Exam 21: Product and Geographic Expansion

An underwriter is quoting the following rates for the issue of new securities on behalf of a firm on a firm commitment basis: $64.00-64.25. 2,000,000 shares are being offered.

The following three FIs dominate a local market and their total assets are given below. If Bank C splits into two separate institutions at ½ its original size each, what is the new Herfindahl (HHI) Index?

Which of the following is a factor deterring Canadian bank expansions abroad?

The USA Patriot Act of 2001

Concern about bank solvency has been used to justify product segmentation on the grounds of

International expansion often produces revenue-risk diversification benefits for Canadian banks.

The following three FIs dominate a local market and their total assets are given below. What are the market shares of banks A, B and C, respectively?

A bank holding company has a banking affiliate and a securities affiliate. If the securities affiliate fails, it could cause the bank to also fail because

The banking industry in Canada has faced increased competition

The approval of cheap loans to an investor under the implicit condition that the loan proceeds are to be used to purchase securities underwritten by a securities affiliate.

Success in a merger from revenue enhancement is more likely if the markets into which expansion occurs are less than fully competitive.

If the firm commitment price is $15 and one million shares are sold in the primary market for $15.50 and then resold in the secondary market for $15.75, what is the underwriter's profit/loss?

The effect of the International Banking Act of 1978 was to accelerate the expansion of foreign bank activities in the U.S. primarily because of their access to the Federal Reserve's discount window, Fedwire, and FDIC insurance.

Banks typically have faced few restrictions in expanding their businesses, while securities firms and insurance companies have faced complex rules regarding expansion.

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

Firewalls are

Canadian financial institutions have expanded abroad in recent years, although their foreign counterparts have been prohibited from expanding into Canada.

A value below 1,000 of the Herfindahl-Hirschman Index (HHI) is considered to reflect

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

The use of inside information about customers or rivals that can be useful in setting securities prices or distributing securities offerings.