Question 1

The CAMELS rating system

Accepted Answer

A)  allows bank loan officers to assess the creditworthiness of borrowers.
B)  is part of the means by which regulators deal with moral hazard problems in banking.
C)  was phased out during the 1980s.
D)  applies to state-chartered banks, but not to federally-chartered banks.

Question 2

Which of the following is NOT true of membership in the FDIC?

Accepted Answer

A)  All commercial banks are members of the FDIC.
B)  All national banks are members of the FDIC.
C)  Most large state banks are members of the FDIC.
D)  Some state banks are not members of the FDIC.

Question 3

A distinguishing feature of German banking, compared with U.S. and Japanese banking, is

Accepted Answer

A)  German banks may operate only a single branch.
B)  the German government closely regulates the interest rate German banks may charge.
C)  Germany allows universal banking.
D)  German banks may make no investments outside the country.

Question 4

National banks are supervised by the

Accepted Answer

A)  Office of the Comptroller of the Currency.
B)  Office of Bank Supervision.
C)  Securities and Exchange Commission.
D)  Office of Management and the Budget.

Question 5

Federal deposit insurance for credit unions is provided by the

Accepted Answer

A)  Office of Thrift Supervision.
B)  FDIC.
C)  National Credit Union Share Insurance Fund.
D)  Federal Reserve System.

Question 6

During a banking panic, a lender of last resort will

Accepted Answer

A)  purchase banks which are having difficulty but appear sound.
B)  make loans to solvent but illiquid banks.
C)  make loans to insolvent but liquid banks.
D)  make loans to any banks which request them.

Question 7

About what percentage of depositors are fully insured under FDIC?

Accepted Answer

A)  1%
B)  5%
C)  50%
D)  99%

Question 8

Bank holding companies are

Accepted Answer

A)  banks that own nonfinancial companies.
B)  banks that are technically bankrupt but whose assets have not yet been sold off.
C)  nonbank banks.
D)  large companies that hold many different banks as subsidiaries.

Question 9

An important private arrangement to deal with bank runs during the pre-Federal Reserve period was called

Accepted Answer

A)  the New York Clearing House.
B)  the Federal Funds Market.
C)  Check Clearing, Inc.
D)  the Bank Loan Fund.

Question 10

Which banks are members of the Federal Reserve System?

Accepted Answer

A)  Only national banks
B)  Only state banks
C)  National banks and some state banks
D)  Only bank holding companies

Question 11

When was the Free Banking Period?

Accepted Answer

A)  1791-1836
B)  1836-1863
C)  1863-1914
D)  1914-1990

Question 12

Compared to the banking systems in other major industrial countries, the banking system in the United States has

Accepted Answer

A)  fewer banks and is more concentrated.
B)  more banks and is more concentrated.
C)  fewer banks and is less concentrated.
D)  more banks and is less concentrated.

Question 13

When the payoff method is used to handle a bank failure,

Accepted Answer

A)  the bank is allowed to remain open.
B)  all depositors, insured and uninsured, receive their deposits back.
C)  insured depositors receive their deposits back only if the bank's assets can be sold for a sufficient amount.
D)  the bank is closed and all insured depositors receive their deposits back.

Question 14

The Federal Reserve System was created in

Accepted Answer

A)  1836.
B)  1863.
C)  1913.
D)  1945.

Question 15

The main reason banks are prohibited from investing deposits in common stocks is that

Accepted Answer

A)  the federal government does not want banks to provide competition for stockbrokers.
B)  worrying about fluctuations in stock prices might distract bank managers from their other activities.
C)  the existence of deposit insurance gives bank managers an incentive to make risky investments.
D)  common stocks are not very liquid investments.

Question 16

The FDIC was created in

Accepted Answer

A)  1863.
B)  1913.
C)  1934.
D)  1991.

Question 17

Critics of allowing bank examiners too much discretion argue that doing so results in banks

Accepted Answer

A)  charging higher interest rates on loans.
B)  being too conservative in making loans.
C)  having to pay bribes in order to receive favorable examiners' reports.
D)  declining to accept deposits from some depositors.

Question 18

As of September 1995,

Accepted Answer

A)  states could permit interstate mergers within their own borders.
B)  interstate mergers were banned.
C)  bank holding companies were prohibited from acquiring banks in other states.
D)  interest rates on bank loans were standardized across states.

Question 19

Geographic restrictions on banks

Accepted Answer

A)  reduce their ability to take advantage of economies of scale.
B)  raise the costs of their providing risk-sharing, liquidity, and information services.
C)  reduce their exposure to credit risk.
D)  reduce the amount of local lending they undertake.

Question 20

The failure of financially healthy banks is particularly likely to hurt

Accepted Answer

A)  large corporations.
B)  sellers of corporate bonds.
C)  the federal government's attempts to sell its securities.
D)  households and small and medium-sized businesses.

Exam 14: The Banking Industry

Bank holding companies are

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Which of the following is NOT true of membership in the FDIC?

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Which banks are members of the Federal Reserve System?

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A distinguishing feature of German banking, compared with U.S. and Japanese banking, is

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An important private arrangement to deal with bank runs during the pre-Federal Reserve period was called

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The CAMELS rating system

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When was the Free Banking Period?

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Critics of allowing bank examiners too much discretion argue that doing so results in banks

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During a banking panic, a lender of last resort will

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About what percentage of depositors are fully insured under FDIC?

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Compared to the banking systems in other major industrial countries, the banking system in the United States has

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As of September 1995,

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The failure of financially healthy banks is particularly likely to hurt

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When the payoff method is used to handle a bank failure,

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The FDIC was created in

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The Federal Reserve System was created in

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Federal deposit insurance for credit unions is provided by the

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National banks are supervised by the

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Geographic restrictions on banks

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The main reason banks are prohibited from investing deposits in common stocks is that

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