Exam 4: The Future of the Financial System and the Money and Capital Markets

An approach adopted in the Financial Services Modernization (Gramm-Leach--Bliley) Act, calls for functional regulation in the future--letting specialized regulators oversee those financial firms about which they know the most and then pooling their regulatory reports to get an overall picture of the condition of a large, complex financial company. A model of this kind may be called the "Functional Regulator" Model.

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Question 1

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What is the disclosure issue and what is its significance?

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Question 2

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Recent laws require increased public disclosure of deposit terms and withdrawal penalties, as well as the risks of losing one's home if it is used as collateral for a loan. With greater disclosure, more financial institutions will be subject to the risk of public disfavor. Ultimately the "discipline of the market" will be unleashed more effectively to help ensure prudent management and control risk taking. The increased disclosure will enable both investors and customers of financial institutions to make more intelligent decisions about expected return and risk and the most economical use of available resources.

What is happening to the global payments system today? What changes in the payments system seem likely for the future? Why are these changes important to both financial institutions and to their customers?

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Question 3

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Global transaction totals are about a trillion dollars daily and growing. In the U.S., the retail payments system lags significantly behind the wholesale payments system in converting from expensive paper transactions to electronic systems. Tomorrow's economy and financial marketplace will depend crucially upon the continuing ability of the world's payments system to function efficiently, speedily and accurately. This is important since, if a few of these transactions failed to settle, the result could be a panicky chain reaction of failed payment transactions spreading around the globe.

The advocates of the "level playing field" issue demand more equal taxation of the earnings of different financial institutions and more equal powers to offer a full range of services competitive with other financial-service firms.

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Question 4

The mega-mergers involving multi-billion-dollar-size institutions within the U.S. financial system are generally of two types: consolidations, which bring together financial firms serving the same industry; and convergences, where firms from two or more different financial industries combine their operations.

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Question 5

One solution mandated by the U.S. Congress for the FDIC was to tie the size of government insurance premiums charged an issued bank directly to the amount of risk taken on. Thus, the risk exposure to the insurance fund becomes the determinant of the insurance paid by private financial institutions.

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Question 6

If governments do not act to free more completely the financial institutions they supervise from today's product-line and geographic restrictions, nonregulated financial intermediaries will move in and eventually drive out the more regulated financial institutions from one market after another.

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Question 7

A device used to pay for goods and services without physical contact is a radiofrequency identification card

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Question 8

Both government and the private sector may offer effective remedies in ensuring the continued viability of existing financial institutions and public confidence in them.

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Question 9

The recent trend toward deregulation of the worldwide financial sector is likely to continue. Governments will be under continuing pressure to

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Question 10

List the principal trends in the economy, society and population that you believe will affect financial institutions and financial services the most over the next five years. How about the next 10 years?

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Question 11

Governments will be under continuing pressure to relax regulations against the development of new services and the geographic expansion of various financial institutions.

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Question 12

The challenge of the "Single Regulator" approach is that such a regulator has to know many different financial businesses well in order to do a good job of supervising the safety of complex financial institutions.

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Question 13

Why was passage of the Gramm-Leach-Bliley (Financial Services Modernization) Act so important for American banks and other financial-service institutions?

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Question 14

In what ways is regulation of the financial-services sector changing? What new types of regulation and deregulation can be expected in the future?

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Question 15

Securitization opens up additional funding sources for financial institutions, adding liquidity and diversification.

(True/False)

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Question 16

Fast technological advances in information technology literally make every financial-service customer into a mobile "branch office." There will be less and less need to ever visit the brick-and-mortar office facilities of a financial institution. Fewer employees will be needed in the financial institutions sector and, eventually hundreds, if not thousands, of full-service branch offices may be closed. The financial-services business clearly is in transition from a labor-intensive industry to a capital-intensive one that relies more and more upon automation and electronic processing.

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Question 17

If you were managing a small bank or insurance agency in your local community, what future trends in financial services and financial institutions are likely to have the greatest impact on your institution? Why? What response or responses could you make to each trend you have listed?

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Question 18

Mere knowledge of existing risk-management tools does not guarantee that all risk exposures will be adequately dealt with. Continuing innovation in the risk-management field is absolutely essential to the future smooth operation of the financial system and to the continuing maintenance of public confidence in that system.

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Question 19

In the financial holding company model, each firm has its own capital and management and its own net earnings or earnings losses, which are independent of the earnings or losses of other affiliated companies belonging to the same holding company.

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Question 20

Showing 1 - 20 of 54

What is the disclosure issue and what is its significance?

What is happening to the global payments system today? What changes in the payments system seem likely for the future? Why are these changes important to both financial institutions and to their customers?

The advocates of the "level playing field" issue demand more equal taxation of the earnings of different financial institutions and more equal powers to offer a full range of services competitive with other financial-service firms.

One solution mandated by the U.S. Congress for the FDIC was to tie the size of government insurance premiums charged an issued bank directly to the amount of risk taken on. Thus, the risk exposure to the insurance fund becomes the determinant of the insurance paid by private financial institutions.

If governments do not act to free more completely the financial institutions they supervise from today's product-line and geographic restrictions, nonregulated financial intermediaries will move in and eventually drive out the more regulated financial institutions from one market after another.

A device used to pay for goods and services without physical contact is a radiofrequency identification card

Both government and the private sector may offer effective remedies in ensuring the continued viability of existing financial institutions and public confidence in them.

The recent trend toward deregulation of the worldwide financial sector is likely to continue. Governments will be under continuing pressure to

List the principal trends in the economy, society and population that you believe will affect financial institutions and financial services the most over the next five years. How about the next 10 years?

Governments will be under continuing pressure to relax regulations against the development of new services and the geographic expansion of various financial institutions.

The challenge of the "Single Regulator" approach is that such a regulator has to know many different financial businesses well in order to do a good job of supervising the safety of complex financial institutions.

Why was passage of the Gramm-Leach-Bliley (Financial Services Modernization) Act so important for American banks and other financial-service institutions?

In what ways is regulation of the financial-services sector changing? What new types of regulation and deregulation can be expected in the future?

Securitization opens up additional funding sources for financial institutions, adding liquidity and diversification.

If you were managing a small bank or insurance agency in your local community, what future trends in financial services and financial institutions are likely to have the greatest impact on your institution? Why? What response or responses could you make to each trend you have listed?

In the financial holding company model, each firm has its own capital and management and its own net earnings or earnings losses, which are independent of the earnings or losses of other affiliated companies belonging to the same holding company.

Functions and Roles of the Financial System in the Global Economy

Financial Assets, Money, Financial Transactions, and Financial Institutions

The Financial Information Marketplace

The Determinants of Interest Rates: Competing Ideas

Measuring and Calculating Interest Rates and Financial Asset Prices

Inflation and Deflation, Yield Curves, and Duration: Impact on Interest Rates and Asset Prices

The Risk Structure of Interest Rates: Defaults, Prepayments, Taxes, and Other Rate-Determining Factors

Interest-Rate Forecasting and Hedging: Swaps, Financial Futures, and Options

Introduction to the Money Market and the Roles Played by Governments and Security Dealers

Commercial Banks, Major Corporations, and Federal Credit Agencies in the Money Market

Roles and Services of the Federal Reserve and Other Central Banks Around the World

The Tools and Goals of Central Bank Monetary Policy

The Commercial Banking Industry: Structure, Products, and Management

Nonbank Thrift Institutions: Savings and Loans, Savings Banks, Credit Unions, and Money Market Funds

Mutual Funds, Insurance Companies, Investment Banks, and Other Financial Firms

Regulation of the Financial Institutions Sector

Federal, State, and Local Governments Operating in the Financial Markets

Business Borrowing: Corporate Bonds, Asset-Backed Securities, Bank Loans, and Other Forms of Business Debt

The Market for Corporate

Consumer Lending and Borrowing

The Residential Mortgage Market Stock

International Transactions and Currency Values

International Banking

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