1. A(n) ___________________ is a machine located at the merchant’s place of business which
allows depositors to use their debit card to pay for purchases directly.
2. A(n) _____________________ is a bank which offers its full range of services from several
locations.
3. A(n) _____________________ is a bank which offers its full range of services from only one
location.
4. A(n)________________________ is a corporation chartered for the express purpose of holding
the stock of one or more banks.
5. Managers who value fringe benefits, plush offices and ample travel budgets over the pursuit of
maximum returns for stockholders are exhibiting signs of __________________________.
6. A(n) __________________________ can invest in corporate stock as sell as loan money to help
finance the start of new ventures or support the expansion of existing businesses.
7. A bank which operates exclusively over the internet is known as a ___________ bank.
8. One new 21st century bank organizational structures is _____________________ . This is a
special type of holding company that may offer the broadest range of financial services.
9. The key problem in a large money center bank is . Managers may be
knowledgeable about banking practices but may be less informed about products and services of
subsidiary companies.
10. The Gramm-Leach-Bliley Act moved the U.S. banking industry closer to banking
in which banks may provide securities, insurance, and other financial products.
11. A bank that is not associated with a bank holding company is called a(n) bank.
12. is a view of how modern corporations operate which analyzes the
relationship between a firm’s owners and its managers.
13. Many experts believe that , the relationships that exist between
managers, the board of directors and stockholders, is more complicated in financial institutions.
14. is the idea that there will be a lower cost of production per
unit as the firm gets larger.
15. is the idea that there will be lower cost of producing multiple
services using the same organization and resources.
16. Over the years, managers of banks and other financial institutions have evolved different
organizational forms to address changes in the industry. Indeed, these firms are organized to carry
out various roles in the most efficient way. This is referred to as _________________________.
17. Bank size is not considered a significant factor in determining how banks are organized.
18. Nearly three quarters of all U.S. banks exceed $100 million in asset size apiece.
19. Nearly all U.S. banks with federal or state charters have their deposits insured by the Federal
Deposit Insurance Corporation.
20. State-chartered banks in the United States represent about a quarter of all U.S.-chartered banks,
while national banks account for approximately three quarters of all U.S. chartered banks.
21. The majority of all U.S. banks are members of the Federal Reserve System.
22. A banking corporation chartered by either federal or state governments that operates only one full-
service office is called a unit bank.
23. Over half of all U.S. states today limit branching activity.
24. The average U.S. bank is larger in size (in terms of number of branch offices) than the average
Canadian bank.
25. Despite the rapid growth of automation in U.S. banking, there are more full-service branch banking
offices than automated teller machines across the whole U.S.
26. In the United States there are more one-bank holding companies than multi-bank holding
companies.
27. Bank holding companies hold more than 90 percent of the industry’s assets in the United States.
28. Research evidence suggests that banks taken over by interstate banking organizations have
generally increased their market shares over their competitors within the same state and
generally are more profitable than their competitors.
29. The concentration of bank deposits at the local level (that is in urban communities and rural
counties) has displayed only moderate changes in recent years.
30. There is evidence that branch banks charge higher fees for some banking services than do unit
banks.
31. Branch banks tend to offer a wider menu of services than unit banks.
32. Recent research suggests that branch banks tend to be more profitable than either unit or holding
company banks, while interstate banks tend to be the most profitable of all.
33. Less than 10 percent of the largest banks in the U.S. control almost 90 percent of the industry
assets.
34. Agency theory suggests that bank management will always pursue the goal of maximizing the
return of the bank’s shareholders.
35. Recent research suggests that the relationship between bank size and the cost of production per unit
is roughly U shaped.
36. Bank holding companies that want to achieve the goal of risk reduction in earnings risk through
interstate banking can achieve the same level of risk reduction by entering any of the fifty
states.
37. Bank holding companies are allowed to own nonbank businesses as long as those businesses offer
services closely related to banking.
38. Banks tend to have a higher proportion of outside directors than a typical manufacturing firm.
39. Banks which operate entirely on the web are known as invisible banks.
40. Banks acquired by holding companies are referred to as affiliated banks.
41. Bank organizational structure has become more complex in recent years.
42. There are only a very small number of unit banks in the U.S. today.
43. Traditional brick-and-mortar bank branch offices are on the decline in the U.S. today.
44. Community banks are usually smaller banks that are devoted principally to the markets for smaller,
locally based deposits and loans.
45. The question of whether financial firms operate as efficiently as possible requires researchers to
look into the issue of x-efficiency. The concept requires an assessment of the financial
firm’s operating costs in relation to its cost-efficient frontier.
46. In banking, organizational form follows __________ because banks usually are organized in such
a way as to carry out the tasks and supply the services demanded of them. The term that correctly
fills in the blank in the sentence above is:
A) Bank size
B) Management’s decision
C) Function
D) Regulation
E) Location
47. Which one of the following is charged with setting policy and overseeing a bank’s performance?
A) Stockholders
B) Board of directors
C) Regulators
D) Depositors
E) None of the above.
48. The largest banks possess some potential advantages over small and medium-size banks,
according to the textbook. What specific advantage of the largest banks over small and medium–
sized banks is not mentioned in the text?
A) Greater diversification geographically and by product line
B) Availability of financial capital at lower cost
C) Greater professional expertise to allocate capital to the most promising products and services
D) Better positioned to take advantage of the opportunities afforded by interstate banking.
E) All of the above were mentioned in the text as advantages typically possessed by the largest
banks.
49. Before any financial services can be offered to anyone a bank in the United States must have a:
A) Certificate of deposit insurance
B) Charter of incorporation
C) List of established customers
D) New building constructed to be the bank’s permanent home
E) None of the above.
50. In the United States there are close to __________ commercial banks in operation. Which
number shown below is closest to the actual total number of U.S. banks operating in the U.S.?
A) 20,500
B) 13,500
C) 11,500
D) 9,000
E) 7,500
51. One of the few states that has opted out of interstate banking is:
A) New York
B) Ohio
C) Texas
D) Montana
E) None of the above
52. The concentration of U.S. bank deposits in the hands of the largest banks has _________ during
the most recent period,
A) Declined
B) Increased
C) Remained essentially unchanged
D) Exhibited large fluctuations in both directions
E) None of above.
53. Bank holding company organizations have several advantages over other types of banking
organizations. Among the advantages mentioned in this chapter is:
A) Greater ease of access to capital markets
B) Tax advantage
C) Product-line diversification
D) All of the above.
E) None of the above.
54. A company which owns the stock of three different banks is known as a(n):
A) Unit Bank
B) Interstate Bank
C) One Bank Holding Company
D) Multi Bank Holding Company
E) None of the above
55. Which of the following is considered an advantage of branch banking?
A) Increased availability and convenience of services
B) Decreased chance of failure
C) Reduced transaction costs
D) B and C above
E) All of the above
56. The types of nonbank businesses a bank holding company can own include which of the
following?
A) Retail Computer Store
B) Security Brokerage Firm
C) Retail Grocery Store
D) Wholesale Electronic Distribution Company
E) All of the above
57. A bank which offers its full range of services from only one office is known as a:
A) Unit Bank
B) Branch Bank
C) Correspondent Bank
D) Bank Holding Company
E) None of the above
58. Why did so many states and the federal government finally enact interstate banking laws?
A) The need for new capital in order to revive struggling economies
B) The expansion of services by nonbank financial institutions
C) Competition from neighboring states that already liberalized their laws
D) Advances in technology which allowed banks to service customers in broader geographic
areas
E) All of the above are reasons for the passage of interstate banking laws
59. What is a bank holding company?
A) It is a bank that offers all of its services out of one office
B) It is a bank that offers all its services out of several offices
C) It is a corporation formed to hold the stock of one or more banks
D) It is a merchant bank
E) None of the above
60. Which of the following is a type of service a bank holding company is not allowed to own?
A) Merchant banking company
B) Savings and loan association
C) Retail electronics equipment sales company
D) Security brokerage firm
E) Insurance agency
61. In the last decade, the number of banks has __________ and the number of branches has
_________.
A) Declined; Increased
B) Grown; Increased
C) Grown; Decreased
D) Declined; Decreased
E) Stabilized; Stabilized
62. Websites known as electronic branches offer all of the following except:
A) Internet banking services
B) ATMs
C) Point of sales terminals
D) Computer and phone services connecting customers
E) Traveler’s checks
63. Relative to manufacturing firms, banks tend to have a (the) ___________ number of board
members.
A) Same
B) Larger
C) Smaller
D) Unknown
E) None of the above
64. The percentage of unit banks in the U.S. today is approximately:
A) 10%
B) 30%
C) 50%
D) 75%
E) 100%
65. The ‘typical’ community bank has:
A) $300 million in assets and is located in a smaller city in the Midwest.
B) $25 billion in assets and is located in a large city in the East
C) $100 million in assets and is located in a large city the South
D) $10 billion in assets and is located in a small city in the West
E) None of the above
66. The ‘typical’ money center bank has:
A) $250 million in assets and is located in a smaller city in the Midwest
B) $25 billion in assets and is located in a large city in the East
C) $100 million in assets and is located in a large city in the South
D) $10 billion in assets and is located in a small city in the West
E) None of the above
67. The majority of banks today are:
A) Federally chartered
B) Uninsured
C) State Chartered
D) National Banks
E) All of the above
68. ‘Member’ banks are:
A) Members of the FDIC
B) National Banks
C) Unit Banks
D) Members of the Federal Reserve
E) All of the above
69. and banks tend to be larger and hold more of the
public’s deposits.
A) National and Member
B) State and Nonmember
C) National and Uninsured
D) State and Insured
E) None of the above
70. Which of the following is a reason for the rapid growth in branch banks?
A) Exodus of population from cities to suburban areas
B) Bank convergence
C) Business failures
D) Decreased costs of brick and mortar
E) All of the above
71. Under the Bank Holding Company Act control of a bank is assumed to exist only if:
A) The bank holding company acquires 100% of the bank’s stock
B) The bank holding company acquires 50% or more of the bank’s stock
C) The bank holding company acquires 25% or more the bank’s stock
D) The bank holding company acquires three banks
E) None of the above
72. When a bank holding company acquires a nonbank business it must be approved by:
A) The FDIC
B) The Comptroller of the Currency
C) The Federal Reserve
D) The President of the U.S.
E) All of the above
73. Many financial experts believe that the customers most likely to be damaged by
decreased competition include:
A) Large corporations in large cities
B) Households and business in smaller cities and towns
C) Households that earn more than a billion dollars a year
D) Students away at college
E) None of the above
74. According to Levonian and Rose in order to achieve some reduction in earnings risk,
interstate banks must expand into at least:
A) 2 states
B) 4 states
C) 6 states
D) 10 states
E) 25 states
75. The major competitors of banks have:
A) Fewer but much larger service providers
B) Fewer but smaller service providers
C) More but smaller service providers
D) More but larger service providers
E) None of the above
76. Of the following countries in Europe, which has the largest number of banks?
A) Belgium
B) France
C) Germany
D) Great Britain
E) None of the above
77. Which country’s banks were owned by the state until the 1990’s?
A) Belgium
B) France
C) Germany
D) Italy
E) None of the above
78. When financial service providers offer a range of services including banking, insurance
and securities services it is known as:
A) Consolidation
B) Convergence
C) Economies of scale
D) E-Efficiencies
E) None of the above
79. The gradual evolution of markets and institutions such that geographic boundaries do not
restrict financial transactions is known as:
A) Deregulation
B) Integration
C) Re-regulation
D) Globalization
E) Moral suasion
80. Banks with less than _______ in assets are generally called community banks.
A) More than $1 billion
B) Less than $1 billion
C) More than $5 million
D) Less than $1 trillion
E) More than $1 trillion
81. Nonbank financial firms that supply insurance coverage to customers borrowing money
to guarantee repayment of a loan are referred to as:
A) Merchant Bankers
B) Factoring Companies
C) Savings Associations
D) Investment Bankers
E) Credit Insurance Underwriters
82. A financial holding companies (FHC), defined as a special type of holding company that
may offer the broadest range of financial services such as securities and insurance
activities, were allowed under which act?
A) Riegle-Neal Interstate Banking and Branching Efficiency Act
B) The Competitive Equality in Banking Act
C) The Basel Agreement
D) The FDIC Improvement Act
E) The Gramm-Leach-Bliley Financial Services Modernization Act