Deck 15: Objectives of Bank Regulation

Question 1

To achieve bank safety, bank regulation uses:

A)federal deposit insurance.
B)regulatory monitoring.
C)capital requirements.
D)liquidity requirements.
E)bank activity restrictions.g.all of the above

Answer 1

G

Question 2

Consider the interaction between a goldsmith and a nascent central bank.The central bank's decision to institute a lender-of-the-last-resort facility

A)represents an additional source of liquidity for the goldsmith.
B)increases the goldsmith's incentives to hold non-earning central bank deposits.
C)at the extreme, transfer all of the goldsmith's withdrawal risk to the central bank.
D)all of the above
E)a and c

Answer 2

E

Question 3

The principal purpose for creating the Federal Reserve System was

A)to charter and regulate national banks.
B)to regulate the securities markets together with the SEC.
C)to provide liquidity in the form of the lender-of-the-last-resort facility.
D)all of the above
E)a and b

Answer 3

C

Question 4

Financial Stability Oversight Council FSOC) was established:

A)under the Dodd-Frank Act in the U.S.
B)to provide an integrated macro picture of the stability of the U.S.financial system.
C)To provide oversight of the Federal Reserve
D)a and b
E)b and c

Question 5

The purpose of creating the Office of the Comptroller of the Currency is

A)to regulate the circulation of the currency.
B)to charter and regulate national banks.
C)to provide the lender-of-the-last resort facility.
D)to control the discount rate.
E)none of the above

Question 6

Which of the following Acts is not a form of consumer protection regulation?

A)Truth-in-Lending Act.
B)Equal Credit Opportunity Act.
C)Real Estate Settlement Procedures Act.
D)Community Reinvestment Act.
E)Employee Retirement Income Security Act.

Question 7

In terms of consumer protection, bank regulation uses

A)truth in lending
B)usury ceilings on consumer loan interest rate
C)the discount rate
D)bank chartering and entry restrictions
E)a and b

Question 8

The Consumer Financial Protection Bureau CFPB) has been choose all correct answers):

A)In existence since 1989, after the S&L crisis.
B)Established as a part of the Dodd-Frank Act.
C)Seeks to protect consumers in mortgages, credit cards and financial products.
D)Established to encourage banks to lend to consumers.
E)Established to teach consumers about finance.

Question 9

CAMELS stands for:

A)Animals that roam deserts
B)the equivalent of horses in deserts
C)an acronym that includes capital adequacy
D)an acronym that includes management ability
E)all of the above f.c and d

Question 10

Capital conservation buffers and higher loss absorbency requirements are considered components of regulation regarding:

A)Stability of financial system
B)Market structure and competition
C)monetary control
D)fairness
E)none of the above

Question 11

In determining a bank's financial condition, liquidity is assessed by examining

A)credit conditions.
B)deposit volatility.
C)current stock of liquid assets.
D)Loan commitments.
E)all of the above

Question 12

Bank regulation in Japan

A)is conducted under the scope of the Financial Services Agency
B)seeks to stimulate automobile sales
C)seeks to safeguard the stability of the U.S.financial system and protect depositors
D)a and b
E)a and c

Question 13

Other than the provision of liquidity, the Fed

A)has a regulatory control over all bank holding companies.
B)has vast powers over the consumer protection issues.
C)can exert control over banks to not abuse their employees.
D)all of the above
E)a and b

Question 14

Bank regulation in the UK is conducted by:

A)Prudential Regulatory Authority
B)Financial Services Authority
C)Financial Conduct Authority
D)a and b
E)a and c

Question 15

The common regulatory and supervisory framework in the EU is called the:

A)ECB
B)the Banking Union
C)Euro
D)Integrated European Banking
E)all of the above

Question 16

The FDIC

A)provides an explicit deposit insurance coverage.
B)provides an implicit deposit insurance coverage at its discretion.
C)charters a national bank.
D)establishes reserve requirements for banks.
E)a and b

Question 17

With respect to monetary control, bank regulation uses:

A)reserve requirements.
B)capital requirements.
C)the discount rate.
D)a and c
E)all of the above

Question 18

The government safety net provisions to reduce the bank's vulnerability to withdrawal risk include

A)the lender-of-the-last-resort facility.
B)the too-big-to-fail policy.
C)the protection of the payment systems
D)all of the above
E)a and b

Question 19

The objectives of bank safety include everything below, except

A)federal deposit insurance
B)regulatory monitoring
C)capital requirements
D)reserve requirements
E)liquidity regulation

Question 20

One of the reasons we have a reserve requirement is

A)it allows the bank to extend credits to more borrowers.
B)it gives the bank a flexibility in raising new capital.
C)it acts as a first line defense against withdrawal risk.
D)it acts as a guaranteed line of credit for the borrowers.
E)it makes the bank more competitive in setting its loan rates.

Question 21

The three biggest advances achieved by the Basel I Capital Accord were:

Question 22

Credit allocation regulation is designed to...

A)improve banks' profit margins in lending
B)achieve social and political objectives.
C)make sure that banks do not lend excessively to a few borrowers.
D)keep the banking industry in balance.
E)all of the above

Question 23

The EU Liikanen Report proposes a restriction on trading activities which says that ________.

Question 24

The three pillars of the Basel II Capital Accord were:

Question 25

Capital requirements choose all the right answers):

A)dictate the minimum amount of regulatory capital the bank must keep
B)include both Tier-1 and Tier-2 requirements
C)dictate the amount of cash the bank must have on its balance sheet
D)depend on the riskiness of the bank's assets
E)all of the above

Question 26

The Basel III Capital Accord seeks to strengthen the global capital framework by doing the following three things:

Question 27

The main purpose of assessing management ability in the CAMELS rating is: choose all right answers):

A)to determine management competence
B)to determine management integrity
C)to determine whether management is willing to grow the bank
D)to determine management's willingness to comply with banking regulations.
E)all of the above

Question 28

In addition to the items included in Tier-1 capital, Tier-2 capital includes:

A)loan and lease loss allowances.
B)deposits.
C)long-maturity preferred stock.
D)cash on the balance sheet.
E)all of the above

Question 29

The Liquidity Coverage Ratio is defined as:

A)high quality liquid assets as a fraction of the total net cash outflows over the next 30 calendar days.
B)the liquidity covered by Ratio Analysis.
C)the ratio of capital to liquid assets
D)the P ratio of capital to total assets

Question 30

Consumer protection regulation seeks to protect...

A)the bank's shareholders.
B)the bank's borrowers.
C)the bank's depositors.
D)a and b
E)b and c

Question 31

The Volcker Rule:

A)prohibits lending discrimination
B)prohibits equity investments by banks
C)prohibits banks from engaging in proprietary trading
D)encourages banks to merge
E)all of the above