Banks are required to file ________ usually quarterly that list information on the bank's assets and liabilities, income and dividends, and so forth.
- A) call reports
- B) balance reports
- C) regulatory sheets
- D) examiner updates
a. generate fee
income but increase a bank's risk
b. generate fee income and reduce risk
c. generate fee income with no increase in risk
d. increase bank risk but do not increase income
Depositors lack of information about the quality of bank assets can lead to
- A) bank panics.
- B) bank booms.
- C) sequencing.
- D) asset transformation.
The leverage ratio is the ratio of a bank's
1. A)capital divided by its total liabilities.
2. B)capital divided by its total assets
3. C)income divided by its assets
4. D)assets divided by its liabilities
To prevent bank runs and the consequent bank failures, the United States established the ________ in 1934 to provide deposit insurance.
- A) FDIC
- B) SEC
- C) Federal Reserve
- D) ATM
The existence of deposit insurance can increase the likelihood that depositors will need deposit protection, as banks with deposit insurance
- A) are likely to take on greater risks than they otherwise would.
- B) are likely to be too conservative, reducing the probability of turning a profit.
- C) are likely to regard deposits as an unattractive source of funds due to depositors' demands for safety.
- D) are placed at a competitive disadvantage in acquiring funds.
The result of the too-big-to-fail policy is that ________ banks will take on ________ risks, making bank failures more likely.
- A) small; fewer
- B) small; greater
- C) big; fewer
- D) big; greater Answer: D
The chartering process is similar to ________ potential borrowers and the restriction of risk assets by regulators is similar to ________ in private financial markets.
- A) screening; restrictive covenants
- B) screening; branching restrictions
- C) identifying; branching restrictions
- D) identifying; credit rationing
The ________ that required separation of commercial and investment banking was repealed in 1999.
- A) the Federal Reserve Act.
- B) the Glass-Steagall Act.
- C) the Bank Holding Company Act.
- D) the Monetary Control Act.
The Basel Accord requires banks to hold as capital an amount that is at least ________ of their riskminus−weighted assets.
A.10%. B.8% . C5% D.3%
When one party to a transaction has incentives to engage in activities detrimental to the other party, there exists a problem of
D.ex ante shirking
The government safety net creates ________ problem because riskminus−loving entrepreneurs might find banking an attractive industry
A.a moral hazard. B.a revenue C.a lemons. D.an adverse selection
Regulators attempt to reduce the riskiness of banks' asset portfolios by
A.requiring collateral for all loans. B.limiting the amount of loans in particular categories or to individual borrowers C.encouraging banks to hold risky assets such as common stocks D.establishing a minimum interest rate floor that banks can earn on certain assets
Because of asymmetric information, the failure of one bank can lead to runs on other banks. This is the
A.moral hazard problem. B.toominus−bigminus−tominus−fail effect. C.contagion effect D.adverse selection problem.
Deposit insurance is only one type of government safety net. All of the following are types of government support for troubled financial institutions except
A.lending from the central bank. B.forgiving tax debt C.lending directly from the government's treasury department D.nationalizing and guaranteeing that all creditors will be repaid their loans in full.