Question 1

Which federal banking act prohibits publishing false or misleading information about the financial performance of a public company and requires top corporate officers to vouch for the accuracy of their company's financial statements?

Accepted Answer

The Sarbanes-Oxley Act was passed in 2002 in response to accounting scandals such as Enron and WorldCom. It established new or expanded requirements for public companies and accounting firms, including the prohibition of publishing false or misleading financial information and the requirement for top corporate officers to personally certify the accuracy of their companies' financial statements.

Question 2

The oldest federal bank agency is the:

Accepted Answer

The Office of the Comptroller of the Currency (OCC) was established in 1863 as part of the National Currency Act, making it the oldest federal bank agency. The OCC charters, regulates, and supervises all national banks and federal savings associations in the United States.

Question 3

Which federal banking act forces more individuals to repay at least part of what they owe and will push higher-income borrowers into more costly forms of bankruptcy?

Accepted Answer

The Bankruptcy Abuse Prevention and Consumer Protection Act forces more individuals to repay at least part of what they owe and will push higher-income borrowers into more costly forms of bankruptcy. It was enacted in 2005 to make it harder for individuals to file for bankruptcy, particularly under Chapter 7, which allows for a complete discharge of debt. The act requires individuals to pass a means test, which compares their income to the median income in their state, and may force them into Chapter 13 bankruptcy, which requires repayment of at least a portion of their debt. This act was intended to reduce abuse of the bankruptcy system by high-income individuals, but critics argue that it disproportionately affects low-income individuals who have legitimate financial hardships.

Question 4

There is an important debate raging today regarding whether banks should be regulated at all.George Benston contends that:

Accepted Answer

George Benston believes that depository institutions should not be given any subsidies or special privileges and should be regulated no differently than any other corporation. This suggests that banks should be subject to the same regulatory framework as other businesses, rather than being subject to specialized regulations or receiving government support.

Question 5

One of the earliest theories regarding the impact of regulation on banks was developed by George Stigler.He contends that:

Accepted Answer

Stigler's theory suggests that firms in regulated industries actually seek out regulations because they bring monopolistic rents. This means that they are able to charge higher prices and make more profits due to the regulations in place. Therefore, A is the correct choice. B and C may be potential outcomes of regulations, but they are not the main argument put forward by Stigler about why firms seek regulations. D is not related to Stigler's theory about the impact of regulation on banks.

Question 6

The act which requires financial institutions to share information about customer identities with government agencies is:

Accepted Answer

The act that requires financial institutions to share information about customer identities with government agencies is the USA Patriot Act, which was passed in 2001 in response to the terrorist attacks on September 11th. The act aims to prevent terrorism and money laundering by allowing government agencies to access customer information from financial institutions.

Question 7

As per the Gramm-Leach-Bliley Act,one of the ways through which a banking-insurance-securities affiliation can take place is through:

Accepted Answer

The Gramm-Leach-Bliley Act allows for banking, insurance, and securities to be affiliated through a financial holding company. This type of company is a specialized type of bank holding company that can engage in a broader range of financial activities, including those related to insurance and securities.

Question 8

The 1977 act that prevents banks from "redlining" certain neighborhoods,refusing to serve those areas is:

Accepted Answer

The Community Reinvestment Act (CRA) of 1977 is the act that prevents banks from "redlining" certain neighborhoods and requires them to serve low- and moderate-income communities where they operate. The act also mandates that banks meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods.

Question 9

The equivalent of the Federal Reserve System in Europe is known as the:

Accepted Answer

The European Central Bank (ECB) serves as the central bank for the Eurozone countries and is responsible for conducting monetary policy, maintaining price stability, and regulating the banking system. It is the equivalent of the Federal Reserve System in the United States. The other options, such as the European Union, Bank of London, European Council, and Swiss Bank Corporation, are not directly responsible for monetary policy and banking regulations in Europe.

Question 10

The federal agency that regulates the most banks is the:

Accepted Answer

The answer of The federal agency that regulates the most...

Question 11

Which federal banking act requires the Federal Trade Commission to make it easier for victims of identity theft to file theft reports and requires credit bureaus to help victims resolve the problem?

Accepted Answer

The Fair and Accurate Credit Transactions Act requires the Federal Trade Commission to make it easier for victims of identity theft to file theft reports and requires credit bureaus to help victims resolve the problem.

Question 12

The law that made bank and nonbank depository institutions more alike in the services they could offer and allowed banks and thrifts to more fully compete with other financial institutions is:

Accepted Answer

The Garn-St Germain Depository Institutions Act, passed in 1982, relaxed a number of restrictions on banks and thrifts, allowing them to offer a wider range of services and compete more effectively with nonbank depository institutions. The act also allowed thrifts to make consumer and commercial loans for the first time and created adjustable-rate mortgages.

Question 13

Which federal banking act requires that financial service providers establish the identity of customers opening new accounts?

Accepted Answer

The USA Patriot Act, passed in 2001, includes measures to combat money laundering and terrorist financing. One of the provisions requires financial service providers to establish the identity of customers opening new accounts. This is intended to help prevent criminals and terrorists from using false identities and financial institutions to launder money or fund illegal activities.

Question 14

The European Central Bank has the main goal of:

Accepted Answer

The main goal of the European Central Bank is to ensure price stability, which means keeping inflation low and stable. The other options may be important objectives for the ECB, but they are not its primary goal.

Question 15

Samuel Peltzman had a different view to George Stigler on the impact of regulation on banks.He contends that:

Accepted Answer

Samuel Peltzman's view is that regulations can lower a firm's risk by sheltering them from changes in demand and costs. He did not believe that firms seek out regulations for monopolistic rents, nor did he advocate for deregulation without any special privileges. Option C is not supported by Peltzman's theory. Therefore, the best choice is B.

Question 16

The _________ allows adequately capitalized bank holding companies to acquire banks in any state.

Accepted Answer

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 allows adequately capitalized bank holding companies to acquire banks in any state. This act removed restrictions on interstate banking, allowing banks to branch out and operate across state lines. It also established a national charter option for banks and expanded the powers that could be exercised by holding companies. The other options listed are also banking acts but do not specifically address interstate banking.

Question 17

Which federal banking act reduces the need for banks to transport paper checks across the country?

Accepted Answer

The Check 21 Act allows banks to create electronic images of paper checks and send them to other banks for processing, reducing the need for physical transportation of checks.

Question 18

The act that allowed bank holding companies to acquire nonbank depository institutions and convert them to branches is:

Accepted Answer

The answer of The act that allowed bank holding companies...

Question 19

The fastest growing financial crime in the U.S.is:

Accepted Answer

Identity theft is the fastest growing financial crime in the U.S. It involves stealing someone's personal information and using it to access their finances or open new accounts in their name. This can lead to significant financial losses for the victim and can be difficult and time-consuming to resolve. Other forms of financial crimes, such as financial statement misrepresentation, bank robberies, and credit card fraud, are also serious issues, but they are not growing at the same rate as identity theft.

Question 20

Common minimum capital requirements on banks in leading industrialized nations that are based on the riskiness of their assets is imposed by:

Accepted Answer

The Basel Agreement (also known as Basel Accords) is a set of international banking regulations developed by the Basel Committee on Bank Supervision, which is made up of central bank governors from different countries. The Basel III Accord, the latest version of the agreement, requires that banks maintain a minimum amount of capital based on the riskiness of their assets. This is known as the Capital Adequacy Ratio (CAR), which is the ratio of a bank's capital to its risk-weighted assets. The agreement has been implemented in most leading industrialized nations, including the US, the UK, Japan, and the EU.

Quiz 2: The Impact of Government Policy and Regulation on the Financial-Services Industry