Bank Management Exam Help

Government Policies and Regulation

Multiple Choice Questions

1. Historically, a commercial bank was defined as a firm that:

accepted NOW accounts and made consumer loans.
accepted demand deposits and made business loans.
accepted government deposits and made public loans.
accepted demand deposits and made consumer loans.
is regulated by the Federal Reserve.

2. Which Act separated commercial banking, investment banking and insurance into three separate industries?

Glass-Steagall Act
Bank Holding Act
McFadden Act
Federal Reserve Act
Competitive Equality Banking Act

3. Which Act limited the activities a company could engage in if it owned a bank?

Federal Reserve Act
Bank Holding Act
McFadden Act
Glass-Steagall Act
Competitive Equality Banking Act

4. Which Act allowed the individual states to determine if a bank could branch within or outside its home state?

Competitive Equality Banking Act
Federal Reserve Act
McFadden Act
Glass-Steagall Act
Riegle-Neal Interstate Banking and Branching Efficiency Act

5. Which of the following is not a purpose of bank regulation?

Guarantee minimal profitability of the banking system.
Provide monetary stability.
Ensure safety and soundness of banks.
Provide a competitive financial system.
Protect consumers from abuses by banks.

6. A primary purpose of maintaining the safety and soundness of banks is to:

encourage loan growth.
protect depositors.
ensure liquidity for the stock market.
prevent discrimination.
minimize bank losses.

7. Which of the following is not represented in the CAMELS ratings.

Cash adequacy
Asset quality
Management quality
Liquidity
Sensitivity to market risk.

8. A formal regulatory document that prescribes corrective action for a problem institution is a:

cease and desist order.
capital request.
memorandum of understanding.
quality assurance directive.
national bank order.

9. A legal document that orders a firm to sop an unfair practice under full penalty of law is a:

cease and desist order.
capital request.
memorandum of understanding.
quality assurance directive.
national bank order.

10. A new charter to start a state bank must be obtained from the:

Federal Reserve.
Federal Deposit Insurance Corporation.
Office of the Comptroller of the Currency.
Office of Thrift Supervision.
State banking department.

11. A new charter to start a federal savings association is obtained from the:

Office of the Comptroller of the Currency.
National Credit Union Administration.
Office of Thrift Supervision.
State banking department.
Federal Reserve

12. National and state charters are available for all of the following except:

credit unions.
commercial banks.
savings associations.
Federal Reserve banks.
National and state charters are available for all of the above.

13. The primary federal regulator of state banks that are not members of the Fed is the:

FDIC.
Office of the Comptroller of the Currency.
Office of Thrift Supervision.
state banking department.
National Credit Union Administration.

14. The primary federal regulator of state banks that are members of the Fed is the:

Resolution Trust Corporation
Federal Reserve
Office of the Comptroller of the Currency
State Banking Authorities.
Federal Deposit Insurance Corporation.

15. Savings and loans have historically specialized in:

commercial loans.
auto loans.
mutual loan.
real estate loans.
demand deposit accounts.

16. Commercial banks mostly specialize in:

mortgages.
mutual loans.
short-term business credit.
savings accounts.
share draft accounts.

17. Savings institutions must maintain what percent of their assets in housing-related assets to be considered a “Qualified Thrift Lender”?

100%
15%
70%
85%
65%

18. Many insurance companies have organized as a _____________ in order to own a depository institution and bypass prohibitions in the Glass-Steagall Act and the Bank Holding Company Act.

unitary thrift holding company
commercial bank
mortgage company
savings bank
credit union

19. Which of the following institutions’ customers have a “common bond”?

credit union
commercial bank
mortgage company
savings bank
thrift

20. Originally, the FDIC insured deposits up to:

$100,000
$50,000
$25,000
$10,000
$5,000

21. Which of the following is not a component of the Farm Credit System?

Farm Credit Banks
Agricultural Credit Associations
Federal Land Credit Associations
Farm Credit Administration
Agricultural Lending Office

22. Which of the following officially designates a bank as insolvent?

Office of the Comptroller of the Currency
Federal Reserve
Office of Thrift Supervision
Office of National Charters
Resolution Trust Corporation

23. Which of the following is the receiver of a failed depository institution?

Federal Reserve
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision
Federal Savings and Loan Insurance Corporation

24. The Federal Deposit Insurance Reform Act of 2005 created which of the following?

Bank Insurance Fund
Deposit Insurance Fund
Savings Association Insurance Fund
National Credit Union Shares Insurance Fund
Federal Savings and Loan Insurance Fund

25. Bank regulations:

can prevent bank failures.
can eliminate economic risk for banks.
serve as guidelines for sound operating policies.
guarantee bankers will make sound management decisions.
guarantee bankers act in an ethical manner.

26. Which of the following is not a fundamental function of the Federal Reserve?

Conduct the nation’s monetary policy.
Provide an effective payments system.
Regulate banking operations.
Ensure bank profitability.
All of the above are fundamental functions of the Federal Reserve.

27. The Federal Reserve has Reserve Banks and branches in ___ districts across the country.

28. Which of the following is not one of the Fed’s monetary policy tools?

Open market operations
Changes in the fed funds rate
Changes in the discount rate
Changes in the required reserve ratio
All of the above are monetary policy tools of the Fed

29. Which of the following is the most flexible of the Fed’s tools for implementing monetary policy?

Changes in the fed funds rate
Changes in the required reserve ratio
Changes in the discount rate
Open market operations
Private placements

30. Currently, the Fed sets the discount rate __________ the target fed funds rate.

1% – 1.5% below
2% – 2.5% below
3% – 3.5% above
2% – 2.5% above
1% – 1.5% above

31. Which of the following allows depository institutions to borrow for a fixed term against a variety of collateral that is normally accepted for discount window loans?

Term Auction Facility
Term Securities Lending Facility
Primary Dealer Credit Facility
Troubled Asset Relief Program
Housing and Economic Recovery Facility

32. Which of the following loans Treasury securities to primary dealers in exchange for other securities held by the dealers?

Term Auction Facility
Term Securities Lending Facility
Primary Dealer Credit Facility
Troubled Asset Relief Program
Housing and Economic Recovery Facility

33. Which of the following is an overnight collateralized loan facility that provides loans for up to 120 days to primary dealers in exchange for a broad range of collateral?

Term Auction Facility
Term Securities Lending Facility
Primary Dealer Credit Facility
Troubled Asset Relief Program
Housing and Economic Recovery Facility

34. Which type of financial institution has seen the largest drop in their share of U.S. financial assets?

Depository institutions
Mutual funds
Insurance companies
Pension plans
Finance companies

35. Federal Reserve Reg. ____ makes it illegal for any lender to discriminate on the basis of national origin.

36. Federal Reserve Reg. ____ requires disclosure of as to why a costumer was denied credit.

37. Which of the following was a goal of the Depository Institutions Deregulation and Monetary Control Act of 1980?

To reduce the range of banking services offered.
To allow banks to pay market rates on deposits.
To allow banks to make long-term mortgage loans.
To allow banks to offer Money Market Deposit Accounts.
To reduce the number of leveraged buyouts.

38. The _________ authorized money market deposit accounts.

Depository Institutions Act (Garn-St. Germain)
Competitive Equality Banking Act
Financial Institutions Reform, Recovery and Enforcement Act
Federal Deposit Insurance Corporation Improvement Act
Depository Institutions Deregulation and Monetary Control Act

39. The _________ expanded the FDIC’s authority for open bank assistance.

Depository Institutions Act (Garn-St. Germain)
Competitive Equality Banking Act
Financial Institutions Reform, Recovery and Enforcement Act
Federal Deposit Insurance Corporation Improvement Act
Depository Institutions Deregulation and Monetary Control Act

40. The _________ created the Office of Thrift Supervision.

Depository Institutions Act (Garn-St. Germain)
Competitive Equality Banking Act
Financial Institutions Reform, Recovery and Enforcement Act
Federal Deposit Insurance Corporation Improvement Act
Depository Institutions Deregulation and Monetary Control Act

41. The _________ mandated that the FDIC take prompt corrective action in dealing with bank failures.

Depository Institutions Act (Garn-St. Germain)
Competitive Equality Banking Act
Financial Institutions Reform, Recovery and Enforcement Act
Federal Deposit Insurance Corporation Improvement Act
Depository Institutions Deregulation and Monetary Control Act

42. FASB 115 requires historical costs to be used for:

trading account securities.
available-for-sale securities.
retained earnings.
held-to-maturity securities.
net income.

43. The _________ allows adequately capitalized bank holding companies to acquire banks in any state.

Riegle-Neal Interstate Banking and Branching Efficiency Act
Competitive Equality Banking Act
Financial Institutions Reform, Recovery and Enforcement Act
Federal Deposit Insurance Corporation Improvement Act
Depository Institutions Deregulation and Monetary Control Act

44. The _________ requires disclosure of a bank’s privacy policy.

Riegle-Neal Interstate Banking and Branching Efficiency Act
Gramm-Leach-Bliley Act
Financial Institutions Reform, Recovery and Enforcement Act
Federal Deposit Insurance Corporation Improvement Act
Depository Institutions Deregulation and Monetary Control Act

45. The _________ repealed the Glass-Steagall Act.

Riegle-Neal Interstate Banking and Branching Efficiency Act
Gramm-Leach-Bliley Act
Financial Institutions Reform, Recovery and Enforcement Act
Federal Deposit Insurance Corporation Improvement Act
Depository Institutions Deregulation and Monetary Control Act

46. The _________ established to Public Company Oversight Board to regulate public accounting firms that audit publicly-traded companies.

Riegle-Neal Interstate Banking and Branching Efficiency Act
Competitive Equality Banking Act
Financial Institutions Reform, Recovery and Enforcement Act
Sarbanes-Oxley Act
Depository Institutions Deregulation and Monetary Control Act

47. _________ allowed any institution to “truncate” the paper check at any point in the check clearing process.

Riegle-Neal Interstate Banking and Branching Efficiency Act
Fair and Accurate Credit Transactions Act
Troubled Asset Relief Program
Sarbanes-Oxley Act
Check 21 Act

48. The _________ created a fund originally designed to allow the U.S. Treasury to purchase distressed assets from financial institutions.

Capital Purchase Program
Foreclosure Prevention Act
Troubled Asset Relief Program
Primary Dealer Credit Facility
Check 21 Act

49. The _________ authorized the Treasury to purchase debt securities issued by the Fannie Mae, Freddie Mac, and the Federal Home Loan Banks and to purchase common stock.

Treasury Emergency Authority Provisions
Foreclosure Prevention Act
Troubled Asset Relief Program
Primary Dealer Credit Facility
Check 21 Act

50. Which of the following statements is/are correct?

Higher capital requirements often result in a higher cost of capital for banks.
Small banks have greater access to the equity markets than large banks.
Higher capital requirements encourage small banks to consolidate into larger banks.
All of the above are correct.
Only a. and c. are correct.

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