Fin 430 CH 11

Because deposits are a significant component of the money supply, commercial banks play a key role in the transmission of ________ from the central bank to the rest of the economy.

Monetary policy

Commercial banks can also raise long-term funds through nondeposit liabilities such as ________ and ________.

Note;Bonds

Large time deposits in a commercial bank have a value of ______ or more. $10,000 $25,000 $50,000 $100,000

$100,000

Commercial banks are highly leveraged, with equity capital comprising only about _______ of total liabilities and equity. 15 percent 20 percent 25 percent 11 percent

11 percent

The __________ has primary regulatory power over bank holding companies. Federal Deposit Insurance Corporation Federal Reserve Bank Office of the Comptroller of the Currency U.S. Treasury

Federal Reserve Bank

Banks were granted full authority to enter the investment banking and insurance business with the passage of the

Financial Services Modernization Act.

Which of the following are depository institutions? Savings banks Insurance companies Mutual funds Commercial banks Credit unions Investment banks

Savings banks Commercial banks Credit unions

The Volcker Rule bans proprietary trading of _________ in the bank and all subsidiaries, including investment banks. pension fund capital finance company capital bank holding company capital insurance company capital

bank holding company capital

Money center banks have fewer ________ and rely heavily on ________ as sources of funds.

branches; wholesale and borrowed funds

Large banks have easier access to ________ which allows them to operate with lower amounts of ________ than small banks. deposits; equity capital deposits; cash capital markets; equity capital capital markets; cash

capital markets; equity capital

As a result of the phenomenal growth in off-balance-sheet activities and the large risks they cause to the banks, regulators have been pushed into imposing _______ on such activities. fines and penalties limits and guidelines insurance capital requirements

capital requirements

The largest financial institution group in dollar value of assets is a. finance companies. b. commercial banks. c. insurance companies. d. mutual funds.

commercial banks.

For larger banks _______ are relatively more important than they are for smaller banks. personal loans small business loans mortgage loans commercial loans

commercial loans

The smallest commercial banks are ________ that specialize in ________ such as residential mortgages and consumer loans. a. community banks; retail banking b. community banks; wholesale banking c. money center banks; retail banking d. money center banks; wholesale banking

community banks; retail banking

Regional and supperregional banks provide some retail banking services, but also develop relationships with large ________ and ________. investors; international money centers corporate customers; international money centers corporate customers; investors corporate customers; government customers

corporate customers; international money centers

The provision of banking services by one bank to other banks that do not have the staff resources to perform the services themselves is called complementary banking. assisted banking. pro bono banking. correspondent banking.

correspondent banking.

Loan sales and securitization are mechanisms that commercial banks use to hedge their ______ exposure. loss risk interest rate risk credit risk foreign exchange risk

credit risk

The commercial bank's loan portfolio is a source of ______ and ______ risk to the bank. liquidity; loss liquidity; foreign exchange credit; liquidity credit; foreign exchange

credit; liquidity

Transaction accounts are checkable deposits that are either ______ or ______. demand deposits; NOW accounts demand deposits; certificates of deposit demand deposits; savings accounts checking accounts; savings accounts

demand deposits; NOW accounts

Commercial banks are highly leveraged and hold little ______ compared to total assets, so that even a relatively small amount of loan defaults can cause the bank to become ______. cash; in default equity; insolvent investment securities; unprofitable equity; unprofitable

equity; insolvent

Commercial banks can also raise short-term funds through nondeposit liabilities such as ________ and ________.

federal funds purchases; repurchase agreements

The trend in bank size and concentration at the smallest bank end is toward ______ banks each having ________.

fewer; decreased asset share

The trend in bank size and concentration at the largest bank end is toward ______ banks each having ________.

fewer; increased asset share

During the early 2000s, ________ helped banks to manage their risks better. improved information technologies risk sharing ventures with other banks stricter bank regulation new business processes

improved information technologies

While loans are the main revenue generating asset for commercial banks, investment securities provide _____ and ______ for the bank.

interest income; liquidity

It was not until the 1980s and 1990s that regulators allowed ________ of banks. a. sales b. interstate mergers c. divestiture d. diversification

interstate mergers

State-chartered banks are _______ regulated and mostly _______ than federal banks. less; smaller more; larger more; smaller less; larger

less; smaller

Loan sales and securitization have improved the ______ of commercial banks' asset portfolios. variety attractiveness size liquidity

liquidity

The commercial bank's investment security portfolio is a source of ______ and ______ risk to the bank. liquidity; foreign exchange credit; foreign exchange liquidity; interest rate credit; liquidity

liquidity; interest rate

The majority of the assets held by commercial banks are U.S. treasury securities. loans. property plant and equipment. mortgage-backed securities.

loans

The major asset of commercial banks is ______ and their major liability is ______. loans; bonds stock; bonds loans; deposits securities; commercial paper

loans; deposits

The significant decrease in the number of commercial banks between 1984 and 2019 was largely due to

mergers and acquisitions.

Increasingly, commercial banks must compete with ________ for small time deposits

money market mutual funds

An item or activity that is moved to the asset side of the balance sheet only when a contingent event occurs is called a(n) off-balance-sheet liability. hidden asset. off-balance-sheet asset. off-balance-sheet equity item.

off-balance-sheet asset.

The Reigle-Neal Act of 1994 allowed banks to _______ across state lines

open branches

The 2010 Wall Street Reform and Consumer Protection Act called for the extension of regulatory oversight to foreign currency trading. exchange-traded derivative securities. over-the-counter derivative securities. loan guarantees.

over-the-counter derivative securities.

Small time deposits include ________ and ________. demand deposits; passbook savings accounts NOW accounts; passbook savings accounts demand deposits; retail time deposits passbook savings accounts; retail time deposits

passbook savings accounts; retail time deposits

A NOW (negotiable order of withdrawal) account is a checking account that uses only a debit card. has no fees. pays interest. allows limited check writing.

pays interest.

The FDIC funds the deposit insurance fund using the ________ it levies on banks under its protection. premiums penalties fees taxes

premiums

A demand deposit is a checking account that has no fees. prior to 2011 could not pay interest. uses only a debit card. allows limited check writing.

prior to 2011 could not pay interest.

As of 2019, the largest category of loans on the commercial bank balance sheet was ________, followed by ________. a. real estate loans; individual loans b. real estate loans; commercial and industrial loans c. commercial and industrial loans; individual loans d. commercial and industrial loans; real estate loans

real estate loans; commercial and industrial loans

The majority of banks in the largest size classes are ______ or ______ banks which engage in a more complex array of ______ services. commercial; savings; lending regional; supperregional; wholesale commercial; savings; consumer regional; supperregional; retail

regional; supperregional; wholesale

Commercial banks are ______ separately from savings institutions and credit unions. regulated insured monitored taxed

regulated

Since 1980, all banks have had to meet the same ________ whether they are members of the Federal Reserve System or not. reserve requirements regulatory requirements membership requirements capital requirements

reserve requirements

The provision of banking services by nonfinancial services firms has been termed hidden banking. shadow banking. unfair competition. silent banking.

shadow banking.

State-chartered banks are regulated by a. state regulators. b. the Federal Reserve System. c. the OCC. d. the FSLIC.

state regulators.

The primary advantage of Federal Reserve System membership is direct access to Federal Reserve consultation on regulatory requirements. the bank reserves held at the Federal Reserve. the Federal Reserve's discount loan window. the federal funds wire transfer network for borrowing and lending of reserves.

the federal funds wire transfer network for borrowing and lending of reserves.