Central bankers work to reduce the volatility of the economic and financial systems by pursuing which (one) of the following specific objectives:
|Low and stable inflation.|
|High and stable real growth, together with high employment.|
|Stable financial markets and institutions.|
|Stable interest and exchange rates.|
|All of the above|
The Glass-Steagall Act of 1933:
|Required commercial banks to sell off their investment banking operations|
|Eliminated the FDIC|
|Required federally chartered banks to meet the branching restrictions of the states|
|Required all state banks to get federal charters|
The federal funds rate is the interest rate:
|The Fed charges banks who borrow from it|
|Banks charge each other for overnight loans on their excess deposits at the Fed|
|The U.S. Treasury charges banks that need emergency funds|
|The FDIC charges banks that need to borrow from it to meet depositor demands|
______________are widely used by the banks to meet customers’ need for large-scale and/or high-risk loans and they enable risk sharing among group of banks and enable large and mid-sized regional banks to participate in international lending activities.
|Note Issuance Facilities (NIF)|
|Credit Default Swaps|
One thing that is common for all bank loans is that they are:
|Part of the banks’ assets|
As of 2014, ______________has the largest banking assets in the world.
|JP Morgan Chase|
|Bank of America|
When corporate issuers sell an entire issue to one or more institutional buyers, such as insurance companies without registering the issue for public sale, this is entitled as _________.
One of the primary goals of the ECB is to make sure that Euro is a highly valuable currency. ECB openly intervenes in markets to manage the value of Euro as we have recently seen in global FX markets.
Considering the balance sheet for all commercial banks in the U.S., the largest category of liabilities is:
|Borrowing from other banks in the U.S.|
|Savings deposits and time deposits|
|Federal fund purchase repurchase agreements|
|Borrowings from non-banks in the U.S.|
__________________ are bank loans that are issued beyond the control of the local regulators.
|Credit Default Swaps|
In a committed facility, lender guarantees the funds intended to be raised by the borrower whereas in an uncommitted facility, lender does its best to raise the intended amount.
FOMC increases the money supply in the economy by
|Buying US dollars|
|Selling US Treasuries to the banking system|
|Buying US Treasuries from the banking system|
The letter of credit is designed to
|allow the buyer to obtain title to the goods before they are received.|
|free the seller from concerns over the payment abilities of the buyer.|
|free the seller from any merchandise guarantees.|
|is issued by the bank at the request of an exporter.|
The difference between traditional corporate finance (CF) and Project Finance (PF) is in the source of payment. In Corporate Finance, the primary source of repayment for investors and creditors is the sponsoring (borrowing) company, backed by its entire balance sheet, whereas in the PF the project alone is the primary source of payment.
Which one of the following is NOT CORRECT about European Central Bank?
|The ECB is composed of 19 Eurozone National Central Banks that participate in the monetary union|
|ECB structure mirrors the structure of the Federal Reserve System in several ways. For instance there is a six-member Executive Board of the ECB, similar to the Board of Governors and The National Central Banks play many of the same roles as the Federal Reserve Banks; and The Governing Council formulates monetary policy as the FOMC does.|
|ECB is located in Frankfurt, Germany.|
|The ECB Chairman is always a German as Europeans trust the tradition of German Central Banking.|
A repurchase agreement is:
|An asset that represents the value of all collateral repossessed by the bank and held for sale|
|A long-term collateralized loan|
|An agreement where the parties agree to reverse the transaction on a specific day|
|Only made between two or more banks|
_______________is similar to commercial paper issued in domestic markets with maturities of 1,3, and 6 months. They are like their CPs allow firms to raise short term funding to finance their working capital needs, but they are issued in unregulated markets.
|Note Issuance Facility|
|Letters of Credit|
|Euro Commercial Paper|
The specific goals of central banks include each of the following, except:
|High and stable real growth|
|Low and stable inflation|
|High levels of exports|
|Low and stable unemployment|
An external control enforced by bank supervisors on credit creation by banks is called required _______.
|Debt Equity Ratio|
The interest rate at which banks lend each other in London is known as:
|The international federal funds rate|
|The London Interbank Offered Rate|
|The discount rate|
|The International Prime Rate|
Which one of the following is NOT among the key retail banking issues?
|Corruption and government interference in their business|
From a banking regulator’s perspective the best capital is _____________.
|Basel III Capital|
|Tier 1 Capital|
|Tier 2 Capital|
|Dodd Frank Capital|
|Your mother’s capital|
Which one of the following is not part of Bank Assets
|Balances at the central bank|
|Money at call and short notice|
|Bank and trade bills of exchange|
Which of the following correctly portrays a bank’s balance sheet?
|Total Bank Liabilities = Total Bank Capital + Total Bank Assets|
|Total Bank Assets = Total Bank Capital – Total Bank Liabilities|
|Total Bank Assets = Total Bank Liabilities – Total Bank Capital|
|Total Bank Assets = Total Bank Liabilities + Total Bank Capital|
Brokerage, Insurance, Security Custody and Foreign Exchange Trading are not typical Retail Bank services, but as banks started to offer a wide range of services under one roof, these services are also offered by large retail commercial banks.
Commercial banking is a highly competitive industry. A large number of banks account for a tiny fraction of the industry assets. US is an exception in the global banking as US is the only country where top 10 banks in the US account for more than half of the bank assets.
Suppose that a bank initially has a leverage ratio of 8 to 1. If this bank increases its capital by $1million and its assets by $10 million, then the bank’s:
|Risk increases and its leverage decreases|
|Liabilities decrease and its leverage increases|
|Leverage decreases and its liabilities increase|
|Leverage and risk increases|
The realization that independent central banks delivered lower inflation and more stable economies forced politicians to let control of central banks and supported the trend towards independent central banking.
Basel II requires banks to calculate capital ratios based on the riskiness of their assets. Banks are required to calculate their risk adjusted assets and commit at least 4% of risk adjusted assets as their Tier-1 capital which is composed of shareholder’s equity, retained earnings and non-cumulative preferred shares.
FedWire, CHIPS, SIT, CHAPS, TIPANET are _______________ .
|State Owned Banks|
A typical investment bank has _______________reverse repo and trading in its asset side of the balance sheet than a typical commercial bank.
|A much Larger|
|A much Smaller|
|About the same|
|Reverse repo and trading has nothing to do with the type of banking|
___________ is defined as the providing of long-term equity and debt finance for corporations and governments, largely through the issuance of new securities.
There are 12 district reserve banks in the US. One of them, NY Fed has some specific responsibilities that other district banks do not. Which one of the following is not an exclusive task handled by New York Fed?
|Treasury Securities Auctions|
|Execution of Monetary Policy Operations|
|Foreign Currency Interventions|
|Regional Economic Analysis and Assessment|
Which of the following is a bank liability?
|U.S. Treasury securities|
Total Equity Capital of the US Banking system is closest to _______.
In ________________ bank itself acts a principal and bets on market developments.
Which one of the following is not among the Central Bank Functions?
|Supervision of the banking system|
|Acting as banker to the other banks|
|Acting as banker to the government|
|Raising money for the municipalities|
Which one of the following is not true about Project Finance?
|Project finance is a funding mechanism tailored to meet the needs of a specific project. Repayment of the financing relies on the cash flow and the assets of the project itself.|
|The risks (and returns) are borne not by the sponsor alone, but by different classes of investors (equity holders, debt providers, quasi-equity investors).|
|Project Finance offers a means for investors, creditors, and other unrelated parties to come together to share the costs, risks, and benefits of new investment in an economically efficient and fair manner.|
|Despite the fact that the financing is structured around the project’s own operating cash flow and assets, often additional sponsor guarantees are required|
|None of the above|
___________ services focus on hedge funds, lending them funds to trade and relieving them of administrative and back-office functions, enabling them to focus on making money.
|Wealth Management Services|
Controlling the nation’s currency reserves, preserving the value of the currency and acting as “lender of last resort” are not among the 21st century central bank functions.
Commercial banks differ from credit unions in the following way:
|Credit unions focus on consumer loans while commercial banks primarily make loans to businesses|
|Credit unions make loans and accept deposits while commercial banks just make loans|
|Commercial banks cannot make auto loans to individuals, just to businesses while credit unions can do both|
|Credit unions do not have to hold reserves while commercial banks do|
The Gramm-Leach-Bliley Act:
|Repealed the Reigle-Neal Interstate Banking and Branching Efficiency Act|
|Repealed the Glass-Steagall Act’s prohibition of mergers between commercial banks and insurance or securities firms|
|Repealed the McFadden Act’s restriction on bank branching|
|Reinforced the Glass-Steagall Act’s limitation on commercial banks’ availability to merge with insurance or securities firms by increasing the penalties for doing so|
|The currency of the European Economic Union|
|Euro-denominated deposits in U.S. Banks|
|Dollar-denominated deposits beyond the control of US monetary authorities in unregulated markets|
|Dollars that are specially printed for use abroad to minimize counterfeiting|
12 member Federal Open Market Committee (FOMC) sets the interest rates to control the availability of money and credit to the economy.
As expected, Europe and Central Asia has much more mobile banking accounts per 100,000 adults than Sub-Saharan Africa.
Firms planning a takeover turn to investment banks for help and advice regarding price, timing, tactics and so on. Equally, the object of the takeover or target firm turns to these bankers for help in fending off the predator. The service provided by the investment banks in this context is referred to as __________________.
Which one of the following statements is NOT CORRECT?
|Commercial banks are in the classic business of taking deposits and lending money, it includes retail banking and wholesale banking.|
|In many European countries (France, Germany, Italy, Austria, the Netherlands and Spain), there are banks that do not have outside shareholders but are ‘mutually’ owned in some way. These are the savings banks and cooperative banks.|
|The term clearing bank is applied to the banks most involved in the system for clearing cheques. They will be the large domestic banks who are heavily into retail banking|
|Merchant bank refers to the banks owned by the state that are not central banks but carry out some public sector activity.|
__________________ facilitate long term equity and debt financing for companies and governments. They provide a range of services from origination, underwriting, placement, and market making to advisory services. The largest companies in the industry perform multiple services advice corporations on mergers and acquisitions as well as advising on the restructuring of existing corporations.
Total Assets of the US Banking system is closest to
Which one of the following is not essential for Central Bank success?
|Independence (isolation from political pressure)|
|A strong personality in chairman’s role (eg. Alan Greenspan or former ECB chairman Jean Claude Trichet)|
|Accountability to the public and transparency in communicating its policy actions|
|Operating within an explicit framework that clearly states its goals and makes clear the trade-offs among them.|