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Finance
Q:
The issue of defining the common bond among members of credit unions has been in the courts and Congress. Why is this issue important to competing bankers? To credit unions? Does it have any relationship to the risks faced by credit unions?
Q:
Explain how unexpected increases in interest rates hurt savings institutions. How would they alter their maturity GAP if they expected interest rates to rise?
Q:
For finance companies, the business that purchase corporate accounts receivables at a discount is:a. Equipment leasingb. Letter of creditc. Retail paperd. Wholesale papere. Factoring
Q:
Which description about the finance companies is NOT correct?a.Since clients are selected, they are low-risk borrowers.b.Finance companies are highly financially leveraged.c.Most funds of finance companies are borrowed from banks and the market.d.Most larger finance companies are now subsidiaries of bank and financial holding companies.e.Finance companies are diverse and adaptive to changing needs
Q:
Comparing to commercial banks, the advantages of credit unions include:
I. Credit unions are not taxed
II. Credit unions are better diversified than banks
III. Credit unions can collectively pool funds
IV. Due to regulations credit unions have better economies of scale and scope than banks
V. Because of their ties to employers credit unions have better personnel expertise than banks
a. I and III only
b. I and II only
c. III and IV only
d. III, IV and V only
e. I, III and V only
Q:
The agency that oversees the operations of the Federal Home Loan Banks is
a. Federal Reserve Board
b. the U.S. Treasury
c. Federal Housing Finance Agency
d. banking agencies in different states
e. Department of Commerce
Q:
The profitability of consumer loans tends to ___________ as loans get ___________.
a. decrease; larger
b. increase; larger
c. stay the same; larger
d. increase; smaller
Q:
Finance companies can issue demand deposits if they
a. qualify for deposit insurance
b. somehow obtain repeal of the laws now prohibiting them from doing so
c. affirmatively disclose that such deposits are uninsured
d. obtain "industrial bank" charters
Q:
Much of the flexibility and variety associated with finance companies is associated witha. the wide variety of financial services allowed by the Federal Reserve System.b. little constraining regulation at the commercial finance level.c. the opportunistic culture of finance company managers.d."b" and "c" above.
Q:
Major finance companies place their commercial paper "directly," which is
a. directly from the bank.
b. through direct contact with dealers.
c. through direct contact with suppliers of funds.
d. directly through the mail.
Q:
Investment securities are owned by finance companies to provide
a. income and financing.
b. liquidity and cash.
c. liquidity and income.
d. collateral and income.
Q:
The major assets of large finance companies are
a. certificates of deposit.
b. cash, ready to be loaned out.
c. loan receivables.
d. commercial paper.
Q:
In contrast to depository institutions, finance companies tend to
a. obtain their funds in large amounts, lend in small amounts.
b. obtain their funds in small amounts, lend in large amounts.
c. have a greater proportion of deposit sources of funds
d. be less flexible in their ability to branch.
Q:
Finance companies have increasingly made second mortgage loans because of
a. higher average balances.
b. profit potential of such loans.
c. the Federal Bankruptcy law.
d. all of the above
Q:
All of the following serve as an advantage for credit unions except
a. small size.
b. sponsor support.
c. federal income tax exemption.
d. payroll deduction.
Q:
Which of the following statements is not true?
a. Credit unions, most of which are very small, cannot match the extent of services offered by a commercial bank.
b. Credit union share accounts are the functional equivalent to passbook accounts.
c. Credit unions may arguably be more comparable to "clubs" than to businesses.
d. Credit unions have a common-bond requirement.
Q:
Credit union large certificates of indebtedness, $100,000 and above, are insured by
a. NCUSIF.
b. FDIC.
c. SAIF.
d. none of the above
Q:
Credit unions are chartered by
a. state governments.
b. the National Credit Union Administration.
c. the Comptroller of the Currency.
d. either a or b
Q:
Which of the following statements is not true?
a. Credit unions pay federal income taxes.
b. To use the services of a credit union one must be a member.
c. Credit unions have been exempt from antitrust laws.
d. The total number of credit unions is declining in the United States.
Q:
Which of the following is an effective way to reduce a thrift's negative maturity GAP?
a. making more adjustable rate mortgage loans
b. buying related futures contracts.
c. borrowing less long-term funds from the FHLB.
d. raising the rates on short-term CD's.
Q:
A thrift institution can reduce interest rate risk by
a. making more mortgages financed by six month CD's.
b. performing more mortgage banking activities.
c. buying Treasury bond futures to reduce the thrift's negative maturity GAP.
d. making more thirty-year mortgages.
Q:
Thrifts' return on average assets (ROAA) has increased in recent years primarily due to
a. increased net interest income per average assets.
b. decreased noninterest expenses per average assets.
c. increased noninterest income per average assets.
d. the decline in average assets in the period.
Q:
Thrift capital ratios increased in the last few years primarily because of
a. industry consolidation
b. stock sales and earnings retention
c. declining problem loans
d. all of the above
Q:
The account, other real estate owned (OREO), found as an asset on a savings and loan balance sheet is associated with:
a. the real estate associated with the home office and branches.
b. the real estate financed by home mortgages
c. the real estate of managers and employees financed by the institution.
d. repossessed real estate associated with foreclosed mortgage loans not yet resold.
Q:
The major asset of thrift institutions is ______ ; ______ are the primary source of funds.
a. home mortgages; small denomination deposits
b. commercial mortgages; large denominations deposits
c. home mortgages; large denomination deposits
d. multifamily home mortgages; small denomination deposits
Q:
The Office of Thrift Supervision (OTS) replaced the _______ as the primary federal thrift regulator in 1989.
a. Federal Savings and Loan Insurance Corporation
b. Federal Deposit Insurance Corporation
c. Federal Home Loan Bank Board
d. Federal National Mortgage Corporation
Q:
The primary function of the Resolution Trust Corporation (RTC) was to:
a. insure the deposits of problem thrift institutions.
b. charter and regulate savings and loan associations.
c. liquidate and sell problem savings and loans.
d. resolve the interest rate risk problems of thrifts.
Q:
Today thrift institutions' deposits are primarily insured by:
a. large insurance companies
b. Federal Deposit Insurance Corporation
c. Federal Savings and Loan Insurance Corporation
d. FDIC-BIF
Q:
Mutual thrift institutions are owned by:
a. managers
b. depositors
c. stockholders
d. the general public
Q:
Most thrift institutions were originally organized as:
a. mutuals
b. corporations
c. proprietorships
d. partnerships
Q:
The number of OTS-regulated thrift institutions has_______ in the last five years, while the amount of assets of those institutions has _______?
a. increased, increased
b. increased, decreased
c. decreased, increased
d. decreased, decreased
Q:
All but one of the followingis a reason mutual thrifts have converted to stock institutions:
a. to obtain federal deposit insurance
b. to sell stock and increase their net worth
c. to acquire subsidiaries more easily
d. to merge with other institutions more easily
Q:
Almost all thrift financial institutions are insured by _________ deposit insurance.
a. state
b. federal
c. private
d. group
Q:
All but one of the following is defunct:
a. FHLBB
b. OTS
c. RTC
d. FSLIC
Q:
Thrift institutions are chartered by
a. states only.
b. the federal government only.
c. both states and the federal government
d. none of the above.
Q:
All but one of the followingis classified to some extent as a "thrift":
a. commercial bank
b. savings and loan association
c. savings bank
d. credit union
Q:
The Resolution Trust Corporation was disbanded because
a. its work was complete
b. its mission proved ultimately impossible
c. it failed
d. of political infighting
Q:
A purpose of the FSLIC today is to:
a. give financial historians something to study.
b. insure federal S&Ls.
c. regulate the capital position of S&Ls.
d. monitor the activities of the 12 FHLBs.
Q:
The Office of Thrift Supervision does all the following except
a. examines federally chartered S&L's.
b. administers the Savings Association Insurance Fund (SAIF).
c. charters federal S&Ls.
d. supervises S&L holding companies.
Q:
Which of the following will definitely increase an S&L's net worth, all else equal?
a. a reduced GAP position
b. conversion from stock to mutual charter
c. sale of preferred stock
d. increased reserve for loan losses
Q:
The sale of mortgages would offer the thrift institution all of the following except:
a. a source of liquidity from the mortgage portfolio.
b. a source of interest income.
c. an opportunity to reduce a high negative GAP position.
d. an opportunity to make additional mortgage loans.
Q:
Which of the following would reduce the high negative GAP position of an S&L?
a. increased fixed rate mortgages
b. increased long-term CDs
c. increased money market deposit accounts
d. increased federal funds purchased
Q:
Though most thrift institutions have had expanded asset/service privileges for several years, few have expanded very far beyond mortgage related activities for all but one of the following reasons:
a. unfamiliarity with new, competitive markets.
b. lack of experienced employees trained in the new areas.
c. reluctance to challenge the banking industry.
d. concern over possible loss of federal income tax advantages
Q:
The major assets of savings and loans are:
a. mortgage-backed securities.
b. construction loans.
c. residential mortgages.
d. cash and investment accounts.
Q:
While thrifts are federally insured, are federally chartered.
a. few; most.
b. most, few.
c. very few; half.
d. most; half.
Q:
Earnings of the S&L industry suffered in the 1980s from both maturity imbalances and
a. loan losses related to new asset powers granted in 1980.
b. high, sustained interest rates.
c. the high rates paid on NOW accounts.
d. higher yields from consumer credit card loans.
Q:
A manager/owner agency problem for thrifts when capital ratios were low was
a. managers would inflate salaries and perks for themselves.
b. managers were encouraged to assume excessive credit risk.
c. managers were encouraged to sell low-yielding mortgages, book the loss, and reinvest in higher yielding 1-4 family residential mortgages.
d. managers were encouraged to reduce risk to dangerously low levels.
Q:
Which of the following has contributed to the very low capital levels of thrifts?
a. the use of the mutual form of organization.
b. loan losses.
c. high operating expenses.
d. all of the above
Q:
When comparing high performing with low-performing thrifts, low-performing thrifts tend to have fewer:
a. intangible assets.
b. repossessed properties.
c. high-yield securities.
d. residential mortgages.
Q:
The takeover of weakly but still positively capitalized thrifts was an important part of the
a. FDIC Improvement Act of 1991.
b. FIRRE Act of 1989.
c. Garn-St. Germain Act of 1982.
d. DIDMCA Act of 1980.
Q:
The expense categories for thrifts, from largest to smallest, are
a. non-interest expense, interest expense, provision for loan losses.
b. provision for loan losses, non-interest expense, and interest expense.
c. interest expense, non-interest expense, and provision for loan losses.
d. tax expense, interest expense, and provision for loan losses.
Q:
All of the following are important sources of liquidity for thrifts except:
a. purchasing federal funds.
b. issuing commercial paper.
c. buying mortgage-backed bonds.
d. advances from Federal Home Loan Banks.
Q:
Thrifts invest in mortgages for which of the following reasons?
a. Tax incentives provided by Congress.
b. To reduce interest rate risk.
c. They have the management expertise to specialize in mortgages.
d. Both a and c.
Q:
Acquisition of a greater proportion of which following asset would help a thrift alleviate a high negative GAP position?
a. NOW accounts
b. high yield bonds
c. adjustable rate mortgages
d. fixed rate mortgage-backed securities
Q:
The regulatory agency most directly concerned with supervising thrifts is the
a. FHLBB.
b. OTS.
c. OCC.
d. Fed.
Q:
The Office of Thrift Supervision and the Resolution Trust Corporation were created by
a. FIRRE Act of 1989.
b. FDIC Improvement Act of 1991.
c. Garn-St. Germain Act of 1982.
d. DIDMCA Act of 1980.
Q:
In the U.S., most savings institutions were established as stockholder organizations or partnerships.
Q:
In general, commercial banks have a higher concentration of mortgage related assets on the balance sheet than savings institutions.
Q:
Financial institutions must have at least 65% of their assets in mortgage related areas in order to maintain their favorable tax status and obtain loans from Federal Home Loan Banks.
Q:
Of all the depository institutions, as a percentage of assets, credit unions have the highest dependence on deposit sources of funds.
Q:
Industrial banks may arguably be likened to finance companies that issue savings deposits.
Q:
The U.S. Central Credit Union is a principal regulator of credit unions.
Q:
The thrift crisis of the 1980s was caused by a combination of unsound lending practices and inadequate interest rate risk management.
Q:
Deregulation has made all lending institutions more alike than different.
Q:
The major expenses of a finance company are salaries and loan losses.
Q:
Most business credit extended by finance companies is unsecured.
Q:
Finance companies borrow in large amounts, lend in small amounts.
Q:
The fixed cost of loan origination and servicing explains why finance companies prefer small shorter-term loans over large longer-term loans.
Q:
Consumer protection legislation has had an impact on the strategy of finance companies.
Q:
Consumer lending is subject to more regulations than business lending.
Q:
A finance company in a recession would worry more about credit risk than interest rate risk.
Q:
Credit unions are exempt from federal income tax on income from financial assets.
Q:
Credit unions have higher loan losses than commercial banks.
Q:
Credit unions have shortened the duration of their loan portfolios by making mortgage loans.
Q:
Liquidity risk is reduced by deposit insurance and the presence of credit union "centrals".
Q:
Credit risk may be reduced by selling credit life insurance to credit union members.
Q:
Credit unions were originally organized with the idea that members could pool their funds together and make low-cost loans to themselves as a group.
Q:
Thrifts assume less interest rate risk and manage it better than they did 25 years ago.
Q:
Noninterest expenses of thrifts have declined significantly.
Q:
Noninterest income has become an important source of revenue for thrifts.