110. Which of the following currently manages the insurance funds for both commercial banks and savings
institutions?
111. The common bond principle of credit unions emphasizes the depository and lending needs of credit union
members.
112. What was the primary objective of the Bank Holding Company Act of 1956?
113. The credit union industry avoided much of the financial distress of the 1980s because of the short maturity
and relatively lower credit risk of their assets.
114. These organizations were originated to avoid the legal definition of a bank.
115. The primary objective of the Reigle-Neal Act was to ease branching across state lines by banks.
116. The qualified thrift lender test is designed to ensure that
117. As with other DIs, profits or return on assets (ROA) is the primary goal of credit union management.
118. Which of the following is the most important source of funds for savings institutions?
119. A significant disadvantage for credit unions in competing with commercial banks is the severe restriction
in the variety of products and services that they can offer.
120. The primary regulators of savings institutions are
121. A significant advantage for credit unions in competing with commercial banks is the tax-exempt status that
has been granted to credit unions.
122. The largest asset class on credit unions’ balance sheet as of year-end 2009 was
123. According to the American Bankers Association, the tax-exempt status of credit unions is the equivalent of
a $1 billion per-year subsidy to the industry.
124. The largest liability on credit unions’ balance sheet as of year-end 2009 was
125. Compared to the average commercial bank, credit unions tend to have higher overhead expenses per dollar
of assets.
126. Credit Unions were generally less affected than other depository institutions by the recent financial crisis
because
127. All credit unions are nationally chartered and regulated by the National Credit Union Administration.
128. The most numerous of the institutions that define the depository institutions segment of the FI industry in
the US is (are)
129. Which of the following FIs does not currently provide a payment function for their customers?
130. Which of the following observations concerning credit unions is NOT true?
131. A consumer lending function is performed by each of the following FIs EXCEPT
132. Compared to banks and savings institutions, credit unions are able to pay a higher rate on the deposits of
members because
133. Which of the following FIs does not provide a business lending function?
134. Which of the following is NOT an off balance sheet activity for U.S. banks?
135. As of 2009, commercial banks with over $10 billion in assets constituted approximately ____ percent of
the industry assets and numbered approximately _____.
136. Correspondent banking may involve
137. The largest asset class on U.S. commercial banks’ balance sheet as of year-end 2009 was
138. What is the defining characteristic of the dual banking system?
139. The largest liability on U.S. commercial banks’ balance sheet as of year-end 2009 was
140. Choose among the following major banking laws
1. Eliminated restrictions on banks, insurance
The Federal Deposit
Insurance Corporation
3. This legislation streamlined bank holding
company supervision, with the Federal
Reserve as the umbrella holding company
The Garn-St Germain
Depository Institutions Act of
4. This legislation limited the use of “too big
The Riegle-Neal Interstate
Banking and Branching
5. This legislation separated commercial and
Financial Services
7. This legislation introduced prompt
corrective action requiring mandatory
intervention by regulators when a bank’s
8. This legislation limited thrift investments in
The Depository Institutions
9. This legislation permits bank holding
The Riegle-Neal Interstate
Banking and Branching
10. This legislation phased out Regulation Q
Financial Services
11. This legislation introduced risk based
Reform, Recovery, and
The Financial Institutions
12. This legislation replaced FSLIC with
The Financial Institutions
Reform, Recovery, and
13. This legislation sought to limit the growth
The Federal Deposit
Insurance Corporation
Improvement Act (FDICIA) of
14. This law allows bank holding companies
to convert out-of-state subsidiary banks into
The Federal Deposit
Insurance Corporation
Improvement Act (FDICIA) of
15. This legislation introduced money market
Financial Services
Saunders – Chapter 02 #103
141. By late 2009, the number of commercial banks in the U.S. was approximately
142. In recent years, the number of commercial banks in the U.S. has been increasing.
143. By late 2009, the number of branches of existing commercial banks in the U.S. approximated _______,
which was a (an) _________ from 1985.
144. Most of the change in the number of commercial banks since 1990 has been due to bank failures.
145. The largest asset class on FDIC-insured savings institutions’ balance sheet as of year-end 2009 was
146. Commercial banks have had limited power to underwrite corporate securities since 1987.
147. The largest liability on FDIC-insured savings institutions’ balance sheet as of year-end 2009 was
148. Large money center banks finance most of their activities by using retail consumer deposits as the primary
source of funds.
149. The future viability of the savings association industry in traditional mortgage lending has been questioned
because of
150. Currently, federal standards do not allow investment banks to covert to a bank holding company structure.
151. Traditionally, the percentage of depository institutions’ assets funded by some form of liability is
approximately
152. Prior to the financial crisis of 2008, the return on equity for small community banks had been larger than
for large money center banks.
153. National-chartered commercial banks are most likely to be regulated by
154. Commercial banks with under $1 billion in assets have become a larger segment of the industry in recent
years.
155. State-chartered commercial banks may be regulated by
156. Money center banks rely more heavily on wholesale and borrowed funds as sources of liability funding
than do community banks.
157. The strong performance of commercial banks during the decade before 2007 was due to
158. Large banks tend to make business decisions based on personal knowledge of customers creditworthiness
and business conditions in the local communities.
159. Money center banks are considered to be any bank which
160. All banks with assets greater than $10 billion are considered money center banks.
161. A large number of the savings institution failures during the in the 1980s was a result of
162. Since 1990, commercial banks decreased the proportion of business loans and increased the proportion of
mortgages in their portfolios.
163. One of the primary reasons that investment banks were allowed to convert to bank holding companies
during the recent financial crisis was recognition that
164. The growth of the commercial paper market has led to a decline in the demand for business loans from
commercial banks.
165. Regulatory forbearance refers to a policy of
166. The securitization of mortgages involves the pooling of mortgage loans for sale in the financial markets.
167. The FIRREA Act of 1989 introduced the qualified thrift lender test (QLT), which set the percentage of
assets required for qualification to be no less than
168. By converting to a bank holding company, an investment bank gains access to Federal Reserve lending
facilities.
169. A primary advantage for a depository institution of belonging to the Federal Reserve System is
170. Large money center banks are often primary dealers in the U.S. Treasury markets.
171. Customer deposits are classified on a DI’s balance sheet as
172. Because of the large amount of equity on a typical commercial bank balance sheet, credit risk is not a
significant risk to bank managers.
173. Holdings of U.S. Treasury securities are classified on a DI‘s balance sheet as
174. Lehman Brothers failed during the recent financial crisis despite having access to the low cost sources of
funds offered by the Federal Reserve.
175. Customer loans are classified on a DI’s balance sheet as
176. A major difference between banks and other nonfinancial firms is the low amount of leverage in
commercial banks.
177. This broad class of loans constitutes the highest percentage of total assets for all U.S. commercial banks as
of the end of 2009.
178. Money market mutual funds have attracted large amounts of retail savings and retail time deposits from
commercial banks in recent years.
179. Which of the following dominates the loan portfolios of banks with assets less than one billion dollars?
180. Retail nontransaction savings and time deposits comprise the largest portion of deposits for commercial
banks.
181. Which of the following is true of off-balance-sheet activities?
182. Negotiable certificates of deposits are differentiated from fixed time deposits by their negotiability and
active trading in the secondary markets.
184. The maturity structure of the assets of commercial banks tends to be shorter than the maturity structure of
liabilities.
185. Which of the following identifies the primary function of the Office of the Comptroller of the Currency?
186. The growth in off-balance-sheet activities during the decade of the 1990s was due, in large part, to the use
of derivative contracts.
187. Which of the following currently manages the insurance funds for both commercial banks and savings
institutions?
188. The movement of an off-balance-sheet asset or liability is dependent on the occurrence of a contingent
event.
189. What was the primary objective of the Bank Holding Company Act of 1956?
190. The use of off-balance-sheet activities allows banks to practice regulatory tax-avoidance.
191. These organizations were originated to avoid the legal definition of a bank.
192. The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.
193. The qualified thrift lender test is designed to ensure that
194. Although growing, the notional value of bank OBS activities remained less than the value of
on-balance-sheet activities at the end of 2009.
195. Which of the following is the most important source of funds for savings institutions?
196. Commercial banks in the U.S. often are subject to several of the four regulatory agencies.
197. The primary regulators of savings institutions are
198. The dual banking system in the U.S. refers to the operation and establishment of large regional as well as
small community banks.
199. The largest asset class on credit unions’ balance sheet as of year-end 2009 was
200. As of December 2009, the number of nationally chartered banks was greater than the number of state
chartered banks.