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Exam 13: Regulation of Commercial Banks

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Question 1

Essay

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What changes to foreign bank operations in the United States have been brought about by the Foreign Bank Supervision and Enhancement Act of 1991?

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*Foreign banks must now have the Fed's approval to establish a U.S. operation. The Fed will not grant such approval unless the foreign bank is subject to home country supervision. The Fed also requires the home country regulators to supply information about the applicant bank to the Fed. *The Fed may close the U.S. operations of a foreign bank (as they did with Daiwa). *The Fed will examine each U.S. operation of a foreign bank. *Only foreign banks with access to FDIC insurance can take retail deposits. *State-licensed foreign banks must adhere to federal standards.

Question 2

Multiple Choice

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Requiring foreign banks to operate under the same rules as domestic banks is termed

A) favored status.
B) IBA clause.
C) national treatment.
D) NAFTA.
E) post-patriotism requirement.

F) A) and B)
G) None of the above

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Question 3

Multiple Choice

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FDIC deposit insurance is generally limited to ________________ per depositor per bank.

How do risk-based deposit insurance premiums and risk-based capital requirements help reduce the moral hazard problem of deposit insurance? (Hint: Moral hazard means that because of deposit insurance,banks may take on excessive amounts of risk.)

The FDIC may require an undercapitalized bank to I. provide the FDIC with a capital restoration plan. II. cease acquiring brokered deposits. III. obtain FDIC approval for all acquisitions. IV. suspend dividends and management fees. V. suspend payments on subordinated debt.

The law that largely repealed the Depression era banking laws was the

To be well-capitalized,a bank must have a leverage ratio of at least ____________ percent,Tier I capital to risk-adjusted asset ratio of at least ____________ percent,and a total risk-based capital ratio of at least ___________ percent.

The layers of regulation imposed on banks to protect depositors against bank failure are termed credit allocation regulations.

(a)A bank has risk-weighted assets of $175 and equity of $12.5. If regulators require a minimum risk-weighted capital ratio of 5 percent given the current level of equity,how many new assets with a 100 percent risk weight can the bank add? How many with a 50 percent risk weight? (b)If the bank had 20 percent more equity,how many new assets with a 100 percent risk weight could the bank add? How many with a 50 percent risk weight? How does having more equity affect a bank's ability to grow? How is this growth affected by the riskiness of the bank's assets?

The CRA of 1977 and the HMDA of 1975 are examples of consumer protection regulations.

Areas of commercial bank regulation dealing with preventing banks from discriminating unfairly in lending are termed ______________________ regulations. rev: 10_17_2013_QC_37326

In the United States,regulators currently use a ________________ to calculate required reserve balances.

There were a greater number of bank failures from 1980 to 1990 inclusive than from 1934 to 1979.

A financial intermediary that can engage in a broad range of financial service activities is termed a universal FI.

Among other things,the Financial Institutions Reform,Recovery,and Enforcement Act stipulated the creation of the

The FDIC insures bank deposits and the OTS insures thrift deposits.

In the post-Depression era the largest number of bank failures occurred in which time period?

All banks located in the European Union offer deposits that are insured for __________ euros,although depositors are subject to a _________________ in the event of loss.

A securities subsidiary of a bank holding company that engages in investment banking is called a Riegle-Neal affiliate.

A bank has Tier 1 capital of $90 million and Tier 2 capital of $70 million. The bank has total assets of $2,522 million and risk-weighted assets of $2,017.6 million. This bank is