Deck 20: International Banking and the Future of Banking and Financial Services

Question 1

A(n)___________________________________ is the simplest organizational form for an international bank.This is a limited service office that markets the services provided by the home office and identifies new customers but does not take deposits or book loans.

Answer 1

representative office

Question 2

A(n)______________________________________ is a receipt issued by a U.S.bank which makes it easier for a foreign business borrower to sell securities in the U.S.

Answer 2

American Depository Receipt

Question 3

A(n)______________________ branch is a special foreign office which merely records the receipt of deposits and other international transactions.Often these branches contain little more than a desk,a telephone,fax machine,and computer and are used as a way around regulations.

Answer 3

shell

Question 4

A(n)______________________ is the most common organizational form for an international bank.It offers the bank's full range of services but is not a separate legal entity from its parent bank.

Question 5

____________________________________________ refers to the market for foreign currency or trading one currency for another.

Question 6

The ____________________________________________ is the first major federal law regulating foreign bank activity in the U.S.It requires foreign banks accepting deposits to meet reserve requirements and allows foreign banks to be eligible for federal deposit insurance under stipulated conditions.

Question 7

A(n)_________________________________________________________________ is a contractual agreement between two parties to exchange interest payments in order to hedge against interest rate risk.

Question 8

A(n)______________________ is where a bank customer,anticipating a future need to make foreign currency purchase,will negotiate a contract for the delivery of the currency at a set price on a set date.

Question 9

A device which aids customers in selling goods abroad is known by the acronym _________ and was originally developed by the Japanese.

Question 10

The ___________________________________________ is an agreement between the U.S. ,Japan,Canada,and several other nations of Western Europe to adopt common capital standards for all of their banks.

Question 11

A(n)___________________________________________ is an organization which has over half its income from activities associated with exporting goods and services from the U.S.They can offer export insurance coverage,transportation,warehousing,and other services.

Question 12

The ______________________________________________ requires regulators to determine if foreign banks selling their services in the U.S.are adequately regulated by their home governments and to close those not adequately supervised or in violation of U.S.law.

Question 13

A(n)______________________________________________ is where computerized records of transactions involving banks and their international customers are kept separate from the rest of the domestic accounts.These are more lightly regulated than regular bank offices.

Question 14

When an international bank acquires majority ownership of a separate,legally incorporated foreign bank under host-country rules,this foreign bank is called a(n)______________________ of the international bank.

Question 15

A(n)______________________ is a more complete organizational form for international banks than a representative office.It does not generally take deposits from the public but gives commitments to make or purchase loans,among other things.

Question 16

A(n)____________________________________________ grants the buyer the right to deliver or take delivery of a designated currency at a specified price until it expires.

Question 17

____________________________________________ is the risk that has to do with the fluctuations in currency prices.

Question 18

____________________________ are domestic U.S.companies owned by U.S.or foreign banks,located outside the home state of the bank that owns them.These organizations are limited primarily to international business transactions.

Question 19

A(n)____________________________________________ is the exchange of different national currencies between two parties who need foreign currencies to repay loans or cover other expenses.

Question 20

The ____________________________________________ is an international market for long-term debt denominated in foreign currency units.

Question 21

A(n)_______________ is a draft for payment due and payable only on a specific future date.

Question 22

An international loan risk evaluation system that uses expert opinion is the ______________.

Question 23

An international loan risk evaluation system that lists economic and political factors believed to be correlated with loan risk is called the ______________.It may apply comparative weights to each factor or consider each factor equally.

Question 24

When dealers speculate on trends in the prices of selected currencies,it is called ______________.

Question 25

When a loan is made in a foreign country and where the court system and bankruptcy laws needed to support the enforcement of contracts and loans are missing,it causes a special type of risk called ______________.

Question 26

The International Lending and Supervision Act does not require federal regulators to supervise the U.S.banks under their jurisdiction more closely but to give banks and the private marketplace more freedom in deciding what their capital requirements should be.

Question 27

The Basel Agreement,on international capital standards,does not cover Japanese banks but does cover major banks in the U.S.and Western Europe.

Question 28

One of the most comprehensive country-risk indicators is provided by ______________.This guide supplies political,economic,and financial risk ratings and an overall composite rating for about 100 countries monthly.

Question 29

The barriers between securities dealers and international banks are falling in many countries,making it harder for the public to see real differences between financial institutions.

Question 30

The Federal Reserve Board can terminate the operations of a foreign bank in the United States if it finds that the bank is not being operated in a manner consistent with the public interest.

Question 31

The International Banking Act of 1978,prohibited foreign-owned banks from crossing state lines unless the state or states involved allow cross-border entry.

Question 32

When a foreign government takes actions that interfere with the repayment of an international loan,it causes a special type of risk called ______________.

Question 33

Under U.S.regulations,Edge Act subsidiaries must devote at least 50 percent of their business to assist customers with export-import trade and international credit.

Question 34

Foreign banks taking retail deposits in the U.S.can qualify for federal deposit insurance.

Question 35

ADRs are issued by foreign banks operating outside the U.S.and sold to investors in the Eurodollar market.

Question 36

Currency options give their buyer the right,but not the obligation,to deliver or take delivery of a foreign currency or currency futures contract.

Question 37

Long hedges in currency futures are designed to protect a bank or its customer from increases in the price of the currency it must eventually acquire.

Question 38

A(n)_______________ is a draft for payment due and payable upon presentation to the bank.

Question 39

Under U.S.regulations,a U.S.international bank can invest more than 50 percent of its consolidated capital and surplus in an export trading company.

Question 40

_______________ are primarily medium-term credit agreements between international banks and their larger corporate and government customers.The customer is authorized to periodically offer short term notes that come due in 90 to 180 days over a stipulated period.

Question 41

A sight draft is a payment for purchase of goods and services across national borders which is payable only on a specific future date.

Question 42

If an international bank has adopted a net short position in a particular currency,and that currency's exchange value increases,the bank will achieve a profit from trading the currency.

Question 43

Under the terms of the International Lending and Supervision Act,the size of loan rescheduling fees that U.S.banks charge their international borrowers,is restricted.

Question 44

Short hedges in currency futures contracts are used to protect a bank or bank customer against rising currency prices.

Question 45

An ETC is a device which aids customers in selling goods abroad.

Question 46

The top trading firms in the global currency markets are all banks.

Question 47

China has the highest overall savings rate in the world.

Question 48

Internet-based banks are not allowed in some countries such as Japan.

Question 49

If an international bank has gone net long in a particular currency,it will score a positive gain if the value of that currency declines.

Question 50

A put option on currency futures is often used to protect against a rise in currency prices.

Question 51

A time draft is a payment for purchase of goods and services across national borders which is payable upon presentation to the bank.

Question 52

One way to determine the soundness of an international loan is to use the Delphi method which uses the consensus opinion of a panel of experts to develop a measure of a country's risk exposure.

Question 53

An international bank with a positive net exposure in a given foreign currency is said to be in a net short position in that particular currency.

Question 54

In a foreign currency swap,a customer who needs to borrow in foreign currency,receives the domestic currency today and swaps it back for the foreign currency just in time to repay the loan in the foreign currency.

Question 55

A bank's net foreign-currency-denominated assets in a given currency are equal to the volume of its assets denominated in that currency less any liabilities that the bank has issued denominated in the same currency.

Question 56

A foreign currency swap fully removes the borrower's currency risk exposure.

Question 57

The currency swap market is in decline following the introduction of the Euro.

Question 58

An international bank's net position in a foreign currency is measured by the difference between the volume of that currency purchased and the volume of that currency sold.

Question 59

The Eurobond market provides a firm with access to funds outside its home country.

Question 60

A call option is often employed to protect a bank or bank customer against losses from falling currency prices.

Question 61

A foreign currency contract that gives the holder of the contract the right to purchase a currency at a fixed price any time before the published expiration date is called a:

A)call currency option.
B)put currency option.
C)long-hedge currency futures contract.
D)short-hedge currency futures contract.
E)None of the options is correct.

Question 62

International banking activities are regulated for many of the same reasons that shape domestic banking regulation.These common reasons for regulation include:

A)restricting bank risk exposure.
B)protecting the safety of depositor funds.
C)promoting stable growth in money and credit.
D)avoiding massive threats to economic health in individual nations.
E)All of the options are correct.

Question 63

A limited service facility that can market services supplied by the home office of an international bank and identify new customers,but cannot take deposits or book loans is known as a:

A)branch office.
B)agency office.
C)subsidiary.
D)representative office.
E)None of options is correct.

Question 64

Separate corporate entities affiliated either with a U.S.bank or with a foreign bank operating in the U.S.that can cross state lines,but must devote the majority of their accounts to international activities are known as:

A)joint ventures.
B)representative office.
C)Agreement corporations.
D)Edge Act corporations.
E)None of options is correct.

Question 65

Under current U.S.law,the Federal Reserve Board must be notified a minimum of __________ days in advance if a foreign bank wishes to close any of its U.S.offices.

A)30
B)60
C)90
D)180
E)None of options is correct.

Question 66

Business corporations that are subsidiaries of a bank organized under Section 25 of the Federal Reserve Act and must devote the bulk of their activities to serving international customers are known as:

A)IBFs.
B)shell branches.
C)ETCs.
D)agreement corporations.
E)None of options is correct.

Question 67

A foreign currency contract that obligates the holder of the contract to make delivery of a foreign currency sometime in the future is called a:

A)call currency option.
B)put currency option.
C)long-hedge currency futures contract.
D)short-hedge currency futures contract.
E)None of options is correct.

Question 68

Organizational devices used by international banks to take deposits offshore and avoid regulations (such as deposit insurance assessments)are known as:

A)international banking facilities (IBFs).
B)export trading companies (ETCs).
C)shell branches.
D)subsidiaries.
E)None of options is correct.

Question 69

Which of the following is (are)the key component(s)included in the International Banking Act (IBA)of 1978?

A)Foreign banks are required to follow the same branching laws as U.S.banks.
B)Legal reserves requirements determined by the Federal Reserve Board are compulsory against deposits accepted by U.S.branch or agency offices of foreign banks with consolidated assets of $1 billion or more.
C)U.S.branches of foreign banks are eligible for deposit insurance under stipulated conditions.
D)U.S.branches of foreign banks have access to certain Federal Reserve services,such as the ability to borrow from the Federal Reserve banks.
E)All of the options are correct.

Question 70

A foreign currency contract that gives the holder of the contract the right to sell a foreign currency at a specified price on or before the published expiration date is called a:

A)call currency option.
B)put currency option.
C)long hedge currency futures contract.
D)short-hedge currency futures contract.
E)None of the options is correct.

Question 71

Which U.S.federal law required branches and agency offices of foreign banks to secure federal licenses for their U.S.operations for the first time?

A)International Banking Act
B)International Lending and Supervision Act
C)Bank Holding Company Act
D)International Bank Supervision and Examination Procedures Act
E)None of options is correct.

Question 72

A foreign currency contract where one party trades currencies with another and trades it back at the end of the contract is called a:

A)currency option contract.
B)currency forward contract.
C)currency swap contract.
D)currency futures contract.
E)None of the options is correct.

Question 73

The specialized firms that can be operated by U.S.banking companies and Edge Act corporations are called:

A)international banking facilities (IBFs).
B)export trading companies (ETCs).
C)shell branches.
D)subsidiaries.
E)None of options is correct.

Question 74

A foreign currency contract that obligates the holder of the contract to take delivery of a foreign currency sometime in the future is called a:

A)call currency option.
B)put currency option.
C)long-hedge currency futures contract.
D)short-hedge currency futures contract.
E)None of options is correct.

Question 75

An organizational form used by international banks,that was created by U.S.regulations and authorized by the Federal Reserve Board,consisting of computerized account records is known as:

A)international banking facility (IBF).
B)export trading company (ETC).
C)Edge Acts.
D)agencies.
E)None of options is correct.

Question 76

International banking regulation(s)that do not apply to most domestic banking activity include:

A)foreign exchange controls.
B)restricting the outflow of scarce capital.
C)protecting domestic financial institutions from foreign competition.
D)protecting domestic markets from foreign competition.
E)All of the options are correct.

Question 77

____________ are often used to protect a nation against loss of its foreign currency reserves,which might damage its prospects for repaying international loans and purchasing goods and services abroad.

A)Export loan rate restrictions
B)Foreign exchange controls
C)Minimum capitalization requirements for domestic banks
D)Examination and supervision regulations for local branch offices
E)None of options is correct

Question 78

The Foreign Bank Supervision Enhancement Act of 1991 places the responsibility for supervising U.S.branches of foreign banks with the:

A)Office of the Comptroller of the Currency.
B)Federal Reserve Board.
C)Federal Deposit Insurance Corporation.
D)Secretary of Commerce.
E)None of options is correct.

Question 79

Banks have been heavily involved in selling their services across national boundaries since:

A)the industry's very beginning.
B)the 1950s.
C)the 1980s.
D)the turn of the century.
E)None of the options is correct.

Question 80

A call currency option:

A)obligates the holder to purchase currency or currency futures contracts at a fixed price any time before the option expires.
B)gives the holder the right to purchase currency or currency futures contracts at a fixed price any time before the option expires.
C)obligates the holder to sell currency or currency futures contracts at a fixed price any time before the option expires.
D)gives the holder the right to sell currency or currency futures contracts at a fixed price any time before the option expires.
E)None of options is correct.