Question 1

During most of the twentieth century the banking industry was able to continue to expand geographically by

Accepted Answer

A) utilizing multi-bank holding companies. 
B) utilizing one-bank holding companies. 
C) successfully implementing reciprocal regional banking pacts. 
D) All of the above. 
E) Answers A and B only. 
A) utilizing multi-bank holding companies. 
B) utilizing one-bank holding companies. 
C) successfully implementing reciprocal regional banking pacts. 
D) All of the above. 
E) Answers A and B only.

Question 2

These interstate banking laws allowed an out-of-state bank to acquire an in-state target bank even if the acquirer's home state did not give banks from the target's state similar acquisition powers.

Accepted Answer

A) Nationwide laws. 
B) Nationwide reciprocal. 
C) Regional reciprocal. 
D) All of the above. 
E) Answers A and B only. 
A) Nationwide laws. 
B) Nationwide reciprocal. 
C) Regional reciprocal. 
D) All of the above. 
E) Answers A and B only.

Question 3

Increased competition for securities underwritings should reduce the spreads and thus lower the price paid for the securities by the investing public.

Accepted Answer

A) True 
 B)False

Question 4

Research suggests that the total risk exposure of a financial services organization could actually increase if there is excessive product expansion in some nonbank lines.

Accepted Answer

A) True 
 B)False

Question 5

Under the 1982 guidelines, would the Fed approve the merger of Banks A and B?

Accepted Answer

A) It is likely to approve because it is not a concentrated market. 
B) It is unlikely to approve because the post-merger HHI has increased by over 100. 
C) It is likely to approve because the post-merger HHI has increased by over 100. 
D) Likely to approve because the post-merger HHI has increased by less than 5,000. 
E) It is unlikely to approve because the post-merger HHI has increased by an amount over 5,000. 
A) It is likely to approve because it is not a concentrated market. 
B) It is unlikely to approve because the post-merger HHI has increased by over 100. 
C) It is likely to approve because the post-merger HHI has increased by over 100. 
D) Likely to approve because the post-merger HHI has increased by less than 5,000. 
E) It is unlikely to approve because the post-merger HHI has increased by an amount over 5,000.

Question 6

A disadvantage to international bank expansion is the potential increase in the monitoring and information collection costs in some overseas markets.

Accepted Answer

A) True 
 B)False

Question 7

A one bank holding company is a parent bank holding company with only one subsidiary involved in banking activities.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following was not an operating characteristic of foreign banks operating in the U.S. prior to the International Banking Act of 1978?

Accepted Answer

A) They had no access to the Federal Reserve's discount window. 
B) They were not subject to the Federal Reserve's audits and exams. 
C) They had special rates on FDIC deposit insurance. 
D) They could not use the Fedwire or the fed funds market. 
E) They were not subject to the Glass-Steagall Act. 
A) They had no access to the Federal Reserve's discount window. 
B) They were not subject to the Federal Reserve's audits and exams. 
C) They had special rates on FDIC deposit insurance. 
D) They could not use the Fedwire or the fed funds market. 
E) They were not subject to the Glass-Steagall Act.

Question 9

Concern about potential abuses of fiduciary responsibility has been used to justify product segmentation on the grounds of

Accepted Answer

A) safety and soundness issues. 
B) economy of scale and scope issues. 
C) conflict of interest issues. 
D) deposit insurance issues. 
E) regulatory oversight issues. 
A) safety and soundness issues. 
B) economy of scale and scope issues. 
C) conflict of interest issues. 
D) deposit insurance issues. 
E) regulatory oversight issues.

Question 10

A fully integrated universal bank allows a bank to engage in securities activities only through a separately owned securities affiliate.

Accepted Answer

A) True 
 B)False

Question 11

Large size is an important characteristic in international banking because it gives a bank a greater ability to diversify across borders.

Accepted Answer

A) True 
 B)False

Question 12

Under the Financial Services Modernization Act of 1999, commercial banks can own and actively manage nonfinancial corporations.

Accepted Answer

A) True 
 B)False

Question 13

The commercial paper market is an example of nonbank competition on the asset side of the balance sheet that has become increasingly intense for banks.

Accepted Answer

A) True 
 B)False

Question 14

Research on bank mergers for the decade of the 1990s found that improved performance of the merged bank occurred because of both revenue enhancements and cost reduction.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

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. 
E) All three parties lose when the securities are underpriced. 
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. 
E) All three parties lose when the securities are underpriced.

Exam 21: Product and Geographic Expansion

During most of the twentieth century the banking industry was able to continue to expand geographically by

These interstate banking laws allowed an out-of-state bank to acquire an in-state target bank even if the acquirer's home state did not give banks from the target's state similar acquisition powers.

Increased competition for securities underwritings should reduce the spreads and thus lower the price paid for the securities by the investing public.

Research suggests that the total risk exposure of a financial services organization could actually increase if there is excessive product expansion in some nonbank lines.

Under the 1982 guidelines, would the Fed approve the merger of Banks A and B?

A disadvantage to international bank expansion is the potential increase in the monitoring and information collection costs in some overseas markets.

A one bank holding company is a parent bank holding company with only one subsidiary involved in banking activities.

Which of the following was not an operating characteristic of foreign banks operating in the U.S. prior to the International Banking Act of 1978?

Concern about potential abuses of fiduciary responsibility has been used to justify product segmentation on the grounds of

A fully integrated universal bank allows a bank to engage in securities activities only through a separately owned securities affiliate.

Large size is an important characteristic in international banking because it gives a bank a greater ability to diversify across borders.

Under the Financial Services Modernization Act of 1999, commercial banks can own and actively manage nonfinancial corporations.

The commercial paper market is an example of nonbank competition on the asset side of the balance sheet that has become increasingly intense for banks.

Research on bank mergers for the decade of the 1990s found that improved performance of the merged bank occurred because of both revenue enhancements and cost reduction.

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

What is the impact of underpricing a securities issue?

Why Are Financial Institutions Special

Financial Services: Depository Institutions

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

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