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Chapter 13

Chapter 13

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Published by: skwagwok on Feb 13, 2010
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Chapter 13 Regulation of Commercial Banks
True/False Questions
1.Banks are generally prohibited from making loans exceeding more than 10 percent of their own equity capital to any one company or borrower.Answer: True Page: 383-384 Level: Medium2.The layers of regulation imposed on banks to protect depositors against bank failureare termed credit allocation regulations.Answer: False Page: 383 Level: Easy3.The part of the money supply produced by the private banking system is called insidemoney.Answer: True Page: 385 Level: Easy4.The difference between the private costs of regulations and the private benefits for the producers of financial services is called the net regulatory burden.Answer: True Page: 384 Level: Easy5.The quantity of notes and coin in the economy is called inside money but the bulk of the money supply is outside money.Answer: False Page: 385 Level: Medium6.The Investment Company Act of 1940 and the Securities Acts of 1933 and 1934 areexamples of investor protection regulations.Answer: True Page: 386 Level: Easy7.A financial intermediary that can engage in a broad range of financial service activitiesis termed a universal FI.Answer: True Page: 387 Level: Easy8.A securities subsidiary of a bank holding company that engages in investment bankingis called a Reigle-Neal affiliate.Answer: False Page: 388 Level: Easy
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9.Restricting the number of institutions that can enter an industry increases profitabilityof firms already in the industry.Answer: True Page: 386 Level: Easy10.A bank that offers demand deposits or makes commercial loans, but does not do bothis called a nonbank bank.Answer: True Page: 391 Level: Easy11.Unit banking states are states that do not allow interstate branch banking, but allow thecreation of intrastate branch banks.Answer: False Page: 392 Level: Medium12.States that only allow unit banking often still allow existing banks to create new denovo branches.Answer: False Page: 392 Level: Medium13.The Glass-Steagall Act came about due to concerns about excessive risk taking at banks and conflicts of interest between commercial and investment banking activities.Answer: True Page: 388 Level: Easy14.Beginning in 1987 a bank could establish a Section 20 affiliate to underwrite all typesof insurance.Answer: False Page: 388 Level: Easy15.There were a greater number of bank failures from 1980 to 1990 inclusive than from1933 to 1979.Answer: True Page: 393-394 Level: Medium
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Multiple Choice Questions
16.A bank that has an equity to asset ratio equal to 12% can normally lend no more than _____ of its assets to any one borrower.A)1.20%B)1.05%C)12.00%D)1.50%E)2.25%Answer: A Page: 383-384 Level: Medium17.The FDIC manages theA)Bank insurance fundB)Savings association insurance fundC)National credit union share insurance fundD)All of the aboveE)A and B onlyAnswer: E Page: 384 Level: Medium18.The reduction in deposit funds cost brought about by government insurance is anexample of theA)Social benefit of regulationB)Private cost of regulation to DIsC)Private benefits of regulation to DIsD)Net regulatory burdenE)None of the aboveAnswer: C Page: 384 Level: Medium19.U.S. depository institutions may be subject to as many as ____ separate regulators.A)4B)5C)6D)7E)8Answer: A Page: 387 Level: Medium
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