Question 1

An organization form that establishes bank subsidiaries rather than branches to expand is

Accepted Answer

A) an unit bank. 
B) a multibank holding company. 
C) a one-bank holding company. 
D) a representative office. 
A) an unit bank. 
B) a multibank holding company. 
C) a one-bank holding company. 
D) a representative office.

Question 2

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 3

In the U.S. ,the Glass-Steagall Act limited the integration of commercial banking and securities activities.

Accepted Answer

A) True 
 B)False

Question 4

An investment bank may take a big loss when underwriting an issue on a firm commitment basis because

Accepted Answer

A) it may overestimate the demand for the shares by the market. 
B) it may underestimate the demand for the shares by the market. 
C) interest rates may rise during the offering period. 
D) security prices in general may increase during this period. 
A) it may overestimate the demand for the shares by the market. 
B) it may underestimate the demand for the shares by the market. 
C) interest rates may rise during the offering period. 
D) security prices in general may increase during this period.

Question 5

Match between columns
                        Premises: When banks have the power to sell nonbank products, employees may no longer give dispassionate, or unbiased, advice to customers. 
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. 
To avoid being exposed to potential losses in a securities offering, a bank may place the securities in the accounts of customers in the trust department or other areas over which it has discretionary investment powers. 
The use of inside information about customers or rivals that can be useful in setting securities prices or distributing securities offerings. 
 Using lending power to coerce a customer to purchase or use the products sold by an affiliate. 
When a bank suggests the issuance of capital market debt for the purpose of reducing bank loans under conditions of deteriorating or questionable firm financial health.

Accepted Answer

The Answer of  Salesperson's stake  and  Stuffing is...

Question 6

Which of the following is an advantage to an FI of expanding globally?

Accepted Answer

A) Exposure to nationalization or expropriation. 
B) Economies of scale. 
C) High fixed costs. 
D) Costs of complying with different regulatory requirements. 
A) Exposure to nationalization or expropriation. 
B) Economies of scale. 
C) High fixed costs. 
D) Costs of complying with different regulatory requirements.

Question 7

What is the impact of underpricing a securities issue?

Accepted Answer

A) The underwriter loses while the issuing firm gains. 
B) Both the underwriter and the outside investor gains while the issuing firm loses. 
C) The outside investor loses while the issuing firm gains. 
D) Both the underwriter and the outside investor loses while the issuing firm gains. 
A) The underwriter loses while the issuing firm gains. 
B) Both the underwriter and the outside investor gains while the issuing firm loses. 
C) The outside investor loses while the issuing firm gains. 
D) Both the underwriter and the outside investor loses while the issuing firm gains.

Question 8

U.S.financial institutions have expanded abroad in recent years,although their foreign counterparts have been prohibited from expanding into the U.S.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true of X efficiencies?

Accepted Answer

A) They result from diseconomies of scope. 
B) They are difficult to pin down in a quantitative fashion. 
C) They result from diseconomies of scale. 
D) They are a direct result of significant economies of scope. 
A) They result from diseconomies of scope. 
B) They are difficult to pin down in a quantitative fashion. 
C) They result from diseconomies of scale. 
D) They are a direct result of significant economies of scope.

Question 10

The FBSEA of 1991 required a foreign bank to have Fed approval to establish a branch as a new entry,but does not require such approval if the entry is by acquisition.

Accepted Answer

A) True 
 B)False

Question 11

Despite a sovereign debt problem that plagued Greece in 2010,by 2012 U.S.Banks had increased their exposure to Greek debt.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The safety and soundness of a holding company that has both a bank subsidiary and a securities affiliate can be enhanced over time by the product diversification benefits of a more stable earnings stream caused by having well-diversified financial services.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following items has not been a factor in the erosion of interstate banking restrictions?

Accepted Answer

A) The purchase of troubled banks. 
B) The establishment of nonbank banks. 
C) The Bank Holding Company Act Amendments of 1970. 
D) The expansion of OBHC activities. 
A) The purchase of troubled banks. 
B) The establishment of nonbank banks. 
C) The Bank Holding Company Act Amendments of 1970. 
D) The expansion of OBHC activities.

Question 15

Interstate banking barriers have deteriorated in part because of the decisions to deal with the failing thrift industry by allowing acquiring firms to cross state lines.

Accepted Answer

A) True 
 B)False

Question 16

By the early 1990s interstate banking pacts basically had opened the doors for nearly all banks to practice interstate branching in any geographic locations.

Accepted Answer

A) True 
 B)False

Question 17

The Garn-St Germain Act is an interstate banking law that allows banks to branch on an interstate basis rather than building more expensive holding company structures.

Accepted Answer

A) True 
 B)False

Question 18

The Financial Services Modernization Act of 1999 has provided for more standardized relationships among financial service sectors and commerce.

Accepted Answer

A) True 
 B)False

Question 19

In late 2015,shadow banking activities came under federal government regulation.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

Exam 21: Product and Geographic Expansion

An organization form that establishes bank subsidiaries rather than branches to expand is

The Financial Services Modernization Act allowed for

In the U.S. ,the Glass-Steagall Act limited the integration of commercial banking and securities activities.

An investment bank may take a big loss when underwriting an issue on a firm commitment basis because

Which of the following is an advantage to an FI of expanding globally?

What is the impact of underpricing a securities issue?

U.S.financial institutions have expanded abroad in recent years,although their foreign counterparts have been prohibited from expanding into the U.S.

Which of the following is true of X efficiencies?

The FBSEA of 1991 required a foreign bank to have Fed approval to establish a branch as a new entry,but does not require such approval if the entry is by acquisition.

Despite a sovereign debt problem that plagued Greece in 2010,by 2012 U.S.Banks had increased their exposure to Greek debt.

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

The safety and soundness of a holding company that has both a bank subsidiary and a securities affiliate can be enhanced over time by the product diversification benefits of a more stable earnings stream caused by having well-diversified financial services.

Which of the following items has not been a factor in the erosion of interstate banking restrictions?

Interstate banking barriers have deteriorated in part because of the decisions to deal with the failing thrift industry by allowing acquiring firms to cross state lines.

By the early 1990s interstate banking pacts basically had opened the doors for nearly all banks to practice interstate branching in any geographic locations.

The Garn-St Germain Act is an interstate banking law that allows banks to branch on an interstate basis rather than building more expensive holding company structures.

The Financial Services Modernization Act of 1999 has provided for more standardized relationships among financial service sectors and commerce.

In late 2015,shadow banking activities came under federal government regulation.

What is the market's Herfindahl-Hirschman Index (HHI)? Bank Asset Size 1 \ 100 million 2 \ 200 million 3 \ 500 million

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Firms and Investment Banks

Financial Services: Mutual Fund and Hedge Fund Companies

Financial Services: Insurance Companies

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

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