
Q:
Chandriga Suppiah has opened a Roth IRA with North Carolina State Bank and plans on making regular contributions to this account until she retires. Which of the financial services is Chandriga taking advantage of?
A. Getting a consumer loan
B. Getting financial advice
C. Managing cash
D. Getting venture capital services
E. Buying a retirement plan
Q:
MyWebCast is a new company that makes it easy for individuals to create streaming videos on the Internet to share with friends and family for a small fee. MyWebCast wants to expand their offerings of video streaming services but needs cash to be able to do this. The Second National Bank of Oklahoma City, through a subsidiary, gives them the cash they need for an ownership share in the company. Which of the more recent services that banks offer is MyWebCast taking advantage of?
A. Getting a consumer loan
B. Getting financial advice
C. Managing cash
D. Getting venture capital services
E. Buying a retirement plan
Q:
The Bartholemew Bakery receives a lot of payments in cash. They deposit it in their local bank who invests the money in an interest bearing account until it is needed to pay bills. Which of the financial services banks offer, is the Bartholemew bakery taking advantage of?
A. Getting a consumer loan
B. Getting financial advice
C. Managing cash
D. Getting venture capital services
E. Buying a retirement plan
Q:
Drew Davis goes to his local bank to get help developing a financial plan and making investment decisions. Which of the more recent services banks offer is Drew taking advantage of?
A. Getting a consumer loan
B. Getting financial advice
C. Managing cash
D. Getting venture capital services
E. Buying a retirement plan
Q:
Nick Rodr gets a loan from the First State Bank of Guthrie to purchase a new refrigerator for his condo. What service that a bank provides is he taking advantage of?
A. Risky arbitrage services
B. Liquidity services
C. Delegated monitoring services
D. Divisibility of money services
E. Credit services
Q:
Jonathan Wynn knows that if he wanted to purchase a Treasury Bill, the minimum amount he would spend would be close to $10,000. He also knows that he could deposit $1,000 in a money market deposit account at a bank and earn about the same rate of interest. Jonathan does not have $10,000 to invest in a Treasury Bill. If Jonathan puts his money in the bank, which service that a bank can provide, is he taking advantage of?
A. Risky arbitrage services
B. Liquidity services
C. Delegated monitoring services
D. Divisibility of money services
E. Credit services
Q:
The First National Bank of Lakeland makes risky loans to businesses to expand and grow their businesses while at the same time issuing low-risk securities to their depositors and other fund providers. Which of the following services is this bank offering to their customers?
A. Risky arbitrage services
B. Liquidity services
C. Delegated monitoring services
D. Divisibility of money services
E. Credit services
Q:
Major trends affecting the performance of financial firms today include all of these except:
A. greater product-line diversification.
B. reduced branching.
C. geographic diversification.
D. convergence.
E. increasing automation.
Q:
The Bank, N.A. accepts deposits from thousands of individuals and lends that money to (among others) the Stillwater Body Shop to expand their work bays. Which of the following roles is the bank performing?
A. The intermediation role
B. The payments role
C. The risk management role
D. The guarantor role
E. The policy role
Q:
Chris Jones gets a cashier's check from Wachovia Bank to make his down payment on a new home. Which of the following roles is the bank performing?
A. The intermediation role
B. The payments role
C. The risk management role
D. The guarantor role
E. The policy role
Q:
Alexander Phua goes to his local bank and gets an insurance policy that protects him against loss in case he is in a car accident. Which of the following roles is the bank performing?
A. The intermediation role
B. The payments role
C. The risk management role
D. The guarantor role
E. The policy role
Q:
The Edmond Wine and Cheese shop wants to buy 30 cases of French Champagne on credit. Bank of America writes a letter of credit stating that the Edmond Wine and Cheese shop is a good risk and that if they do not pay off the loan, Bank of America will. Which of the following roles is the bank performing?
A. The intermediation role
B. The payments role
C. The risk management role
D. The guarantor role
E. The policy role
Q:
The U.S. government wants to prevent money laundering by drug cartels. To promote this goal, they have asked banks to report any cash deposits greater than $10,000 to the government. Which of the following roles is the bank performing?
A. The intermediation role
B. The payments role
C. The risk management role
D. The guarantor role
E. The policy role
Q:
Early European banks were places for safekeeping of wealth because:
A. loans to the poor often carried high interest rates.
B. loans and deposits were primarily for wealthy customers.
C. the industrial revolution demanded new methods of making payments and obtaining credit.
D. savings and wealth were lost due to war, theft, and expropriation by governments.
E. All of the options are correct.
Q:
Banks like the Medici Bank in Italy and the Hochstetter Bank in Germany were successful because __________ and they responded well to these new needs.
A. the poor needed loans at high interest rates
B. primarily wealthy customers needed loans and deposits
C. the Industrial Revolution demanded new methods of making payments and obtaining credit
D. people needed to protect their savings and wealth from the government
E. All of the options are correct.
Q:
Religious opposition decreased during the Renaissance because:
A. loans to the poor often carried high interest rates.
B. loans and deposits primarily consisted of wealthy customers.
C. the Industrial Revolution demanded new methods of making payments and obtaining credit.
D. savings and wealth were lost due to war, theft, and expropriation by governments.
E. All of the options are correct.
Q:
During the middle ages, banks encountered religious opposition because:
A. loans to the poor often carried high interest rates.
B. loans and deposits were primarily for wealthy customers.
C. the Industrial Revolution demanded new methods of making payments and obtaining credit.
D. savings and wealth were lost due to war, theft, and expropriation by governments.
E. All of the options are correct.
Q:
Which of the following is considered a fringe bank?
A. Community Bank
B. Wholesale Bank
C. Merchant Bank
D. Payday Lender
E. None of the options are correct.
Q:
The Charleston Southern Bank makes loans for families to purchase new and existing homes but does not take deposits. What type of bank is this most likely to be?
A. Virtual Bank
B. Mortgage Bank
C. Community Bank
D. Merchant banks
E. None of the options are correct.
Q:
The Edmond National Bank serves only the City of Edmond, Oklahoma and concentrates on providing the best possible service to this city. What type of bank is this most likely to be?
A. Virtual Bank
B. Mortgage Bank
C. Community Bank
D. Bankers' banks
E. None of the options are correct.
Q:
Jonathan Robbins has an account in a bank that does not have a physical branch. Jonathan does all of his banking business over the Internet. What type of bank does Jonathan have his account at?
A. Virtual Bank
B. Mortgage Bank
C. Community Bank
D. Minority banks
E. None of the options are correct.
Q:
Wholesale banks are those banks that:
A. sell at a discount relative to all commercial banks.
B. only make loans to the wholesale industry.
C. lend almost exclusively to farmers.
D. serve corporations and government.
E. have only retail customers.
Q:
Bank equipment leasing activity involves:
A. a bank leasing its office facilities instead of buying.
B. a bank buying equipment and then leasing the item to a customer.
C. a customer buying equipment and then leasing it to a bank.
D. a bank leasing computer equipment.
E. None of the options are correct.
Q:
The phenomenon of convergence refers to:
A. financial service firms expanding into other product lines.
B. firms reducing their product lines.
C. bank merger activity.
D. globalization in banking.
E. technological innovation in banking.
Q:
Which of the following types of banks would most likely offer the largest number of financial services virtually?
A. A retail bank
B. A community bank
C. A commercial bank
D. A universal bank
E. An international bank
Q:
Which of the following is not a current trend in the banking industry?
A. The number of banks is declining
B. The number of bank branches is declining
C. The number of bank services is increasing
D. The number of bank competitors is increasing
E. Bank industry convergence
Q:
A bank which manages the investment portfolio and pays the bills of an elderly customer who is unable to do it for him or herself is carrying out the __________ of banks.
A. intermediation role
B. payment role
C. guarantor role
D. agency role
E. policy role
Q:
Examples of imperfections in the financial system which allow banks to exist include which of the following?
A. Informational asymmetry
B. Efficiency of markets
C. Divisibility of assets
D. Adequate liquidity
E. All of the examples are of the imperfections that exist.
Q:
A bank that wires funds for the purchase of a beach house in South Carolina for a customer in Oklahoma is carrying out the __________ of banks.
A. intermediation role
B. payment role
C. guarantor role
D. agency role
E. policy role
Q:
The banking services that include marketing new securities to raise funds for corporations and other institutions is referred to:
A. comprehensive packaging.
B. wrap-around accounts.
C. investment banking.
D. professional banking.
E. None of the options are correct.
Q:
Smaller, locally focused commercial and savings banks that offer narrower but more personalized menu of financial services are known as:
A. money-center banks.
B. community banks.
C. mutual funds.
D. state banks.
E. fringe banks.
Q:
Included among leading structural trends in the U.S. banking industry in recent years are:
A. the number of independently owned banks has declined.
B. the average size of individual banking firms has increased.
C. entry across state lines from neighboring states has increased.
D. the mergers among some of the largest banks in the industry.
E. All of the options are correct.
Q:
Which of the following has been an important trend regarding consolidation and geographic expansion in banks?
A. Increased bank branching activity
B. The formation of more holding companies to purchase smaller banks
C. Mergers among some of the largest banks in the industry
D. Significant rise in the average size of individual banks
E. All of the options are correct