Question 1

Currently, federal standards do not allow investment banks to convert to a bank holding company structure.

Accepted Answer

A) True 
 B)False

Question 2

The Financial Institutions Reform Recovery and Enforcement Act (FIRREA) of 1989 introduced the qualified thrift lender test ( QTL), which set the percentage of assets required for qualification to be no less than

Accepted Answer

A) 50 percent. 
B) 55 percent. 
C) 60 percent. 
D) 65 percent. 
E) 68 percent. 
A) 50 percent. 
B) 55 percent. 
C) 60 percent. 
D) 65 percent. 
E) 68 percent.

Question 3

The future viability of the savings association industry in traditional mortgage lending has been questioned because of

Accepted Answer

A) securitization practices of other FIs. 
B) the additional risk exposure of long-term mortgage lending. 
C) intense competition from other FIs. 
D) the liquidity risks associated with mortgage lending. 
E) All of the options. 
A) securitization practices of other FIs. 
B) the additional risk exposure of long-term mortgage lending. 
C) intense competition from other FIs. 
D) the liquidity risks associated with mortgage lending. 
E) All of the options.

Question 4

Large money center banks finance most of their activities by using retail consumer deposits as the primary source of funds.

Accepted Answer

A) True 
 B)False

Question 5

A major difference between banks and other nonfinancial firms is the low amount of leverage in commercial banks.

Accepted Answer

A) True 
 B)False

Question 6

Regulator forbearance is a policy of allowing economically insolvent FIs to continue in operation.

Accepted Answer

A) True 
 B)False

Question 7

What is the defining characteristic of the dual banking system?

Accepted Answer

A) Coexistence of parent and holding companies. 
B) Coexistence of both nationally chartered and state chartered banks. 
C) Control of nationally chartered and state chartered banks by the state regulators. 
D) Control of nationally chartered banks by both FRS and State bank regulators. 
E) Nonbanking companies carrying out both banking and other activities. 
A) Coexistence of parent and holding companies. 
B) Coexistence of both nationally chartered and state chartered banks. 
C) Control of nationally chartered and state chartered banks by the state regulators. 
D) Control of nationally chartered banks by both FRS and State bank regulators. 
E) Nonbanking companies carrying out both banking and other activities.

Question 8

Credit Unions were generally less affected than other depository institutions by the recent financial crisis because

Accepted Answer

A) they had relatively more assets in consumer loans than other DIs. 
B) they had relatively more residential mortgages. 
C) they hold more government and agency securities, on average. 
D) they hold less government and agency securities, on average. 
E) they had relatively more assets in consumer loans than other DIs and they hold more government and agency securities, on average. 
A) they had relatively more assets in consumer loans than other DIs. 
B) they had relatively more residential mortgages. 
C) they hold more government and agency securities, on average. 
D) they hold less government and agency securities, on average. 
E) they had relatively more assets in consumer loans than other DIs and they hold more government and agency securities, on average.

Question 9

Retail nontransaction savings and time deposits comprise the largest portion of deposits for commercial banks.

Accepted Answer

A) True 
 B)False

Question 10

The primary regulators of savings institutions are

Accepted Answer

A) the Federal Reserve and the FDIC. 
B) the Office of Thrift Supervision and the FDIC. 
C) the FDIC and the Office of the Comptroller of the Currency. 
D) the Office of Thrift Supervision and the Comptroller of the Currency. 
E) the Federal Reserve and the Comptroller of the Currency. 
A) the Federal Reserve and the FDIC. 
B) the Office of Thrift Supervision and the FDIC. 
C) the FDIC and the Office of the Comptroller of the Currency. 
D) the Office of Thrift Supervision and the Comptroller of the Currency. 
E) the Federal Reserve and the Comptroller of the Currency.

Question 11

Which of the following is true of off-balance-sheet activities?

Accepted Answer

A) They involve generation of fees without exposure to any risk. 
B) They include contingent activities recorded in the current balance sheet. 
C) They invite regulatory costs and additional "taxes." 
D) They have both risk-reducing as well as risk-increasing attributes. 
E) The risk involved is best represented by notional or face value. 
A) They involve generation of fees without exposure to any risk. 
B) They include contingent activities recorded in the current balance sheet. 
C) They invite regulatory costs and additional "taxes." 
D) They have both risk-reducing as well as risk-increasing attributes. 
E) The risk involved is best represented by notional or face value.

Question 12

Because of the large amount of equity on a typical commercial bank balance sheet, credit risk is not a significant risk to bank managers.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is NOT an off balance sheet activity for U.S.banks?

Accepted Answer

A) Derivative contracts. 
B) Loan commitments. 
C) Standby letters of credit. 
D) Trust services. 
E) When-issued securities. 
A) Derivative contracts. 
B) Loan commitments. 
C) Standby letters of credit. 
D) Trust services. 
E) When-issued securities.

Question 14

Which of the following identifies the primary function of the Office of the Comptroller of the Currency?

Accepted Answer

A) Manage the deposit insurance fund and carry out bank examinations. 
B) Regulate and examine bank holding companies as well as individual commercial banks. 
C) Charter national banks and approve their merger activity. 
D) Determine permissible activities for state chartered banks. 
E) Stand as the "lender of last resort" for troubled banks. 
A) Manage the deposit insurance fund and carry out bank examinations. 
B) Regulate and examine bank holding companies as well as individual commercial banks. 
C) Charter national banks and approve their merger activity. 
D) Determine permissible activities for state chartered banks. 
E) Stand as the "lender of last resort" for troubled banks.

Question 15

The growth of the commercial paper market has led to a decline in the demand for business loans from commercial banks.

Accepted Answer

A) True 
 B)False

Question 16

As of 2015, the number of nationally chartered banks was greater than the number of state chartered banks.

Accepted Answer

A) True 
 B)False

Question 17

The primary objective of the Reigle-Neal Act (1994) was to ease branching across state lines by banks.

Accepted Answer

A) True 
 B)False

Question 18

Net interest margin is defined as the interest income plus interest expense multiplied by earning assets.

Accepted Answer

A) True 
 B)False

Question 19

The dual banking system in the U.S.refers to the operation and establishment of large regional as well as small community banks.

Accepted Answer

A) True 
 B)False

Question 20

Customer deposits are classified on a DI's balance sheet as

Accepted Answer

A) assets, because the DI uses deposit funds to earn profits. 
B) liabilities, because the DI uses deposits as a source of funds. 
C) assets, because customers view deposits as assets. 
D) liabilities, because the DI must meet reserve requirements on customer deposits. 
E) liabilities, because DIs are required to serve depositors. 
A) assets, because the DI uses deposit funds to earn profits. 
B) liabilities, because the DI uses deposits as a source of funds. 
C) assets, because customers view deposits as assets. 
D) liabilities, because the DI must meet reserve requirements on customer deposits. 
E) liabilities, because DIs are required to serve depositors.

Exam 2: Financial Services: Depository Institutions

Currently, federal standards do not allow investment banks to convert to a bank holding company structure.

The Financial Institutions Reform Recovery and Enforcement Act (FIRREA) of 1989 introduced the qualified thrift lender test ( QTL), which set the percentage of assets required for qualification to be no less than

The future viability of the savings association industry in traditional mortgage lending has been questioned because of

Large money center banks finance most of their activities by using retail consumer deposits as the primary source of funds.

A major difference between banks and other nonfinancial firms is the low amount of leverage in commercial banks.

Regulator forbearance is a policy of allowing economically insolvent FIs to continue in operation.

What is the defining characteristic of the dual banking system?

Credit Unions were generally less affected than other depository institutions by the recent financial crisis because

Retail nontransaction savings and time deposits comprise the largest portion of deposits for commercial banks.

The primary regulators of savings institutions are

Which of the following is true of off-balance-sheet activities?

Because of the large amount of equity on a typical commercial bank balance sheet, credit risk is not a significant risk to bank managers.

Which of the following is NOT an off balance sheet activity for U.S.banks?

Which of the following identifies the primary function of the Office of the Comptroller of the Currency?

The growth of the commercial paper market has led to a decline in the demand for business loans from commercial banks.

As of 2015, the number of nationally chartered banks was greater than the number of state chartered banks.

The primary objective of the Reigle-Neal Act (1994) was to ease branching across state lines by banks.

Net interest margin is defined as the interest income plus interest expense multiplied by earning assets.

The dual banking system in the U.S.refers to the operation and establishment of large regional as well as small community banks.

Customer deposits are classified on a DI's balance sheet as

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