90. Concern about the financial impact of an extension of the federal safety net has been used to justify product
segmentation on the grounds of
91. Concern about the ability to analyze a more complex corporate structure has been used to justify product
segmentation on the grounds of
92. Concern about potential abuses of fiduciary responsibility has been used to justify product segmentation on
the grounds of
93. A bank threatens to credit ration unless the customer agrees to let the bank’s securities affiliate do its
securities underwritings. Identify the conflict of interest in this scenario.
94. According to economists, this is the main reason for underpricing of new issues.
95. What is the impact of underpricing a securities issue?
96. Chinese Walls are
97. Firewalls are
98. Identify the procompetitive effect of banks’ expansion of their securities activities.
99. Restrictions on branching occurred initially at the state level because
100. During most of the twentieth century the banking industry was able to continue to expand geographically
by
101. The Douglas amendment to the Bank Holding Company was passed to address a potential loophole to
interstate banking posed by
102. The passage of which regulation extended the interstate acquisition powers of banks to encompass healthy
thrifts?
103. Identify the legislation that restricted the branching of nationally-chartered banks to the same guidelines as
allowed to state-chartered banks.
104. Which of the following items has not been a factor in the erosion of interstate banking restrictions?
105. An organization form that limits business transactions to a single location is
106. An organization form that establishes bank subsidiaries rather than branches to expand is
107. An agreement to allow competition from certain geographic areas, usually in return for the ability to
compete within those areas, is
108. These interstate banking laws allowed an out-of-state bank to acquire an in-state target bank even if the
acquirer’s home state did not give banks from the target’s state similar acquisition powers.
109. The first state in the U.S. to allow out of state acquisitions was
110. The first regional banking pact in the U.S. was in
111. Legislations restricting geographic expansion have been undermined in all of the following ways
EXCEPT
112. The Riegle-Neal Act of 1994
113. Which of the following is NOT an advantage of domestic geographic diversification?
114. Which of the following is true of X efficiencies?
115. The argument that mergers are valuable because they create revenue synergies is based on
116. The realization of revenue synergies from the acquisition of a bank may come
117. The Herfindahl-Hirschman Index (HHI) is a measure of
118. A level _____ of the Herfindahl-Hirschman Index (HHI) is considered to reflect a highly concentrated
market.
119. A value below 1,000 of the Herfindahl-Hirschman Index (HHI) is considered to reflect
120. The use of the Herfindahl-Hirschman Index (HHI) to measure bank concentration has been criticized
because
121. The merger bid premium usually is defined as
122. What are the ways in which an FI can establish a global or international presence?
123. Which of the following is a factor deterring U.S. bank expansions abroad?
124. Identify the fundamental regulatory philosophy underlying the International Banking Act.
125. What is seen as a reason for the increased expansion of foreign bank activities in the United States
following the passage of the International Banking Act?
126. The establishment of a global or international presence by an FI can be achieved in all but which of the
following ways?
127. A Eurodollar transaction
128. The USA Patriot Act of 2001
129. Which of the following has NOT been a factor deterring U.S. bank expansion abroad?
130. Prior to the International Banking Act of 1978, foreign banks operating with state licenses
131. Which of the following was not an operating characteristic of foreign banks operating in the U.S. prior to
the International Banking Act of 1978?
132. Which of the following is not a feature of the Foreign Bank Supervision Enhancement Act?
133. Which of the following is an advantage to an FI of expanding globally?
134. Which of the following is a disadvantage of international expansion?
135. Which of the following items is an advantage of international expansion for an FI?
136. Match each of the following potential conflicts of interest with their corresponding definition or
description found in 136 to 141.
1. The approval of cheap loans to an investor under the
implicit condition that the loan proceeds are to be used to
Salesperson’s
2. To avoid being exposed to potential losses in a
securities offering, a bank may place the securities in the
accounts of customers in the trust department or other
3. The use of inside information about customers or rivals
that can be useful in setting securities prices or distributing
Bankruptcy risk
4. When a bank suggests the issuance of capital market
debt for the purpose of reducing bank loans under
5. When banks have the power to sell nonbank products,
employees may no longer give dispassionate, or unbiased,
6. Using lending power to coerce a customer to purchase
Saunders – Chapter 21 #136
137. What is the market share of Bank 1?
138. What is the market share of Bank 2?
139. What is the market share of Bank 3?
140. What is the market’s Herfindahl Hirschman Index (HHI)?
141. If Bank 1 is acquired by Bank 2, what is the impact on the market’s HHI?
142. If Bank 1 is acquired by Bank 3, what is the impact on the market’s HHI?
143. How do you think the Department of Justice (DOJ) would characterize this market before the merger and
which merger is more likely to be approved?
144. What are the market shares of banks A, B and C, respectively?
145. What is the Herfindahl-Hirschman Index (HHI) for the local market?
146. If Bank A acquires Bank B, what is the new Herfindahl Index?
147. Under the 1982 guidelines, would the Fed approve the merger of Banks A and B?
148. If Bank A acquires Bank C, what is the new Herfindahl Index (HHI)?
149. Under the 1982 guidelines, would the Fed approve the merger of Banks A and C?
150. If Bank C splits into two separate institutions at ½ its original size each, what is the new Herfindahl (HHI)
Index?
151. If Bank C agrees to be purchased by Banks A and B, what proportion of assets of Bank C should be taken
by Banks A and B, respectively in order to have equal post-merger assets?