1. The Securities Act of 1933: A. Provides for transparency in financial statements B. Prohibits misrepresentation and fraudulent activities C. Was followed by the Securities and Exchange Act which authorizes the SEC to enforce securities laws D. All of the above 2. Which Act prohibited banks from participating in securities trading? A. Securities Act of 1933 B. Exchange Act of 1934 C. Bank Holding Act of 1956 D. McFadden Act of 1927 E. Banking Act of 1933 3. Which Act prohibited interstate branching? A. Securities Act of 1933 B. McFadden Act of 1927 C. Exchange Act of 1934 D. Banking Act of 1933 E. Bank Holding Act of 1956 4. Bank Management: The balance sheets of savings institutions consist mostly of: A. Consumer loans and high quality corporate bonds B. Commercial loans and small time deposits C. Residential mortgages and corporate bonds D. Residential mortgages and time deposits 5. Bank Management: Bank liabilities consist mostly of A. Reserves B. Demand and time deposits C. Holdings of investment securities D. Savings deposits E. Real estate and commercial loans 6. A bank chartered by the federal government in the United States is known as a: A. national bank B. universal bank C. merchant bank D. member bank E. none of the above 7. FLASHBACK! The agreement that pledged Europe to a single currency and a unified financial system was the: A. Basle Agreement B. Treaty of Rome C. European Monetary Treaty D. EC Memorandum E. Maastricht Treaty 8. ___ is considered the most important aspect of financial regulation in the United States A. Securities trading B. Fair competition C. Equal housing opportunity D. Information disclosure E. Low inflation and high employment 9. Which financial institution receives its corporate charter from the Office of the Comptroller of the Currency (OCC)? A. State banks B. National banks C. Credit unions D. Savings and Loans Associations E. All receive their charter from the OCC 10. Which regulatory agency is entrusted with the following duties? [I] act as a check on state banking commissions [II] review the adequacy of bank capital [III] evaluate the earnings prospects of banks and nonbanks [IV] assess the character and risk capacity of bank management, and [V] insure all banks and thrifts A. Federal Reserve System B. Comptroller of Currency C. SEC D. FDIC E. CFTC 11. In 1999, Congress passed a sweeping legislation that allow banks, securities firms, and insurance companies to combine their activities if they so wish. This deregulation overrides many of the provisions of which earlier legislation? A. McFadden Act , 1927 B. Federal Reserve Act, 1913 C. FDI Improvement Act, 1991 D. Glass-Steagall (Banking) Act, 1933 E. DIDMCA, 1980 12. Which of the following statements is correct? [I] Most commercial banks in the United States are chartered by the states [II] All national banks must be insured by the FDIC [III] It is NOT mandatory for state banks to be members of the Federal Reserve System [IV] Banks, which are members of the Federal Reserve System hold the bulk of bank deposits in the United States [V] The FDIC insures both commercial banks and thrift institutions A. I, III, V B. III, IV, V C. I, II, IV, V D. All are correct 13. A banking facility that can be located anywhere in the U.S. but must devote a majority of its transactions to international accounts is a(n): A. Edge Act B. IBF C. Representative office D. Joint Venture E. Bank holding company 14. Which of the following is a provision of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994? A. Allows bank holding companies to acquire banks in any state and to branch across state lines if the states do not "opt out" of interstate branching B. Allows only savings banks to acquire banks in any state and to branch across state lines if the states do not "opt out" of interstate branching C. Allows the Federal Reserve Bank to acquire banks in any state and to branch across state lines if the states do not "opt out" of interstate branching D. None of the above is correct 15. The legislation that set up the SAIF to insure savings and loan deposits was the: A. Depository Institutions Deregulation and Monetary Control Act B. Garn-St Germain Depository Institutions Act C. Financial Institutions Reform, Recovery, and Enforcement Act D. Competitive Equality in Banking Act 16. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 set up which agency to liquidate the assets of failed savings and loans? Note: this agency was later dissolved in 1995. A. The Resolution Trust Corporation (RTC) B. The Office of Thrift Supervision (OTS) C. The Savings Association Insurance Fund (SAIF) D. The Federal Deposit Insurance Corporation (FDIC) 17. The ___ merged BIF and SAIF into ___ and also increased insurance coverage for IRAs to ___ per account A. Sarbanes-Oxley of 2002; Deposit Insurance Fund; $500,000 B. Federal Deposit Insurance Reform Act of 2005; Deposit Insurance Fund; $250,000 C. Federal Deposit Insurance Reform Act of 2005; Savings Insurance Fund$500,000 D. Financial Services Modernization Act of 1999; Deposit Insurance Fund; $250,000 E. FDIC Improvement Act of 1991; Savings Insurance Fund; $250,000 F. None of the above 18. The primary regulator of federally chartered savings and loans associations is: A. Comptroller of the Currency B. Federal Deposit Insurance Corporation C. Federal National Mortgage Association D. Federal Home Loan Bank Board E. Office of Thrift Supervision 19. Which insurance agency insures funds held in a money market mutual funds A. Savings association insurance fund B. Bank insurance fund C. Money market insurance fund D. Office of Thrift Supervision E. Money market funds have no insurance agency 20. The ___ insures customer deposits in thrift institutions A. Bank insurance fund B. Money market insurance fund C. Office of Thrift Supervision D. FDIC E. None 21. Although investments in a ___ are NOT insured by the government, investments in a ___ with a bank or thrift are insured by the FDIC. A. Money market deposit account; money market mutual fund B. Money market mutual fund; money market deposit account C. Savings account; money market deposit account D. Money market deposit account; NOW account E. None of the above is correct 22. In 2005, Congress passed the Federal Deposit Insurance Reform Act, which [I] raised the federal deposit insurance level on retirement accounts from $100,000 to $250,000 [II] abolished the Savings Association Insurance Fund [III] merged the deposit insurance funds for thrifts and commercial banks into one insurance fund called the Deposit Insurance Fund [IV] allows qualifying S&Ls to change their charter to become savings banks [V] empowers FDIC to raise insurance on regular deposits by $10,000 per year after 2010, based on inflation. A. II, IV, V B. I, III , V C. IV, V D. I, III, IV E. All are correct 23. The Emergency Economic Stabilization Act of 2008 was signed into law by ___ and provided for $700 billion to ___ under a program known for short as ___ A. President George W. Bush; purchase distressed bank assets; TARP B. President Obama; purchase distressed bank assets; TARP C. President Obama; purchase preferred stock in the auto industry; Dodd-Frank D. President George W. Bush; purchase shares in the auto industry; too-big-to-fail E. None of the above 24. Which financial legislation ended too-big-to-fail? A. Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) B. Emergency Economic Stabilization Act (2008) C. Sarbanes-Oxley Act (2002) D. None of the above 25. In the FDIC Risk-Based Bank Classifications, a bank is adequately capitalized - among other conditions - if its ___ is at least ___ A. Total risk-based capital; 5% B. Total risk-based capital; 6% C. Tier 1 risk-based capital; 6% D. Tier 1 risk-based capital; 4% E. None of the above 26. Under the Basel standards, Tier 1 capital comprises: A. Common stock and retained earnings B. Common stock, retained earnings, and non-cumulative non-redeemable preferred stock C. Common stock, retained earnings and all forms of preferred stock D. Common equity, cumulative preferred stock, and long-term debentures E. None of the above 27. Under the Basel standards, Core Tier 1 capital includes: A. Common stock and retained earnings B. Common stock, retained earnings, and non-cumulative non-redeemable preferred stock C. Common stock, retained earnings and all forms of preferred stock D. Common equity, cumulative preferred stock, and long-term debentures E. None of the above 28. The Basel Accords contain a set of recommendations on bank regulation, supervision, and risk management issued by the Basel Committee on Banking Supervision(True/False) 29. Which of the following is a goal of Basel II? [I] Promote enhanced risk-management practices especially for internationally active banks [II] Encourage banks to diversify their operations across different risk classes [III] Make regulatory capital more risk sensitive [IV] Provide deposit insurance for all bank deposits [V] Make bank capital requirements comparable internationally A. I, IV, V B. I, III, V C. II, III, IV D. II, IV, V E. None of the above 30. Pillar 1 of Basel II is the most important and provides for A. Supervisory review of all banks B. Market discipline C. Capital Conservation Buffer D. Countercyclical Capital Buffer E. None of the above 31. Under the Basel Accords, the three types of risks for which a capital charge is required are A. Credit risk, market risk, and operational risk B. Credit risk, market risk, and interest rate risk C. Environment risk, credit risk, and operational risk D. None of the above 32. While Basel II called for half of required bank capital to be Tier 1, Basel III A. Increased the proportion of Tier 1 capital from 4% to 8%, of which Core Tier 1 rises to 2.5% B. Increased the proportion of Tier 1 capital from 8% to 10.5%, of which Core Tier 1 rises to 4.5% C. Increased the proportion of Tier 1 capital from 4% to 6%, of which Core Tier 1 rises to 4.5% D. None of the above 33. Under Basel III, total regulatory capital ratio is the sum of Tier 1 capital ratio, capital conservation buffer, countercyclical capital buffer, and additional capital for systemically important banks 34. Under Basel III, Core Tier 1 Capital ratio A. Rises to 6% B. Rises to 4.5% C. Rises to 2.5% D. None of the above 35. Which provision in Basel III calls for banks to hold additional capital in order to withstand future periods of stress? A. Tier 1 Capital B. countercyclical capital buffer C. systemically important banks buffer D. none of the above 36. Which provision in Basel III calls for banks to hold additional Core Tier 1 capital to accommodate periods of high credit growth? A. Tier 1 Capital B. countercyclical capital buffer C. systemically important banks buffer D. none of the above 37. Under Basel III, an important financial ratio that measures whether a bank has sufficient high quality liquid assets to cover cash flows is A. Leverage ratio B. Liquidity coverage ratio C. Net Stable funding ratio D. Current ratio 38. The Federal Deposit Insurance Reform Act of 2005 [I] Raised the federal deposit insurance level on retirement accounts from $100,000 to $250,000 [II] Raised the federal deposit insurance level on all bank accounts from $100,000 to $250,000 [III] Provided maximum coverage for all noninterest-bearing transaction accounts [IV] Raised the deposit insurance limit for all interest-bearing accounts to $250,000 [V] Merged BIF and SAIF into one insurance fund called the Deposit Insurance Fund A. I and II B. II and III C. III and IV D. 1 and V E. None of the above choices is correct 39. Which of the following is true concerning the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010? A. Noninterest-bearing transaction accounts have a deposit insurance limit of $250,000 until 2012 B. Deposit insurance limit on interest-bearing deposit accounts is raised to $250,000 C. All bank accounts have a 100 percent insurance coverage D. None of the above 40. FOR THE NEXT 3 QUSTIONS: A bank has the assets shown below. The credit risk weights for the listed assets are also shown. Assets Amount Weight Cash $5,000 0% Federal funds sold 10,500 10% Home loans 20,000 75% Commercial loans 50,000 75% Municipal bonds 2,500 50% Other assets 1,000 100% What is the total credit risk-weighted assets value? A. $89,000 B. $4,464 C. $45,000 D. $3,906 E. $55,800 F. None of the above 41. If the regulatory capital ratio is 8%, calculate the minimum regulatory capital. A. $89,000 B. $4,464 C. $45,000 D. $3,906 E. $55,800 F. None of the above 42. Basel III recommends a mandatory Capital Conservation Buffer in addition to a revised Tier I Capital. Given the total risk weighted assets (RWA) in the above bank balance sheet, how much CORE TIER 1 CAPITAL should this bank have for these two standards to be met under Basel III? A. $89,000 B. $4,464 C. $45,000 D. $3,906 E. $55,800 F. None of the above 43. Which of the following is considered an off-balance sheet item? A. Repurchase agreement B. Futures contracts on gold C. Foreign currency transactions D. Treasury bonds E. None of the above 44. In calculating market risk capital using the Internal Model Approach, k = 5.2, VaR = $25 million, and specific risk charge (SRC) = $2.5 million. Calculate market risk capital if the regulatory capital ratio is 8%. A. $130 million B. $132.50 million C. $10.6 million D. None of the above 45. Under Basel III, the combination of Core Tier 1 capital and the capital conservation buffer raises the Core Tier 1 capital ratio to A. 7% B. 7.5% C. 4.5% D. 6% E. None of the above 46. Which of the following banks would normally be considered "systemically important?" A. Deutsche Bank B. HSBC C. JPMorgan Chase D. Royal Bank of Scotland E. All of the above 47. Under Basel III, which of the following could be considered appropriate for measuring a financial institution's liquidity coverage ratio? A. Short-term liquidity assets divided by average cash flow B. Short-term liquidity assets divided by long-term debt C. Long-term loans divided by average cash flow D. Long-term loans divided by long-term reliable liability and equity E. None of the above 48. Under Basel III, which of the following could be considered appropriate for measuring Net Stable Funding Ratio? A. Short-term liquidity assets divided by average cash flow B. Short-term liquidity assets divided by long-term debt C. Long-term loans divided by average cash flow D. Long-term loans divided by long-term reliable liability and equity E. None of the above 49.The liquidity problem of banks can be explained by A. The size of delinquent loans B. Maintaining a common equity ratio below the regulatory standard C. Insufficient cash and near cash assets to meet deposit customer payout requests D. None of the above 50. The third standard under Basel III calls for a Countercyclical Capital Buffer, which is up to 2.5% of Core Tier 1 capital. This is required during periods of high credit growth. The motivation behind this provision is: A. Banking crises have been found to often follow periods of high credit growth B. Banking crises have been found to often follow periods of slow credit growth C. Banking crises have been found to often follow periods of high interest rates and high inflation D. Banking crises have been found to often follow periods of liquidity problems for banks E. None of the above