Commercial Banking Structure, Regulation, and Performance
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1. State banks

a. are chartered by the Comptroller of the Currency.
b. are not required to subscribe to federal deposit insurance with the FDIC.
c. are required to belong to the Federal Reserve System (Fed).
d. must belong to the Fed if they want their deposits to be insured by the FDIC.

2. Which of the following statements is false?

a. National banks and state banks are subject to the same reserve requirements.
b. Most state banks do not belong to the Fed.
c. National banks are not required to subscribe to deposit insurance through the FDIC.
d. The majority of the banks in the U.S. have state charters, but banks with federal charters hold the majority of the deposits.

3. During which of the following time periods was the number of bank failures in the U.S. the highest?

a. the late 1930s
b. during World War II
c. the late 1980s
d. the late 1990s

4. The primary reason Congress passed the Interstate Banking and Branching Efficiency Act (IBBEA) was to

a. strengthen the McFadden Act and more effectively restrict branching.
b. increase competition in the banking industry by allowing nationwide branching.
c. force the states to allow branching.
d. allow very limited interstate branching.

5. Bank holding companies

a. are corporations that own at least one bank, but do not own other types of firms.
b. are often less profitable than a simple bank would be.
c. usually operate within a restricted geographical region.
d. can diversify more than a simple bank, allowing them to offer a wide variety of financial services.

6. Since 1980,

a. the number of banks has decreased, largely because of an increase in the number of mergers.
b. the number of banks has decreased, largely because of numerous bank failures in the 1990s.
c. the number of banks in the U.S. has increased substantially.
d. the banking industry has become less concentrated.

7. Which of the following statements about international banking is true?

a. Increasing regulation has made international banking more difficult.
b. The increase in competition for international transactions has decreased profit margins.
c. It is illegal for foreign banks to own U.S. banks.
d. It is illegal for foreign banks to operate branches in the U.S.

8. Potential borrowers generally know more about the risks and returns of an investment than the bank loan officer does. This is called

a. asymmetric information.
b. the adverse selection problem.
c. the moral hazard problem.
d. credit risk.

9. Adjustable rate loans are used

a. whenever credit risk is high.
b. to reduce exchange rate risk.
c. to reduce liquidity risk.
d. to hedge interest rate risk.

10. In the 1990s,

a. banks have been only slightly more profitable than they were in the 1980s.
b. banks have seen an increase in their level of intermediation.
c. banks face increasing levels of competition from other intermediaries and nonfinancial institutions.
d. bank stocks have not performed well against the Standard & Poor's 500.

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