Question 1

Holdings of U.S.Treasury securities are classified on a DI's balance sheet as

Accepted Answer

A) assets, because U.S.Treasury securities are default risk-free. 
B) liabilities, because the DI must pay cash in order to acquire the securities. 
C) assets, because securities holdings represent a use of funds for investment. 
D) liabilities, because the Treasury securities must be pledged as collateral against discount window borrowing. 
E) assets, because the market for U.S.Treasury securities is the most liquid in the world. 
A) assets, because U.S.Treasury securities are default risk-free. 
B) liabilities, because the DI must pay cash in order to acquire the securities. 
C) assets, because securities holdings represent a use of funds for investment. 
D) liabilities, because the Treasury securities must be pledged as collateral against discount window borrowing. 
E) assets, because the market for U.S.Treasury securities is the most liquid in the world.

Question 2

One of the primary reasons that investment banks were allowed to convert to bank holding companies during the recent financial crisis was recognition that

Accepted Answer

A) their operating activities were too risky and they needed the cushion of bank deposits to alleviate funding risks. 
B) the industry had acquired too much capital during the previous decade. 
C) bank holding companies needed the ability to underwrite new issues of corporate securities. 
D) it was the only way an investment bank could qualify for federal bailout funds. 
E) the Federal Reserve was unable to purchase troubled assets from investment banks, but they could from bank holding companies. 
A) their operating activities were too risky and they needed the cushion of bank deposits to alleviate funding risks. 
B) the industry had acquired too much capital during the previous decade. 
C) bank holding companies needed the ability to underwrite new issues of corporate securities. 
D) it was the only way an investment bank could qualify for federal bailout funds. 
E) the Federal Reserve was unable to purchase troubled assets from investment banks, but they could from bank holding companies.

Question 3

All credit unions are nationally chartered and regulated by the National Credit Union Administration.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following currently manages the insurance funds for both commercial banks and savings institutions?

Accepted Answer

A) FDIC. 
B) FSLIC. 
C) OCC. 
D) FRS. 
E) State authorities. 
A) FDIC. 
B) FSLIC. 
C) OCC. 
D) FRS. 
E) State authorities.

Question 5

Commercial banks that have invested in Internet and mobile banking services and products have significantly outperformed those banks that have chosen to avoid these markets.

Accepted Answer

A) True 
 B)False

Question 6

The largest asset class on U.S.commercial banks' combined balance sheet as of June 30, 2015 was

Accepted Answer

A) investment securities. 
B) commercial and industrial loans. 
C) real estate loans. 
D) cash. 
E) deposits. 
A) investment securities. 
B) commercial and industrial loans. 
C) real estate loans. 
D) cash. 
E) deposits.

Question 7

Most of the change in the number of commercial banks since 1990 has been due to bank failures.

Accepted Answer

A) True 
 B)False

Question 8

In terms of total assets, commercial banks with under $1 billion in assets have become a larger segment of the industry in recent years.

Accepted Answer

A) True 
 B)False

Question 9

This broad class of loans constitutes the highest percentage of total assets for all U.S.commercial banks as of 2015.

Accepted Answer

A) Commercial and industrial. 
B) Commercial and residential real estate. 
C) Individual loans. 
D) Credit card debt. 
E) Less developed country loans. 
A) Commercial and industrial. 
B) Commercial and residential real estate. 
C) Individual loans. 
D) Credit card debt. 
E) Less developed country loans.

Question 10

The strong performance of commercial banks during the decade before 2007 was due to

Accepted Answer

A) the stability of interest rates during this period. 
B) the ability of banks to shift credit risk from their balance sheets to financial markets. 
C) the contraction of the number of banks and thrifts. 
D) the growth in the number of thrifts and credit unions. 
E) All of the options. 
A) the stability of interest rates during this period. 
B) the ability of banks to shift credit risk from their balance sheets to financial markets. 
C) the contraction of the number of banks and thrifts. 
D) the growth in the number of thrifts and credit unions. 
E) All of the options.

Question 11

As a percent of total assets, savings institutions hold lower amounts of cash and U.S.Treasury securities than commercial banks.

Accepted Answer

A) True 
 B)False

Question 12

The number of savings associations has been declining since 1990.

Accepted Answer

A) True 
 B)False

Question 13

A spread is defined as the difference between lending and deposit rates.

Accepted Answer

A) True 
 B)False

Question 14

State-chartered commercial banks may be regulated by

Accepted Answer

A) the FDIC only. 
B) the FDIC and the Federal Reserve System. 
C) the Federal Reserve System only. 
D) the FDIC, the Federal Reserve System, and the Comptroller of the Currency. 
E) the FDIC, the Federal Reserve System, the Comptroller of the Currency, and state banking commissions. 
A) the FDIC only. 
B) the FDIC and the Federal Reserve System. 
C) the Federal Reserve System only. 
D) the FDIC, the Federal Reserve System, and the Comptroller of the Currency. 
E) the FDIC, the Federal Reserve System, the Comptroller of the Currency, and state banking commissions.

Question 15

What was the primary objective of the Bank Holding Company Act of 1956?

Accepted Answer

A) Permitted bank holding companies to acquire banks in other states. 
B) Restricted the banking and nonbanking acquisition activities of multibank holding companies. 
C) Regulated foreign bank branches and agencies in the United States. 
D) Bank holding companies were permitted to convert out-of-state subsidiary banks into branches of a single interstate bank. 
E) Allowed for the creation of a financial services holding company. 
A) Permitted bank holding companies to acquire banks in other states. 
B) Restricted the banking and nonbanking acquisition activities of multibank holding companies. 
C) Regulated foreign bank branches and agencies in the United States. 
D) Bank holding companies were permitted to convert out-of-state subsidiary banks into branches of a single interstate bank. 
E) Allowed for the creation of a financial services holding company.

Question 16

The use of off-balance-sheet activities allows banks to practice regulatory tax-avoidance.

Accepted Answer

A) True 
 B)False

Question 17

The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following FIs does not currently provide a payment function for their customers?

Accepted Answer

A) Depository institutions. 
B) Insurance companies. 
C) Finance companies. 
D) Pension funds. 
E) Mutual funds. 
A) Depository institutions. 
B) Insurance companies. 
C) Finance companies. 
D) Pension funds. 
E) Mutual funds.

Question 19

The largest liability on U.S.commercial banks' combined balance sheet as of June 30.2015 was

Accepted Answer

A) investment securities. 
B) non-transaction accounts. 
C) transaction accounts. 
D) borrowings. 
E) cash. 
A) investment securities. 
B) non-transaction accounts. 
C) transaction accounts. 
D) borrowings. 
E) cash.

Question 20

Small banks make proportionately larger amounts of real estate loans than large banks.

Accepted Answer

A) True 
 B)False

Exam 2: Financial Services: Depository Institutions

Holdings of U.S.Treasury securities are classified on a DI's balance sheet as

One of the primary reasons that investment banks were allowed to convert to bank holding companies during the recent financial crisis was recognition that

All credit unions are nationally chartered and regulated by the National Credit Union Administration.

Which of the following currently manages the insurance funds for both commercial banks and savings institutions?

Commercial banks that have invested in Internet and mobile banking services and products have significantly outperformed those banks that have chosen to avoid these markets.

The largest asset class on U.S.commercial banks' combined balance sheet as of June 30, 2015 was

Most of the change in the number of commercial banks since 1990 has been due to bank failures.

In terms of total assets, commercial banks with under $1 billion in assets have become a larger segment of the industry in recent years.

This broad class of loans constitutes the highest percentage of total assets for all U.S.commercial banks as of 2015.

The strong performance of commercial banks during the decade before 2007 was due to

As a percent of total assets, savings institutions hold lower amounts of cash and U.S.Treasury securities than commercial banks.

The number of savings associations has been declining since 1990.

A spread is defined as the difference between lending and deposit rates.

State-chartered commercial banks may be regulated by

What was the primary objective of the Bank Holding Company Act of 1956?

The use of off-balance-sheet activities allows banks to practice regulatory tax-avoidance.

The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.

Which of the following FIs does not currently provide a payment function for their customers?

The largest liability on U.S.commercial banks' combined balance sheet as of June 30.2015 was

Small banks make proportionately larger amounts of real estate loans than large banks.

Why Are Financial Institutions Special

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

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters