Question 1

Because asymmetric information problems in the banking industry are a fact of life throughout the world,bank regulation in other countries is similar to that in the United States.

Accepted Answer

A) True 
 B)False

Question 2

The legislation that separated commercial banking from the securities industry is known as the ________.

Accepted Answer

A)   National Bank Act
B)   Federal Reserve Act
C)   Glass-Steagall Act
D)   McFadden ActE) All of the above
F) None of the above

Question 3

Regular bank examinations and restrictions on asset holdings indirectly help to ________ the adverse selection problem because,given fewer opportunities to take on risk,risk-prone entrepreneurs will be ________ from entering the banking industry.

Accepted Answer

A)   increase; encouraged
B)   increase; discouraged
C)   reduce; encouraged
D)   reduce; discouragedE) B) and D)
F) B) and C)

Question 4

Once a bank has been chartered,it is required to file periodic call reports that reveal the bank's assets and liabilities,income,ownership,and other details.

Accepted Answer

A) True 
 B)False

Question 5

What is the primary argument for not giving depositors greater incentive to monitor financial institutions?

Accepted Answer

A)   Experts do not believe that depositors are capable of monitoring banks and imposing discipline on them.
B)   Banks could be subject to more frequent runs by nervous depositors.
C)   Both A and B are correct.
D)   Neither A nor B is correct.E) All of the above
F) None of the above

Question 6

Describe the difference between macroprudential and microprudential regulation.

Accepted Answer

Macroprudential regulation and microprud...

Question 7

One way for bank regulators to assure depositors that a bank is not taking on too much risk is to require the bank to

Accepted Answer

A)   diversify its loan portfolio.
B)   reduce its equity capital.
C)   reduce the size of its loan portfolio.
D)   do both A and B of the above.
E)   do both B and C of the above.F) B) and D)
G) B) and C) A

Question 8

Just prior to the global financial crisis,mortgage loans known as NINJA loans were issued to borrowers.What is a NINJA loan?

Accepted Answer

A)   A loan issued by a Japanese bank, thus avoiding U.S. regulation.
B)   A loan document originated by a mortgage banker named Bruce Lee.
C)   A loan issued to borrowers with no income, employment, nor assets to speak of.
D)   A loan issued with a "martial arts" clause.E) None of the above
F) A) and C)

Question 9

Which of the following is least likely to accompany financial consolidation and the development of large,complex banking organizations?

Accepted Answer

A)   More financial institutions will be considered too big to fail.
B)   The government safety net will be extended to include nonbanking activities.
C)   Moral hazard problems will become less important.
D)   Banks will have greater incentives and opportunities to take on more risk.E) A) and B)
F) None of the above

Question 10

How does Dodd-Frank claim to eliminate the too-big-to-fail problem?

Accepted Answer

The Dodd-Frank Wall Street Reform and Co...

Question 11

To understand banking regulation in the United States,it is helpful to understand the concepts of asymmetric information,adverse selection,and moral hazard.

Accepted Answer

A) True 
 B)False  True

Question 12

How has bank regulation in the United States changed since the late 1980s? What accounts for these changes?

Accepted Answer

Bank regulation in the United States has...

Question 13

According to some economists,Congress made a mistake when it passed the FDICIA of not requiring the FDIC to assess risk-based insurance premiums.

Accepted Answer

A) True 
 B)False

Question 14

In an effort to control the use of derivatives by financial institutions,the Dodd-Frank legislation of 2010 requires ________.

Accepted Answer

A)   standardized derivatives products
B)   over-the-counter trading (instead of exchange trading)  of derivatives products
C)   an increase in counterparty risk
D)   all of the aboveE) B) and C)
F) All of the above

Question 15

Describe the CAMELS rating system used by bank examiners.

Accepted Answer

The CAMELS rating system is a supervisor...

Question 16

Discuss some of the problems of Basel 2 that the global financial crisis revealed.

Accepted Answer

Basel 2, which was implemented in 2004, ...

Question 17

The Federal Deposit Insurance Corporation Improvement Act of 1991

Accepted Answer

A)   reduced the scope of deposit insurance in several ways.
B)   eliminated restrictions on nationwide banking.
C)   allowed well-capitalized banks to do some securities underwriting.
D)   did only A and B of the above.
E)   did only A and C of the above.F) C) and D)
G) B) and E)

Question 18

Under the Basel plan,

Accepted Answer

A)   assets and off-balance sheet activities are assigned to various categories to reflect the degree of credit risk.
B)   a bank's total capital must equal or exceed 8 percent of total risk-weighted assets.
C)   both of the above occur.
D)   none of the above occur.E) B) and D)
F) All of the above C

Question 19

In the years just prior to the global financial crisis,mortgage loans were issued to borrowers with no income or employment.

Accepted Answer

A) True 
 B)False

Question 20

Discuss the role of mark-to-market accounting during the global financial crisis.Did it help or hurt credit markets and bank lending?

Accepted Answer

Mark-to-market accounting played a signi...

Exam 18: Financial Regulation

Because asymmetric information problems in the banking industry are a fact of life throughout the world,bank regulation in other countries is similar to that in the United States.

Correct AnswerverifiedShow Answer

The legislation that separated commercial banking from the securities industry is known as the ________.

Correct AnswerverifiedShow Answer

Regular bank examinations and restrictions on asset holdings indirectly help to ________ the adverse selection problem because,given fewer opportunities to take on risk,risk-prone entrepreneurs will be ________ from entering the banking industry.

Correct AnswerverifiedShow Answer

Once a bank has been chartered,it is required to file periodic call reports that reveal the bank's assets and liabilities,income,ownership,and other details.

Correct AnswerverifiedShow Answer

What is the primary argument for not giving depositors greater incentive to monitor financial institutions?

Correct AnswerverifiedShow Answer

Describe the difference between macroprudential and microprudential regulation.

Correct AnswerAnswered by ExamLex AIMacroprudential regulation and microprud...View AnswerShow Answer

One way for bank regulators to assure depositors that a bank is not taking on too much risk is to require the bank to

Correct AnswerverifiedA

Just prior to the global financial crisis,mortgage loans known as NINJA loans were issued to borrowers.What is a NINJA loan?

Correct AnswerverifiedShow Answer

Which of the following is least likely to accompany financial consolidation and the development of large,complex banking organizations?

Correct AnswerverifiedShow Answer

How does Dodd-Frank claim to eliminate the too-big-to-fail problem?

Correct AnswerAnswered by ExamLex AIThe Dodd-Frank Wall Street Reform and Co...View AnswerShow Answer

To understand banking regulation in the United States,it is helpful to understand the concepts of asymmetric information,adverse selection,and moral hazard.

Correct AnswerverifiedTrue

How has bank regulation in the United States changed since the late 1980s? What accounts for these changes?

Correct AnswerAnswered by ExamLex AIBank regulation in the United States has...View AnswerShow Answer

According to some economists,Congress made a mistake when it passed the FDICIA of not requiring the FDIC to assess risk-based insurance premiums.

Correct AnswerverifiedShow Answer

In an effort to control the use of derivatives by financial institutions,the Dodd-Frank legislation of 2010 requires ________.

Correct AnswerverifiedShow Answer

Describe the CAMELS rating system used by bank examiners.

Correct AnswerAnswered by ExamLex AIThe CAMELS rating system is a supervisor...View AnswerShow Answer

Discuss some of the problems of Basel 2 that the global financial crisis revealed.

Correct AnswerAnswered by ExamLex AIBasel 2, which was implemented in 2004, ...View AnswerShow Answer

The Federal Deposit Insurance Corporation Improvement Act of 1991

Correct AnswerverifiedShow Answer

Under the Basel plan,

Correct AnswerverifiedC

In the years just prior to the global financial crisis,mortgage loans were issued to borrowers with no income or employment.

Correct AnswerverifiedShow Answer

Discuss the role of mark-to-market accounting during the global financial crisis.Did it help or hurt credit markets and bank lending?

Correct AnswerAnswered by ExamLex AIMark-to-market accounting played a signi...View AnswerShow Answer

Correct Answer
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Correct Answer
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Regular bank examinations and restrictions on asset holdings indirectly help to the adverse selection problem because,given fewer opportunities to take on risk,risk-prone entrepreneurs will be from entering the banking industry.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
Answered by ExamLex AI
Macroprudential regulation and microprud...
View Answer

Correct Answer
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A

Correct Answer
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Correct Answer
verified

Correct Answer
Answered by ExamLex AI
The Dodd-Frank Wall Street Reform and Co...
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Correct Answer
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True

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Bank regulation in the United States has...
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Correct Answer
verified

Correct Answer
Answered by ExamLex AI
The CAMELS rating system is a supervisor...
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Correct Answer
Answered by ExamLex AI
Basel 2, which was implemented in 2004, ...
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Correct Answer
verified

Correct Answer
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C

Correct Answer
verified

Correct Answer
Answered by ExamLex AI
Mark-to-market accounting played a signi...
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