Questions with 100% Correct Answers
The strong performance of commercial banks during the decade before 2007 was due to
A) All of the options.
B) the growth in the number of thrifts and credit unions.
C) the stability of interest rates during this period.
D) the contraction of the number of banks and thrifts.
E) the ability of banks to shift credit risk from their balance sheets to financial markets. -
ANSWER -E) the ability of banks to shift credit risk from their balance sheets to financial
markets.
Money center banks are considered to be any bank which
A) has corporate headquarters in either New York City, Chicago, San Francisco, Atlanta, Dallas,
or Charlotte.
B) does not participate in foreign currency markets.
C) is a net supplier of funds on the interbank marke.
D) relies almost entirely on nondeposit and borrowed funds as sources of liabilities.
E) is not characterized by any of the above. - ANSWER -D) relies almost entirely on nondeposit
and borrowed funds as sources of liabilities.
Regulatory forbearance refers to a policy of
A) rescheduling of all loans of a client in the event of non-payment.
B) allowing insolvent banks to continue to operate.
C) foreclosing real estate properties in the event on non-payments of mortgages and strict
regulation of banks, closing them down as soon as they are insolvent.
D) strict regulation of banks, closing them down as soon as they are insolvent.
E) foreclosing real estate properties in the event on non-payments of mortgages. - ANSWER -B)
allowing insolvent banks to continue to operate.
A primary advantage for a depository institution of belonging to the Federal Reserve System is
A) direct access to correspondent banking services.
B) decreased costs of regulatory compliance.
C) the lower deposit reserves required under the Federal Reserve System.
D) direct access to the discount window of the Fed.
E) commission less trading of U.S. government securities. - ANSWER -D) direct access to the
discount window of the Fed.
Customer deposits are classified on a DI's balance sheet as
, A) liabilities, because the DI must meet reserve requirements on customer deposits.
B) liabilities, because DIs are required to serve depositors.
C) assets, because customers view deposits as assets.
D) liabilities, because the DI uses deposits as a source of funds.
E) assets, because the DI uses deposit funds to earn profits. - ANSWER -D) liabilities, because
the DI uses deposits as a source of funds.
Customer loans are classified on a DI's balance sheet as
A) assets, because DIs originate and monitor loan portfolios.
B) liabilities, because the DI must transfer funds to the borrower at the initiation of the loan.
C) assets, because the DI's major asset is its client base.
D) assets, because the DI earns servicing fees on the loan.
E) liabilities, because the customer may default on the loan. - ANSWER -A) assets, because DIs
originate and monitor loan portfolios.
Which of the following is true of off-balance-sheet activities?
A) They have both risk-reducing as well as risk-increasing attributes.
B) They involve generation of fees without exposure to any risk.
C) They invite regulatory costs and additional "taxes."
D) They include contingent activities recorded in the current balance sheet.
E) The risk involved is best represented by notional or face value - ANSWER -A) They have
both risk-reducing as well as risk-increasing attributes.
Which of the following identifies the primary function of the Office of the Comptroller of the
Currency?
A) Manage the deposit insurance fund and carry out bank examinations.
B) Determine permissible activities for state chartered banks.
C) Regulate and examine bank holding companies as well as individual commercial banks.
D) Charter national banks and approve their merger activity.
E) Stand as the "lender of last resort" for troubled banks. - ANSWER -D) Charter national banks
and approve their merger activity.
Which of the following currently manages the insurance funds for both commercial banks and
savings institutions?
A)OCC.
B) FDIC.
C) State authorities.
D) FSLIC.
E) FRS. - ANSWER -B) FDIC.