FIN 433 Chapter 18
Deposit insurance has a limit of
$250,000
Which of the following is NOT a corrective action that regulators may take when a bank is identified as a problem bank?
All of these are possible corrective actions taken by bank regulators.
A federal bank charter is issued by the
Comptroller of the Currency.
____ is NOT a characteristic used by bank regulators to rate banks.
Current stock price
Which banking act allowed for the creation of NOW accounts?
DIDMCA
Which banking act removed interest rate ceilings on deposits?
DIDMCA
The ____ is the fund used to cover insured depositors.
Deposit Insurance Fund
All banks that are members of the Federal Reserve must hold
FDIC insurance on deposits.
Which banking act allowed banks to cross state lines in order to acquire a failing institution?
Garn-St Germain Act
Which of the following statements is NOT correct with respect to the Financial Services Modernization Act of 1999?
It expanded the Glass-Steagall Act.
Which banking act allowed interstate banking?
Reigle-Neal Interstate Banking and Branching Efficiency Act
____ is not a rating criterion used by bank regulators.
Savings deposit volume
The Financial Services Modernization Act of 1999
allowed financial institutions to offer a diversified set of financial services.
Which of the following was NOT achieved by the Depository Institutions Deregulation and Monetary Control Act of 1980?
allowed interstate banking for depository institutions in most states
The Glass-Steagall Act of 1933 prevented
any firm that accepts deposits from underwriting stocks and bonds of corporations
In making loans to a single customer, commercial banks ____ restricted to a maximum percentage of their capital, and they ____ allowed to use borrowed or deposited funds to purchase common stock.
are; are not
The moral hazard problem is minimized when deposit insurance premiums are
based on the banks risk.
The premiums banks pay to the FDIC for deposit insurance are
based on the risk of the bank.
The key reason for regulatory examinations (such as CAMELS ratings) is to
detect problems of a bank in time to correct them.
Which of the following is NOT a specific criterion that regulators use to monitor banks?
dollar value of fixed assets
A potential benefit of the Financial Services Modernization Act is that
financial institutions can reduce their reliance on the demand for a single service.
The liquidity component of the CAMELS rating refers to
how a banks earnings would change if economic conditions change.
The Basel III framework proposes
increased capital requirements and liquidity requirements for banks.
The Depository Institutions Deregulation and Monetary Control Act of 1980 allowed banks to set their own
interest rates on savings deposits.
Bank regulations typically
involve a trade-off between the safety of the banking system and the efficiency of bank operations. B : impose restrictions on the types of assets in which banks can invest. C : set requirements for the minimum amount of capital that banks must hold. ALL ARE CORRECT
The liquidity coverage ratio, which is measured under the Basel III guidelines, is the ratio of a bank's _________ to its ___________.
liquid assets; projected net cash outflow
The Garn-St Germain Act of 1982
permitted depository institutions to offer money market deposit accounts.
A common argument in favor of government rescues of large banks is that rescues can
reduce systemic risk in the financial system.
Which of the following was NOT a provision of the Financial Reform Act of 2010?
reestablished the separation between banking and securities activities that had existed under the Glass-Steagall Act
The opening of a commercial bank in the United States
requires a charter from a state or the federal government.
The Basel framework recommends that banks maintain capital in proportion to their
risk-weighted assets.
A bank can increase its capital ratio by
selling assets.
The Financial Reform Act (Wall Street Reform and Consumer Protection Act or Dodd-Frank Act) of 2010
set requirements for the Deposit Insurance Fund's reserves.
The Volcker Rule, named for a former Fed chair
sets limits on banks' proprietary trading.
Which of the following is an "off-balance-sheet commitment"?
standby letters of credit backing commercial paper issued by firms
The potential risk that financial problems can spread through financial institutions and the financial system is referred to as ________ risk.
systemic
National banks are regulated by ____, and state banks are regulated by ____.
the Comptroller of the Currency; their state agency
During the credit crisis, all of the following occurred EXCEPT
the Supreme Court ruled that the Federal Reserve had exceeded its authority by assisting Bear Stearns because Bear was a securities firm and not a commercial bank.
Federal deposit insurance
was created in 1933.
