Exam 21: Product and Geographic Expansion

The European Community Second Banking Directive has aided the international competitive position of European banks by creating a single banking market in Europe.

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

The USA Patriot Act of 2001 prohibits U.S. banks from providing banking services to foreign banks.

The process of using lending power to coerce a loan customer to use products sold by a securities affiliate is called information transfer.

Restrictions on branching occurred initially at the state level because

The Financial Services Modernization Act of 1999 allows bank holding companies to open insurance underwriting affiliates.

Information transfer refers to the conflict of interest that occurs when banks have the power to sell nonbank products.

Permissible section 20 subsidiary activities include

The first regional banking pact in the U.S. was in

The establishment of a presence in local markets by insurance companies is reasonably inexpensive because of low capital requirements established by state regulators.

Bank Asset Size 1 \1 00 million 2 \2 00 million 3 \5 00 million -If Bank 1 is acquired by Bank 3, what is the impact on the market's HHI?

Historically, commercial banks have been prohibited from acting as an underwriter of insurance products.

This legislation restricts insurance companies from owning or being affiliated with full service banks.

In recent years, commercial banks have attempted to expand their activities into nonbanking areas, but securities firms have not been interested in expanding into commercial banking.

A Eurodollar transaction

Which of the following has NOT been a factor deterring U.S. bank expansion abroad?

In order to achieve a more stable revenue stream in a merger, the asset and liability portfolios of the two institutions should have similar credit, interest rate, and liquidity characteristics.

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 not a reasonable argument for the increase in the number of banks that can compete in security underwriting activities?

The following three FIs dominate a local market and their total assets are given below. Institution Asset Size Bank A \5 0 million Bank B \6 0 million Bank C \9 0 million -What is the Herfindahl-Hirschman Index (HHI) for the local market?