ࡱ>   M bjbj== ;"WWѼllll84m @m\nn(nnnnnn-  !$j `EEnnnnnEnnnnnnN8nn pm@elp0,0Chapter 10 Banking Industry: Structure and Competition ( Multiple Choice The modern commercial banking system began in America when the Bank of United States was chartered in New York in 1801. Bank of North America was chartered in Philadelphia in 1782. Bank of United States was chartered in Philadelphia in 1801. Bank of North America was chartered in New York in 1782. Question Status: Revised A major controversy involving the banking industry in its early years was whether banks should both accept deposits and make loans or whether these functions should be separated into different institutions. whether the federal government or the states should charter banks. what percent of deposits banks should hold as fractional reserves. whether banks should be allowed to issue their own bank notes. Question Status: Previous Edition The government institution that has responsibility for the amount of money and credit supplied in the economy as a whole is the central bank. commercial bank. bank of settlement. monetary fund. Question Status: Previous Edition Because of the abuses by state banks and the clear need for a central bank to help the federal government raise funds during the War of 1812, Congress created the Bank of United States in 1812. Bank of North America in 1814. Second Bank of the United States in 1816. Second Bank of North America in 1815. Question Status: Previous Edition The Second Bank of the United States was denied a new charter by President Andrew Jackson. Vice President John Calhoun. President Benjamin Harrison. President John Q. Adams. Question Status: Previous Edition To eliminate the abuses of the state-chartered banks, the _____ created a new banking system of federally chartered banks, supervised by the _____. National Bank Act of 1863; Office of the Comptroller of the Currency Federal Reserve Act of 1863; Office of the Comptroller of the Currency National Bank Act of 1863; Office of Thrift Supervision Federal Reserve Act of 1863; Office of Thrift Supervision Question Status: Previous Edition Although the National Bank Act of 1863 was designed to eliminate state-chartered banks by imposing a prohibitive tax on banknotes, these banks have been able to stay in business by issuing credit cards. ignoring the regulations. issuing deposits. branching into other states. Question Status: Previous Edition The belief that bank failures were regularly caused by fraud or the lack of sufficient bank capital explains, in part, the passage of the National Bank Charter Amendments of 1918. the Garn-St. Germain Act of 1982. the National Bank Act of 1863. none of the above. Question Status: Revised Before 1863, banks acquired funds by issuing bank notes. banks were chartered by state banking commissions. federally-chartered banks had regulatory advantages not granted to state-chartered banks. all of the above. only (a) and (b) of the above. Question Status: Previous Edition Before 1863, federally-chartered banks had regulatory advantages not granted to state-chartered banks. the number of federally-chartered banks grew at a much faster rate than at any other time since the end of the Civil War. banks acquired funds by issuing bank notes. all of the above. Question Status: Previous Edition Before 1863, the Federal Reserve System regulated only federally-chartered banks. the Comptroller of the Currency regulated both state and federally-chartered banks. the number of federally-chartered banks grew at a much faster rate than at any other time since the end of the Civil War. none of the above. Question Status: Previous Edition The National Bank Act of 1863, and subsequent amendments to it, created a banking system of federally-chartered banks. established the Office of the Comptroller of the Currency. broadened the regulatory powers of the Federal Reserve. did all of the above. did only (a) and (b) of the above. Question Status: Previous Edition The regulatory system that has evolved in the United States whereby banks are regulated at the state level, the national level, or both, is known as a bilateral regulatory system. tiered regulatory system. two-tiered regulatory system. dual banking system. Question Status: Previous Edition Today the United States has a dual banking system in which banks supervised by the _____ and by the _____ operate side by side. federal government; municipalities state governments; municipalities federal government; states municipalities; states Question Status: Previous Edition The U.S. banking system is considered to be a dual system because banks offer both checking and savings accounts. it actually includes both banks and thrift institutions. it is regulated by both state and federal governments. it was established before the Civil War, requiring separate regulatory bodies for the North and South. all of the above. Question Status: Study Guide The Federal Reserve Act of 1913 required that state banks be subject to the same regulations as national banks. national banks establish branches in the cities containing Federal Reserve banks. national banks join the Federal Reserve System. all of the above be done. Question Status: Previous Edition Which bank regulatory agency has the sole regulatory authority over bank holding companies? The FDIC The Comptroller of the Currency The FHLBS The Federal Reserve System Question Status: Previous Edition State banks that are not members of the Federal Reserve System are most likely to be examined by the Federal Reserve System. FDIC. FHLBS. Comptroller of the Currency. Question Status: Previous Edition The Federal Reserve Act required all _____ banks to become members of the Federal Reserve System, while _____ banks could choose to become members of the system. state; national state; municipal national; state national; municipal Question Status: Previous Edition Probably the most significant factor explaining the drastic drop in the number of bank failures since the Great Depression has been the creation of the FDIC. rapid economic growth since 1941. the employment of new procedures by the Federal Reserve. better bank management. Question Status: Previous Edition Which regulatory body charters national banks? The Federal Reserve The FDIC The Comptroller of the Currency None of the above Question Status: Previous Edition Bank regulatory agencies include the Comptroller of the Currency. the Federal Reserve System. the Federal Deposit Insurance Corporation. all of the above. both (a) and (b) of the above. Question Status: Study Guide With the creation of the Federal Deposit Insurance Corporation, member banks of the Federal Reserve System _____ to purchase FDIC insurance for their depositors, while non-member commercial banks _____ to buy deposit insurance. could choose; were required could choose; were given the option were required, could choose were required; were required Question Status: Previous Edition With the creation of the Federal Deposit Insurance Corporation, member banks of the Federal Reserve System were given the option to purchase FDIC insurance for their depositors, while non-member commercial banks were required to buy deposit insurance. member banks of the Federal Reserve System were required to purchase FDIC insurance for their depositors, while non-member commercial banks could choose to buy deposit insurance. both member and non-member banks of the Federal Reserve System were required to purchase FDIC insurance for their depositors. both member and non-member banks of the Federal Reserve System could choose, but were not required, to purchase FDIC insurance for their depositors. Question Status: Previous Edition The Glass-Steagall Act, before its repeal in 1999, prohibited commercial banks from issuing equity to finance bank expansion. prohibited commercial banks from engaging in underwriting and dealing of corporate securities. prohibited commercial banks from selling new issues of government securities. prohibited commercial banks from purchasing any debt securities. Question Status: Previous Edition Before it was repealed in 1999, the Glass-Steagall Act prohibited commercial banks from engaging in underwriting and dealing in corporate securities. investment banks from engaging in commercial banking activities. commercial banks from selling new issues of government securities. all of the above. only (a) and (b) of the above. Question Status: Study Guide The legislation that separated investment banking from commercial banking until its repeal in 1999 is known as the: National Bank Act of 1863. Federal Reserve Act of 1913. Glass-Steagall Act. McFadden Act. Question Status: Previous Edition Which of the following statements concerning bank regulation in the United States are true? The Office of the Comptroller of the Currency has the primary responsibility for the 4000 national banks. The Federal Reserve and the state banking authorities jointly have responsibility for the 1000 state banks that are members of the Federal Reserve System. The Fed has sole regulatory responsibility over bank holding companies. All of the above are true. Only (a) and (b) of the above are true. Question Status: Previous Edition Which of the following statements concerning bank regulation in the United States are true? The Office of the Comptroller of the Currency has the primary responsibility for state banks that are members of the Federal Reserve System. The Federal Reserve and the state banking authorities jointly have responsibility for the 1000 state banks that are members of the Federal Reserve System. The Office of the Comptroller of the Currency has sole regulatory responsibility over bank holding companies. All of the above are true. Only (a) and (b) of the above are true. Question Status: Previous Edition Which of the following are important factors in determining the degree and timing of financial innovation? Changes in technology Changes in market conditions Changes in regulation All of the above Only (a) and (b) of the above Question Status: Previous Edition Burdensome regulations, and rising interest rates and inflation help to explain the rapid pace of financial innovations in banking in the 1960s and 1970s. the low rate of bank failures in the 1980s. both (a) and (b) of the above. neither (a) nor (b) of the above. Question Status: Previous Edition Rising interest-rate risk increased the cost of financial innovation. increased the demand for financial innovation. reduced the cost of financial innovation. reduced the demand for financial innovation. Question Status: Previous Edition The most significant change in financial market conditions since 1970 has been the dramatic increase in new Treasury issues. increase in new stock offerings. increase in the volatility of interest rate movements. decline in the number of institutional investors, such as pension and mutual funds, relative to individual investors. Question Status: Previous Edition The most significant change in the economic environment that changed the demand for financial products since 1970 has been the aging of the baby-boomer generation. the dramatic increase in the volatility of interest rates. the dramatic increase in competition from foreign banks. the deregulation of financial institutions. Question Status: Previous Edition In the 1950s the interest rate on three-month Treasury bills fluctuated between 1 percent and 3.5 percent; in the 1980s it fluctuated between ____ percent and ____ percent. 5; 15 4; 11.5 4; 18 5; 10 Question Status: Previous Edition In the 1950s the interest rate on three-month Treasury bills fluctuated between 1 percent and 3.5 percent; in the 1970s it fluctuated between ____ percent and ____ percent. 4; 14 4; 11.5 2; 14 2; 11.5 Question Status: Previous Edition Large fluctuations in interest rates lead to substantial capital gains and losses to owners of securities. greater uncertainty about returns on investments. greater interest-rate risk. all of the above. Question Status: Previous Edition Adjustable rate mortgages protect households against higher mortgage payments when interest rates rise. keep financial institutions earnings high even when interest rates are falling. benefit homeowners when interest rates are falling. do only (a) and (b) of the above. none of the above. Question Status: Previous Edition Adjustable rate mortgages protect households against higher mortgage payments when interest rates rise. keep financial institutions earnings high even when interest rates are falling. have many attractive attributes, explaining why so few households now seek fixed-rate mortgages. do only (a) and (b) of the above. none of the above. Question Status: Previous Edition Adjustable rate mortgages benefit homeowners when interest rates are falling. reduce financial institutions interest-rate risk. reduce households risk of having to pay higher mortgage payments when interest rates rise. all of the above. do only (a) and (b) of the above. Question Status: Revised Adjustable rate mortgages protect financial institutions from declining earnings when interest rates rise. benefit households when interest rates are falling. have many attractive attributes, explaining why so few households now seek fixed-rate mortgages. do only (a) and (b) of the above. do only (b) and (c) of the above. Question Status: Previous Edition Individuals purchasing homes for the first time might prefer financing the purchase with a fixed-rate mortgage if they have limited incomes that would make it difficult for them to make ends meet during periods of rising interest rates. if they would rather not be subject to the interest-rate risk due to rising rates. if they believed that interest rates would be likely to rise and remain at a level higher than the current rate. for any of the above reasons. for none of the above reasons. Question Status: Revised The agreement to provide a standardized commodity to a buyer on a specific date at a specific future price is a put option. a call option. a futures contract. a legal contract. a mortgage-backed security. Question Status: New An instrument developed to help investors and institutions hedge interest-rate risk is a put option. a call option. a financial derivative. a mortgage-backed security. a Treasury security. Question Status: New New computer technology has increased the cost of financial innovation. increased the demand for financial innovation. reduced the cost of financial innovation. reduced the demand for financial innovation. Question Status: Previous Edition The most important source of the changes in supply conditions that stimulate financial innovation has been the aging of the baby-boomer generation. dramatic increase in the volatility of interest rates. improvement in computer and telecommunications technology. dramatic increase in competition from foreign banks. the deregulation of financial institutions. Question Status: Previous Edition Credit cards date back to prior to the second World War. just after the second World War. the early 1950s. the late 1950s. Question Status: Previous Edition A firm issuing credit cards earns income from loans it makes to credit card holders. payments made to it by stores on credit card purchases. payments made to it by manufacturers of the products sold in stores on credit card purchases. all of the above. only (a) and (b) of the above. Question Status: Previous Edition The entry of AT&T and GM into the credit card business is an indication of governments efforts to deregulate the provision of financial services. the rising profitability of credit card operations. the reduction in costs of credit card operations since 1990. the sale of unprofitable operations by Bank of America and Citicorp. Question Status: Previous Edition A debit card differs from a credit card in that a debit card is a loan while for a credit card purchase, payment is made immediately. a debit card is a long-term loan while a credit card is a short-term loan. a credit card is a loan while for a debit card purchase, payment is made immediately. a credit card is a long-term loan while a debit card is a short-term loan. debit card purchases result in an immediate deduction from a checking account, while credit card purchases result in an immediate deduction from a savings account. Question Status: New The advantages of electronic banking facilities include lower costs to the bank. greater convenience for bank customers. ease of obtaining foreign currency abroad. all of the above. both (a) and (b) of the above. Question Status: New Automated teller machines have the advantage that it costs less to operate than human tellers. they are more widely located than bank branch offices. they operate twenty-four hours a day. they provide easy access to foreign currency when traveling in Europe. do all of the above. Question Status: New Automated teller machines are more costly to use than human tellers, so banks discourage their use by charging more for use of ATMs. cost about the same to use as human tellers in banks, so banks discourage their use by charging more for use of ATMs. cost less than human tellers, so banks may encourage their use by charging less for using ATMs. are more costly to use than human tellers, so banks encourage their use by charging less for use of ATMs. cost nothing to use, so banks provide their services free of charge. Question Status: New Decreasing costs of computer technology have facilitated the development of home banking. virtual banking. international banking. all of the above. both (a) and (b) of the above. Question Status: New The declining cost of computer technology has made __________ a reality. brick and mortar banking international banking virtual banking investment banking commercial banking Question Status: New Examples of financial services that became practical realities as the result of new computer technology include credit cards. electronic banking facilities. checking accounts. all of the above. only (a) and (b) of the above. Question Status: Previous Edition Bank customers perceive Internet banks as being more secure than physical bank branches. a better method for the purchase of long-term savings products. better at keeping customer information private. prone to many more technical problems. all of the above. Question Status: New A disadvantage of virtual banks (clicks) is that their hours are more limited than physical banks. they are less convenient than physical banks. they are more costly to operate than physical banks. customers worry about the security of on-line transactions. all of the above. Question Status: New So-called fallen angels differ from junk bonds in that junk bonds refer to newly issued bonds with low credit ratings. fallen angels refer to previously issued bonds that have had their credit ratings fall below Baa. fallen angels refer to newly issued bonds with low credit ratings. both (a) and (b) of the above. Question Status: Previous Edition So-called fallen angels differ from junk bonds in that junk bonds refer to previously issued bonds that have had their credit ratings fall below Baa. fallen angels refer to newly issued bonds with low credit ratings. junk bonds refer to newly issued bonds with low credit ratings. both (a) and (b) of the above. Question Status: Previous Edition So-called fallen angels differ from junk bonds in that junk bonds refer to newly issued bonds with low credit ratings, whereas fallen angels refer to previously bonds that have had their credit ratings fall below Baa. junk bonds refer to previously bonds that have had their credit ratings fall below Baa, whereas fallen angels refer to newly issued bonds with low credit ratings. junk bonds have ratings below Baa, whereas fallen angels have ratings below . fallen angels have ratings below Baa, whereas junk bonds have ratings below . Question Status: Previous Edition Newly-issued high-yield bonds rated below investment grade by the bond-rating agencies are frequently referred to as municipal bonds. Yankee bonds. fallen angels. junk bonds. Question Status: Revised In 1977, he pioneered the concept of selling new public issues of junk bonds for companies that had not yet achieved investment-grade status. Michael Milken Roger Milliken Ivan Boskey Carl Ichan Question Status: Previous Edition The rapid growth of the commercial paper market since 1970 is due to the fact that commercial paper has no default risk. improved information technology making it easier to screen credit risks. government regulation. FDIC insurance for commercial paper. all of the above. Question Status: New The rapid growth of the commercial paper market can be attributed to improvements in information technology. the growth of money market mutual funds. government insurance of commercial paper all of the above. both (a) and (b) of the above. Question Status: New The process of transforming otherwise illiquid financial assets into marketable capital market instruments is know as securitization. internationalization. arbitrage. program trading. none of the above. Question Status: Previous Edition The practice of creating marketable debt instruments that are backed by otherwise illiquid assets is known as standardization. homogenization. securitization. adverse selection. Question Status: Previous Edition Creating a marketable capital market instrument by bundling a portfolio of mortgage or auto loans is diversification. arbitrage. computerization. securitization. optioning the portfolio. Question Status: Study Guide The driving force behind the securitization of mortgages and automobile loans has been the rising regulatory constraints on substitute financial instruments. the desire of mortgage and auto lenders to exit this field of lending. the improvement in computer technology. the relaxation of regulatory restrictions on credit card operations. Question Status: Previous Edition According to Edward Kane, because the banking industry is one of the most _____ industries in America, it is an industry in which _____ is especially likely to occur. competitive; loophole mining competitive; innovation regulated; loophole mining regulated; innovation Question Status: Previous Edition Loophole mining refers to financial innovation designed to hide transactions from the IRS. financial innovation designed to conceal transactions from the SEC. financial innovation designed to get around regulations. none of the above. Question Status: Previous Edition Bank managers look on reserve requirements as a tax on deposits. as a subsidy on deposits. as a subsidy on loans. as a tax on loans. Question Status: Previous Edition The cost of holding reserves to a bank equals the interest paid on deposits times the amount of reserves. the interest paid on deposits times the amount of deposits. the interest earned on loans times the amount of loans. the interest earned on loans times the amount on reserves. the interest earned on reserves times the amount of reserves. Question Status: New Avoiding reserves requirements would enable banks to increase interest income. reduce expenses. increase profits. all of above. both (a) and (c) of the above. Question Status: New The process in which people take their money out of financial institutions seeking higher interest rates is called capital mobility. loophole mining. disintermediation. deposit jumping. Question Status: Previous Edition Money market mutual funds function as interest-earning checking accounts. are legally deposits. are subject to reserve requirements. all of the above. both (a) and (c) of the above. Question Status: New In this type of arrangement, any balances above a certain amount in a corporations checking account at the end of the business day are removed and invested in overnight securities that pay the corporation interest. This innovation is referred to as a sweep account. share draft account. removed-repo account. stockman account. Question Status: Previous Edition Reserve requirements are no longer binding for many banks because of the reduction of these requirements by the Fed. the development of sweep accounts. the growth of the commercial paper market. the rapid growth of international banking. all of the above. Question Status: New Sweep accounts have made reserve requirements nonbonding for many banks. sweep funds out of deposit accounts into long-term securities. enable banks to avoid paying interest to corporate customers. reduce banks assets. all of the above. Question Status: New Since 1974, commercial banks importance as a source of funds for nonfinancial borrowers has shrunk dramatically, from around 40 percent of total credit advanced to 30 percent by 1999. has shrunk dramatically, from around 70 percent of total credit advanced to below 50 percent by 1999. has expanded dramatically, from around 50 percent of total credit advanced to above 70 percent by 1999. has expanded dramatically, from around 30 percent of total credit advanced to above 50 percent by 1999. Question Status: Revised Since 1974, commercial banks importance as a source of funds for nonfinancial borrowers has shrunk dramatically, from around _____ percent of total credit advanced to about _____ percent by 1999. 60; 30 40; 30 25; 20 30; 15 Question Status: Revised Since 1974, commercial banks importance as a source of funds for nonfinancial borrowers has _____ dramatically, from around _____ percent of total credit advanced to about _____ percent by 1999. expanded; 40; 60. expanded; 35; 55 contracted; 40; 20 contracted; 60; 40 contracted; 90; 10 Question Status: Study Guide Thrift institutions importance as a source of funds for borrowers has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent by 1999. has shrunk from over 20 percent of total credit advanced in the late 1970s to below 10 percent by 1999. has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 25 percent by 1999. has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 30 percent by 1999. Question Status: Previous Edition Since the late 1970s, thrift institutions importance as a source of funds for borrowers has shrunk markedly, from above _____ percent of total credit advanced to below _____ percent by 1999. 30; 20 30; 15 20; 20 20; 10 Question Status: Previous Edition Since 1980 bank profitability has declined. banks have offset the decline in profits from traditional activities with increased income from off-balance-sheet activities. banks have offset the decline in profits from off-balance-sheet activities with increased income from traditional activities. bank profits have grown rapidly due to deregulation. banks profits have declined rapidly due to increased competition. Question Status: New Financial innovation has caused banks to suffer declines in their cost advantages in acquiring funds, although it has not caused a decline in income advantages. banks to suffer a simultaneous decline of cost and income advantages. banks to suffer declines in their income advantages in acquiring funds, although it has not caused a decline in cost advantages. banks to achieve competitive advantages in both costs and income. Question Status: Previous Edition Disintermediation resulted from interest rate ceilings combine with inflation-driven increases in interest rates. elimination of Regulation Q (the regulation imposing interest rate ceilings on bank deposits). increases in federal income taxes. reserve requirements. all of the above. Question Status: New The experience of disintermediation in the banking industry illustrates that more regulation of financial markets may avoid such problems in the future. banks are unable to remain competitive with other financial intermediaries. consumers no longer desire the services that banks provide. markets invent alternatives to costly regulations. the financial services sector should be nationalized. Question Status: New The process of disintermediation reduced banks income advantages. reduce banks cost advantages. resulted in an increase in banking regulation. increased banks profits. had no effect on the banking industry. Question Status: New Banks responded to disintermediation by supporting the elimination of interest rate regulations, enabling them to better compete for funds. opposing the elimination of interest rate regulations, as this would increase their cost of funds. demanding that interest rate regulations be imposed on money market mutual funds. supporting the elimination of interest rate regulations, as this would reduce their cost of funds. refusing to pay interest on deposits. Question Status: New Rising market interest rates in the 1960s and the 1970s, combined with regulated deposit rate ceilings, worked in the short run to give mortgage-issuing institutions a source of low-cost funds. led eventually to an outflow of deposits from depository institutions. led to financial innovations that worked to undo deposit rate ceilings. did all of the above. did only (a) and (c) of the above. Question Status: Previous Edition One factor contributing to the decline in cost advantages that banks once had is the decline in the importance of checkable deposits from over _____ percent of banks source of funds to under _____ percent today. 60; 30 60; 15 50; 20 40; 15 Question Status: Previous Edition One factor contributing to the decline in cost advantages that banks once had is the decline in the importance of checkable deposits from over 60 percent of banks liabilities to under 15 percent today. decline in the importance of savings deposits from over 60 percent of banks liabilities to under 15 percent today. decline in the importance of checkable deposits from over 40 percent of banks liabilities to under 15 percent today. decline in the importance of savings deposits from over 40 percent of banks liabilities to under 20 percent today. Question Status: Previous Edition The most important developments that have reduced banks cost advantages in the past thirty years include: the elimination of Regulation Q ceilings. the competition from money market mutual funds. the growth of securitization. all of the above. only (a) and (b) of the above. Question Status: Revised Banks cost advantages have been reduced during the past thirty years due to the elimination of Regulation Q ceilings. the competition from money market mutual funds. the competition from junk bonds. all of the above. only (a) and (b) of the above. Question Status: Study Guide The most important developments that have reduced banks cost advantages in the past thirty years include: the growth of the junk bond market. the competition from money market mutual funds. the growth of securitization. all of the above. only (a) and (b) of the above. Question Status: Revised The most important developments that have reduced banks income advantages in the past thirty years include: the competition from money market mutual funds. the growth of the junk bond market. the growth of securitization. all of the above. only (b) and (c) of the above. Question Status: Study Guide The most important developments that have reduced banks income advantages in the past thirty years include: the growth of the commercial paper market. the growth of the junk bond market. the elimination of Regulation Q ceilings. all of the above. only (a) and (b) of the above. Question Status: Revised One factor contributing to the decline in income advantages that banks once had is the increased competition from the commercial paper market which has grown from _____ percent of commercial and industrial bank loans to over _____ percent today. 10; 20 5; 20 10; 40 5; 40 Question Status: Previous Edition Banks have attempted to maintain adequate profit levels by making riskier loans, such as commercial real estate loans. pursuit of new off-balance-sheet activities. increasing reserve deposits at the Fed. all of the above. both (a) and (b) of the above. Question Status: New The decline in profitability of traditional banking activities resulted in bank failures. consolidations by merger and acquisition. increased risk taking by banks. banks increasing their off-balance-sheet activities. all of the above. Question Status: New The decline in traditional banking internationally can be attributed to deregulation. improved information technology. increasing monopoly power of banks over depositors. all of the above. both (a) and (b) of the above. Question Status: New The presence of so many commercial banks in the United States is most likely the result of consumers strong desire for dealing with only local banks. adverse selection and moral hazard problems that give local banks a competitive advantage over larger banks. prior regulations that restrict the ability of these financial institutions to open branches. all of the above. Question Status: Previous Edition The McFadden Act of 1927 effectively prohibited banks from branching across state lines. required that banks maintain bank capital equal to at least 6 percent of their assets. effectively required that banks maintain a correspondent relationship with large money center banks. did all of the above. Question Status: Previous Edition The legislation that effectively prohibited banks from branching across state lines and forced all national banks to conform to the branching regulations in the state in which they reside is the McFadden Act. National Bank Act. Glass-Steagall Act. Garn-St.Germain Act. Question Status: Previous Edition As a result of restrictive banking regulations, the United States has too few banks when compared to other industrialized countries. has banks that are quite large relative to those in other countries. has too many banks when compared to other industrialized countries. both (a) and (b) of the above. Question Status: Previous Edition The large number of banks in the United States is an indication of vigorous competition within the banking industry. lack of competition within the banking industry. only efficient banks operating within the United States. none of the above. Question Status: Previous Edition Lack of competition in the United States banking industry can be attributed to the fact that competition does not benefit consumers. the fact that branching has eliminated competition. recent legislation restricting competition. nineteenth-century populist sentiment. nationalization of the banking industry. Question Status: New Which of the following is an advantage of forming a bank holding company? It allows ownership of several banks where branching is prohibited. It allows owners to engage in the provision of investment advice. Holding companies can service loans in other states. All of the above. Question Status: Revised Which of the following are true statements concerning bank holding companies? Bank holding companies own almost all large banks. Bank holding companies have experienced dramatic growth in the past three decades. Over 90% of commercial bank deposits are held by banks owned by holding companies. All of the above are true. Only (a) and (b) of the above are true. Question Status: Revised The bank holding company form of organization can provide a bank with important advantages in that it allows banks to circumvent restrictive branch banking requirements. bank holding companies can engage in activities closely related to banking, such as credit card services. bank holding companies can provide data processing and leasing services. all of the above. only (a) and (b) of the above. Question Status: Revised Which of the following are true statements concerning bank holding companies? Bank holding companies own few large banks. Bank holding companies have experienced dramatic growth in the past three decades. The McFadden Act has prevented bank holding companies from establishing branch banks. All of the above are true. Only (a) and (b) of the above are true. Question Status: Previous Edition Which of the following are true statements concerning bank holding companies? Bank holding companies own almost all large banks. Bank holding companies have experienced dramatic growth in the past three decades. The McFadden Act has prevented bank holding companies from establishing branch banks. All of the above are true. Only (a) and (b) of the above are true. Question Status: Previous Edition As a result of shared electronic banking facilities, barriers to branching have become less burdensome. banking has become less competitive. both of the above have occurred. neither of the above has occurred. Question Status: Previous Edition Which of the following are true statements concerning shared electronic banking facilities? Most courts and states have held that electronic bank facilities are technically subject to branching restrictions. If an electronic facility is paid for on a transaction fee basis, it is not considered a branch bank, and is therefore not subject to branching regulations. McFadden Act restrictions do not apply to electronic facilities owned outright by banks. All of the above are true. Only (a) and (b) of the above are true. Question Status: Previous Edition The dismal performance of the banking industry in the 1980s and early 1990s has led to a large number of bank failures and mergers that have reduced the number of commercial banks from around _____ in the 1970s to about _____ today. 25,000; 11,500 15,000; 8,500 20,000; 12,500 15,000; 5,500 Question Status: Previous Edition The primary reason for the recent reduction in the number of banks is bank failures. re-regulation of banking. restrictions on interstate branching. mergers and acquisitions. all of the above. Question Status: New Bank holding companies that rival money center banks in size, but are not located in money center cities are nonbank banks. bank clearing houses. international banks. local banks. superregional banks. Question Status: New The ability to use one resource to provide different products and services is economies of scale. economies of scope. diversification. divestiture. vertical integration. Question Status: New The business term for economies of scope is economies of scale. diversification. consolidation. synergies. cooperation. Question Status: New The recent legislation that overturned the prohibition on interstate banking is the McFadden Act. the Douglas Amendment. the Glass-Steagall Act the Riegle-Neal Act the Gramm-Leach-Bliley Act. Question Status: New The only country without a true national banking system in which banks have branches throughout the nation is Canada. France. Italy. the United States. Question Status: Previous Edition Although it has a population about half that of the United States, Japan has many more banks. only 10 percent of the number of banks. only 5 percent of the number of banks. only 1 percent of the number of banks. Question Status: Previous Edition Experts predict that the future structure of the U.S. banking industry will have an increased number of banks. will have approximately the same number of banks as currently exist. will have several thousand banks. will have a few hundred banks. will have as few as ten banks. Question Status: New Bank consolidation will likely result in less competition. the elimination of community banks. increased competition. both (a) and (b) of the above. both (b) and (c) of the above. Question Status: New Critics of nationwide banking fear an elimination or community banks. reduced lending to small businesses. cutthroat competition. all of the above. both (a) and (b) of the above. Question Status: New Benefits of nationwide banking will likely include increased competition. increased diversification of banks loan portfolios. reduced bank failures. all of the above. both (b) and (c) of the above. Question Status: New Nationwide banking will likely reduce bank failures due to reduced competition. reduced lending to small businesses. diversification of loan portfolios across state lines. regulatory forbearance. elimination of community banks. Question Status: New Banking consolidation in the United States is resulting in an increased number of small banks. an increase in bank size. a reduction in bank size. elimination of small banks. no change in the number of large and small banks. Question Status: New As the banking system in the United States evolves, it is expected that the number and importance of small banks will increase. the number and importance of large banks will decrease. small banks will grow at the expense of large banks. the number and importance of large banks will increase. there will be no change in the relative size or importance of large and small banks. Question Status: New The legislation overturning the Glass-Steagall Act is the McFadden Act. the Douglas Amendment. the Garn-St. Germain Act the Riegle-Neal Act. the Gramm-Leach-Bliley Act. Question Status: Revised Recently, commercial banks have been allowed to invest in real estate. enter certain insurance markets. underwrite stocks. do all of the above. only (a) and (b) of the above. Question Status: Previous Edition In a _____ banking system, commercial banks provide a full range of banking, securities, and insurance services, all within a single legal entity. universal British-style universal barrier-free dividerless severable Question Status: Previous Edition In a _____ banking system, commercial banks engage in securities underwriting, but legal subsidiaries conduct the different activities. Also, banking and insurance are not typically undertaken together in this system. universal British-style universal short-fence compartmentalized dual Question Status: Revised Under Section 65 of the Japanese Securities Act, commercial banks in Japan are increasingly being allowed to engage in securities activities and are thus becoming more like universal banks that exist in Germany and the Netherlands. British-style universal banking system, which exists in the U.K., Canada, and Australia. both (a) and (b) of the above. neither (a) nor (b) of the above. Question Status: Previous Edition A major difference between the United States and Japanese banking systems is that American banks are allowed to hold substantial equity stakes in commercial firms, whereas Japanese banks cannot. Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas American banks cannot. bank holding companies are illegal in the United States. only (a) and (c) of the above. only (b) and (c) of the above. Question Status: Previous Edition Major differences between the United States and Japanese banking systems include: American banks are allowed to hold substantial equity stakes in commercial firms, whereas Japanese banks cannot. Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas American banks cannot. bank holding companies are illegal in Japan. only (a) and (c) of the above. only (b) and (c) of the above. Question Status: Previous Edition The regulatory agency responsible for supervising savings and loans institutions is the FSLIC. Fed. Comptroller of the Currency. Federal Home Loan Bank System. Question Status: Previous Edition Agencies regulating savings and loans include the Office of Thrift Supervision. the Federal Deposit Insurance Corporation. the Federal Home Loan Bank System. all of the above. only (b) and (c) of the above. Question Status: Study Guide Unlike banks, _____ have been allowed to branch statewide since 1980. federally-chartered S&Ls state-chartered S&Ls financially troubled S&Ls technically insolvent S&Ls Question Status: Revised Thrift institutions include commercial banks. brokerage firms insurance companies. mutual savings banks. all of the above. Question Status: New An essential characteristic of credit unions is that they are typically large. branching across state lines is prohibited. their lending is primarily for mortgage loans. they are organized for individuals with a common bond. all of the above are true. Question Status: New The rapid growth in international banking is due to rapid growth in world trade. the decline in world trade since 1960. the creation of the World Trade Organization. the 1988 Basel agreement. none of the above. Question Status: Study Guide The spectacular growth in international banking can be explained by the rapid growth in international trade. the desire for U.S. banks to expand. the desire for U.S. banks to escape burdensome domestic regulations. all of the above. only (a) and (b) of the above. Question Status: Previous Edition Which of the following is not a reason for the rapid expansion of international banking? The rapid growth in international trade The desire for U.S. banks to expand The growth of multinational corporations None of the above Question Status: Previous Edition Which of the following is a reason for the rapid expansion of international banking? The rapid growth in international trade The growth of multinational corporations The desire of U.S. banks to expand Each of the above Question Status: Previous Edition What country is given credit for the birth of the Eurodollar market? The United States England The Soviet Union Japan Question Status: Previous Edition Deposits in European banks denominated in dollars for the purpose of international transactions are known as Eurodollars. European Currency Units. European Monetary Units. International Monetary Units. Question Status: Previous Edition The main center of the Eurodollar market is London. Basel. Paris. New York. Question Status: Previous Edition Eurodollars are dollar-dominated deposits held in banks outside the United States. deposits held by U.S. banks in Europe. deposits held by U.S. banks in foreign countries. dollar-dominated deposits held in U.S. banks by Europeans. Question Status: Previous Edition Reasons for holding Eurodollars include the fact that Eurodollar deposits are insured by the FDIC. the fact that dollars are widely used to conduct international transactions. the fact that minimum transaction sizes are very low, making Eurodollars an attractive savings instrument for consumers. the fact that Eurodollar deposits are heavily regulated. all of the above reasons. Question Status: New An advantage to American banks from operating foreign branches is that Eurodollar deposits in offshore branches are not subject to reserve requirements. Eurodollar deposits in offshore branches are insured by the FDIC. Eurodollar deposits in offshore branches are subject to extensive regulatory supervision. Eurodollar deposits in offshore branches are all demand deposits that pay no interest. there is no advantage to opening offshore branches that offer Eurodollar accounts. Question Status: New U.S. banks have most of their branches in Latin America, the Far East, the Caribbean, and London. Latin America, the Middle East, the Caribbean, and London. Mexico, the Middle East, the Caribbean, and London. South America, the Middle East, the Caribbean, and Canada. Question Status: Previous Edition International banking facilities (IBFs) that operate in the United States accept time deposits from foreigners but are not subject to either reserve requirements on any restrictions on interest payments. make loans to foreigners but not to domestic residents. have grown rapidly with the encouragement of American governments. all of the above. only (a) and (b) of the above. Question Status: Study Guide Since the passage of the International Banking Act of 1978, the competitive advantage enjoyed by foreign banks has been reduced. mildly expanded. completely eliminated. greatly expanded. 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