Question 1

Permissible section 20 subsidiary activities include

Accepted Answer

A) insurance activities. 
B) hedging. 
C) factoring. 
D) extensions of lines of credit. 
E) investment banking activities. 
A) insurance activities. 
B) hedging. 
C) factoring. 
D) extensions of lines of credit. 
E) investment banking activities.

Question 2

The merger bid premium usually is defined as

Accepted Answer

A) the difference between the price paid for the company and the market value immediately prior to the merger announcement. 
B) the ratio of the purchase price of a target bank's equity to its book value. 
C) the difference between the market value immediately prior to the merger announcement and the book value of the company. 
D) All of the options. 
E) None of the options. 
A) the difference between the price paid for the company and the market value immediately prior to the merger announcement. 
B) the ratio of the purchase price of a target bank's equity to its book value. 
C) the difference between the market value immediately prior to the merger announcement and the book value of the company. 
D) All of the options. 
E) None of the options.

Question 3

Identify the legislation that restricted the branching of nationally-chartered banks to the same guidelines as allowed to state-chartered banks.

Accepted Answer

A) Bank Holding Company Act. 
B) McFadden Act. 
C) Garn-St.Germain Act. 
D) Glass-Steagall Act. 
E) Competitive Equality in Banking Act. 
A) Bank Holding Company Act. 
B) McFadden Act. 
C) Garn-St.Germain Act. 
D) Glass-Steagall Act. 
E) Competitive Equality in Banking Act.

Question 4

Commercial banks have expanded their activities in each of the following ways EXCEPT

Accepted Answer

A) opening nonbank banks. 
B) grandfathering previously permitted activities. 
C) expanding off shore. 
D) petitioning regulators for enhanced powers. 
E) acquiring nonfinancial firms. 
A) opening nonbank banks. 
B) grandfathering previously permitted activities. 
C) expanding off shore. 
D) petitioning regulators for enhanced powers. 
E) acquiring nonfinancial firms.

Question 5

The process of using lending power to coerce a loan customer to use products sold by a securities affiliate is called information transfer.

Accepted Answer

A) True 
 B)False

Question 6

The Financial Services Modernization Act allowed for

Accepted Answer

A) the creation of financial services holding companies. 
B) the replacement of all previous regulatory agencies with one super regulator. 
C) the placement of some securities underwriting in bank subsidiaries. 
D) All of the options. 
E) the creation of financial services holding companies and the placement of some securities underwriting in bank subsidiaries. 
A) the creation of financial services holding companies. 
B) the replacement of all previous regulatory agencies with one super regulator. 
C) the placement of some securities underwriting in bank subsidiaries. 
D) All of the options. 
E) the creation of financial services holding companies and the placement of some securities underwriting in bank subsidiaries.

Question 7

Identify the procompetitive effect of banks' expansion of their securities activities.

Accepted Answer

A) Reduces the degree of underpricing of new issues. 
B) Encourages stuffing of fiduciary accounts. 
C) Increased provision of cheap loans on the implicit condition that this loan is used to purchase securities. 
D) Use of lending powers by a bank to coerce a customer to buy the products sold by its securities affiliate. 
E) Use of inside information by a bank to set the prices, or help the distribution of securities offerings by its affiliate. 
A) Reduces the degree of underpricing of new issues. 
B) Encourages stuffing of fiduciary accounts. 
C) Increased provision of cheap loans on the implicit condition that this loan is used to purchase securities. 
D) Use of lending powers by a bank to coerce a customer to buy the products sold by its securities affiliate. 
E) Use of inside information by a bank to set the prices, or help the distribution of securities offerings by its affiliate.

Question 8

During most of the twentieth century the banking industry was able to continue to expand geographically by

Accepted Answer

A) utilizing multi-bank holding companies. 
B) utilizing one-bank holding companies. 
C) successfully implementing reciprocal regional banking pacts. 
D) All of the options. 
E) None of the options. 
A) utilizing multi-bank holding companies. 
B) utilizing one-bank holding companies. 
C) successfully implementing reciprocal regional banking pacts. 
D) All of the options. 
E) None of the options.

Question 9

If Bank 1 is acquired by Bank 2, what is the impact on the market's HHI? $$\begin{array} { | c | r | } 
\hline \text { Bank } & \text { Asset Size } \
\hline 1 & \text { \$100 million } \
\hline 2 & \text { \$200 million } \
\hline 3 & \text { \$500 million } \
\hline
\end{array}$$

Accepted Answer

A) An increase in the HHI of 1600. 
B) An increase in the HHI of 625. 
C) An increase in the HHI of 1563. 
D) A decrease in the HHI of 222. 
E) A decrease in the HHI of 360. 
A) An increase in the HHI of 1600. 
B) An increase in the HHI of 625. 
C) An increase in the HHI of 1563. 
D) A decrease in the HHI of 222. 
E) A decrease in the HHI of 360.

Question 10

The USA Patriot Act of 2001 prohibits U.S.banks from providing banking services to foreign banks.

Accepted Answer

A) True 
 B)False

Question 11

International expansion by a commercial bank should provide increased access to funding sources.

Accepted Answer

A) True 
 B)False

Question 12

Historically, commercial banks have been prohibited from acting as an underwriter of insurance products.

Accepted Answer

A) True 
 B)False

Question 13

Identify the action taken by OCC and the Federal Reserve in 1997, to expand the permitted activities of bank holding companies.

Accepted Answer

A) Repealed the Glass-Steagall barriers between commercial banking and investment banking. 
B) Allowed commercial banks to acquire directly existing investment banks. 
C) Allowed investment banks to offer banking products. 
D) Allowed investment banks to offer deposit products. 
E) All of the options. 
A) Repealed the Glass-Steagall barriers between commercial banking and investment banking. 
B) Allowed commercial banks to acquire directly existing investment banks. 
C) Allowed investment banks to offer banking products. 
D) Allowed investment banks to offer deposit products. 
E) All of the options.

Question 14

Concern about the financial impact of an extension of the federal safety net has been used to justify product segmentation on the grounds of

Accepted Answer

A) safety and soundness issues. 
B) economy of scale and scope issues. 
C) conflict of interest issues. 
D) deposit insurance issues. 
E) regulatory oversight issues. 
A) safety and soundness issues. 
B) economy of scale and scope issues. 
C) conflict of interest issues. 
D) deposit insurance issues. 
E) regulatory oversight issues.

Question 15

Banks increasingly have been susceptible to nonbank competition on both sides of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 16

Chinese walls are barriers within organizations that limit the flow of confidential information between departments of business areas.

Accepted Answer

A) True 
 B)False

Question 17

The passage of which regulation extended the interstate acquisition powers of banks to encompass healthy thrifts?

Accepted Answer

A) Bank Holding Company Act. 
B) McFadden Act. 
C) Garn-St.Germain Act. 
D) Financial Institutions Reform, Recovery, and Enforcement Act. 
E) Glass-Steagall Act. 
A) Bank Holding Company Act. 
B) McFadden Act. 
C) Garn-St.Germain Act. 
D) Financial Institutions Reform, Recovery, and Enforcement Act. 
E) Glass-Steagall Act.

Question 18

What is the market's Herfindahl Hirschman Index (HHI)? $$\begin{array} { | c | r | } 
\hline \text { Bank } & \text { Asset Size } \
\hline 1 & \text { \$100 million } \
\hline 2 & \text { \$200 million } \
\hline 3 & \text { \$500 million } \
\hline
\end{array}$$

Accepted Answer

A) 4,688. 
B) 3,600. 
C) 548. 
D) 8. 
E) 0. 
A) 4,688. 
B) 3,600. 
C) 548. 
D) 8. 
E) 0.

Question 19

An organization form that limits business transactions to a single location is

Accepted Answer

A) an unit bank. 
B) a multibank holding company. 
C) a one-bank holding company. 
D) an interstate bank. 
E) a fully integrated universal bank. 
A) an unit bank. 
B) a multibank holding company. 
C) a one-bank holding company. 
D) an interstate bank. 
E) a fully integrated universal bank.

Question 20

Which of the following items is an advantage of international expansion for an FI?

Accepted Answer

A) An FI faces the political risk that a change in government may lead to the nationalization of fixed assets. 
B) A global FI must master the rules and regulations of each market in which it operates. 
C) The fixed costs of establishing overseas organizations may be very high in certain markets. 
D) International expansions allow an FI to maintain contact with and provide service to the needs of domestic multinational corporations. 
E) The absolute level of risk exposure in certain markets can be very high. 
A) An FI faces the political risk that a change in government may lead to the nationalization of fixed assets. 
B) A global FI must master the rules and regulations of each market in which it operates. 
C) The fixed costs of establishing overseas organizations may be very high in certain markets. 
D) International expansions allow an FI to maintain contact with and provide service to the needs of domestic multinational corporations. 
E) The absolute level of risk exposure in certain markets can be very high.

Exam 22: Product and Geographic Expansion

Permissible section 20 subsidiary activities include

The merger bid premium usually is defined as

Identify the legislation that restricted the branching of nationally-chartered banks to the same guidelines as allowed to state-chartered banks.

Commercial banks have expanded their activities in each of the following ways EXCEPT

The process of using lending power to coerce a loan customer to use products sold by a securities affiliate is called information transfer.

The Financial Services Modernization Act allowed for

Identify the procompetitive effect of banks' expansion of their securities activities.

During most of the twentieth century the banking industry was able to continue to expand geographically by

If Bank 1 is acquired by Bank 2, what is the impact on the market's HHI? Bank Asset Size 1 \1 00 million 2 \2 00 million 3 \5 00 million

The USA Patriot Act of 2001 prohibits U.S.banks from providing banking services to foreign banks.

International expansion by a commercial bank should provide increased access to funding sources.

Historically, commercial banks have been prohibited from acting as an underwriter of insurance products.

Identify the action taken by OCC and the Federal Reserve in 1997, to expand the permitted activities of bank holding companies.

Concern about the financial impact of an extension of the federal safety net has been used to justify product segmentation on the grounds of

Banks increasingly have been susceptible to nonbank competition on both sides of the balance sheet.

Chinese walls are barriers within organizations that limit the flow of confidential information between departments of business areas.

The passage of which regulation extended the interstate acquisition powers of banks to encompass healthy thrifts?

What is the market's Herfindahl Hirschman Index (HHI)? Bank Asset Size 1 \1 00 million 2 \2 00 million 3 \5 00 million

An organization form that limits business transactions to a single location is

Which of the following items is an advantage of international expansion for an FI?

Why Are Financial Institutions Special

Financial Services: Depository Institutions

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

Fintech Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters