Question 1

Which of the following statements is true?

Accepted Answer

During the 1960s and 1970s, there were significant developments in the financial sector. Building societies grew and provided more funds for housing loans, credit unions expanded offering more accessible personal loans, and banks faced regulatory constraints that limited their ability to meet consumer credit demand.

Question 2

Which of the following statements is true?

Accepted Answer

The majority of players in terms of asset value as a percentage of GDP in the Australian financial system are banks. While credit unions and building societies are present in the financial system, they hold a smaller market share compared to banks. Superannuation funds are not included in this statistic as they are not considered part of the traditional financial system.

Question 3

Which of the following statements is true?

Accepted Answer

The Financial System Inquiry, commonly known as the Wallis Committee, was the inquiry that led to the development of Australia's current financial regulatory system. The Campbell Committee was actually conducted in the 1980s and focused more on the regulation of banks. The Martin Committee and Valentine Committee do not exist.

Question 4

Costs to average assets ratio is the highest for:

Accepted Answer

Credit unions typically have a higher costs to average assets ratio compared to major banks and building societies. This is because credit unions are not-for-profit organizations that often prioritize providing value to their members over minimizing costs, which can lead to higher operational expenses relative to their asset size.

Question 5

Which of the following statements is true?

Accepted Answer

Deregulation of the banking system in the 1980s brought greater competition from the banks and resulted in loss of market share by non-bank depository institutions. This is because the deregulation allowed banks to offer previously restricted services, such as mortgage lending and credit cards, which had been dominated by non-bank institutions. This led to increased competition and loss of market share for non-bank depository institutions.

Question 6

The current financial system in Australia consists of three major agencies, these being:

Accepted Answer

APRA is responsible for regulation and supervision of banks, insurance companies and superannuation funds, ASIC is responsible for regulating and enforcing laws related to corporations and financial services, and the RBA is responsible for monetary policy and maintaining financial stability. Therefore, option C is the correct choice as it includes all three agencies.

Question 7

The main features of the local banking industry over the two decades to 2010 have been an increase in concentration.This has occurred due to mergers and acquisitions motivated by the desire to:

Accepted Answer

All of the listed options are correct. The increase in concentration in the local banking industry can be attributed to various factors such as the need to be competitive in global markets, protect against takeover by foreign competitors, and increase efficiency in terms of economies of scale and scope.

Question 8

Which of the following statements is true?

Accepted Answer

Post-GFC, Australian banks increased their reliance on off-shore funding, which led to funding pressures and increased costs due to the global financial environment's instability and higher risk premiums.

Question 9

Costs to average assets ratio is the lowest for:

Accepted Answer

The answer of Costs to average assets ratio is the...

Question 10

Which of the following statements is not true?

Accepted Answer

The RBA is responsible for monetary policy and overall financial system stability, but prudential supervision is mainly the responsibility of the Australian Prudential Regulation Authority (APRA).

Question 11

Which of the following statements is true?

Accepted Answer

The answer of Which of the following statements is true?
...

Question 12

Which of the following statements is true?

Accepted Answer

The statement "On average building societies are larger than credit unions and their total share of the depository institution market has decreased significantly since 1992" is true. This is supported by data from the Federal Reserve Bank of St. Louis, which shows that as of 2019, the average asset size of building societies was approximately $8.8 billion, while the average asset size of credit unions was approximately $305 million. Additionally, the total share of the depository institution market held by building societies has decreased from approximately 3% in 1992 to less than 1% in recent years.

Question 13

Depository institutions are required by APRA to be responsible for:

Accepted Answer

Depository institutions are required by APRA to be responsible for both their own liquidity, capital management strategies and a business continuity plan. This includes ensuring that the institution has sufficient capital buffers to absorb losses, maintaining adequate liquidity in order to meet any potential funding needs, and having a plan in place to ensure the continuity of essential services in the event of a disruption to the institution's operations.

Question 14

Which of the following statements is true?

Accepted Answer

Off-balance-sheet transactions for Australian banks include direct credit substitutes, interest rate derivative contracts and foreign exchange derivative contracts. On-balance-sheet transactions include loans, securities, and physical assets held by the bank.

Question 15

Since 1 February 2012, a financial claims scheme provides protection to depositors up to:

Accepted Answer

The financial claims scheme provides protection to depositors up to $250,000 per account holder per ADI (Authorized Deposit-taking Institution) in the event of the ADI becoming insolvent. Therefore, option A is the correct choice.

Question 16

In which way did building societies respond to the competitive pressures resulting from the deregulation of the banking system in the 1980s?

Accepted Answer

Building societies responded to the competitive pressures resulting from the deregulation of the banking system in the 1980s by engaging in mergers for efficiency and scale reasons, adopting improved technology, and diversifying their products and activities. Therefore, all of the listed options are correct.

Question 17

In response to the GFC and the global liquidity crisis the Australian government introduced the following measure in 2008:

Accepted Answer

Option C is the best choice as it includes both the guarantee of bank deposits coverage up to a million dollars per depositor as well as a temporary wholesale funding guarantee to provide additional liquidity for financial institutions during the crisis. This measure helped to restore confidence in the financial system and prevent a further escalation of the crisis.

Question 18

The major reasons for the shift in the composition of bank lending commitments from the retail market to the commercial market are the:

Accepted Answer

The shift was indeed from commercial loans to housing loans, not the other way around as implied by the options A, B, and C. This shift was influenced by various factors including regulatory changes, market dynamics, and risk considerations, which are not accurately captured by the options provided.

Question 19

The term 'spread' refers to the difference between an FI's:

Accepted Answer

The term 'spread' typically refers to the difference between the interest rates at which an FI lends money to borrowers and the interest rates it pays to depositors. This is commonly known as the lending-deposit spread or simply the interest rate spread. Therefore, the correct option is D - lending and deposit rates.

Question 20

Which of the following statements is true?

Accepted Answer

Statement D is the only one that is true. Capital adequacy regulations were introduced in 1989 and require banks to maintain levels of capital adequate for the type of activity undertaken, on average, less capital for low-risk assets such as housing loans compared to higher risk assets such as commercial loans. Statement A is partially true but lacks the second part of the explanation. Statement B is false as it is the opposite; banks are required to hold more capital for higher risk assets. Statement C is also false as capital adequacy regulations are still in place.

Quiz 2: The Financial Service Industry: Depository Institutions

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

Costs to average assets ratio is the highest for:

Which of the following statements is true?

The current financial system in Australia consists of three major agencies, these being:

The main features of the local banking industry over the two decades to 2010 have been an increase in concentration.This has occurred due to mergers and acquisitions motivated by the desire to:

Which of the following statements is true?

Costs to average assets ratio is the lowest for:

Which of the following statements is not true?

Which of the following statements is true?

Which of the following statements is true?

Depository institutions are required by APRA to be responsible for:

Which of the following statements is true?

Since 1 February 2012, a financial claims scheme provides protection to depositors up to:

In which way did building societies respond to the competitive pressures resulting from the deregulation of the banking system in the 1980s?

In response to the GFC and the global liquidity crisis the Australian government introduced the following measure in 2008:

The major reasons for the shift in the composition of bank lending commitments from the retail market to the commercial market are the:

The term 'spread' refers to the difference between an FI's:

Which of the following statements is true?