Chapter 03
The Organization and Structure of Banking and the Financial-Services Industry
Fill in the Blank Questions
1.
A(n) ___________________ is a machine located at the merchant's place of business which allows
depositors to use their debit card to pay for purchases directly.
________________________________________
2.
A(n) _____________________ is one which offers its full range of banking services from several
locations.
________________________________________
3.
A(n) _____________________ is one which offers its full range of banking services from only one
location.
________________________________________
4.
A(n) ________________________ is a corporation chartered for the specific purpose of holding the stock
of one or more banks, often along with other businesses.
________________________________________
5.
Managers who value fringe benefits, plush offices, and ample travel budgets over the pursuit of maximum
returns for stockholders are exhibiting signs of _________________________.
________________________________________
6.
A(n) __________________________ can invest in corporate stock as well as loan money to help finance
the start of new ventures or support the expansion of existing businesses.
________________________________________
7.
A bank which operates exclusively over the internet is known as a ___________ bank.
________________________________________
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
8.
A(n) _____________________ is a special type of holding company that may offer the broadest range of
financial services, including dealing in and underwriting securities, and selling and underwriting insurance.
________________________________________
9.
The key problem in a large money center bank is ________________. Managers may be knowledgeable
about banking practices but may be less informed about products and services of subsidiary companies.
________________________________________
10. The Gramm-Leach-Bliley Act moved the U.S. banking industry closer to the concept of ___________
banking in which banks merge with security and insurance firms and various other financial products.
________________________________________
11. A bank that is not owned by a holding company is called a(n) ______________ bank.
________________________________________
12. ___________________ is a larger view of how modern corporations operate, and analyzes the relationship
between a firm's owners and its managers.
________________________________________
13. Many experts believe that lower agency costs and better company performance depend upon the
effectiveness of ____________ the relationship that exists among managers, the board of directors,
stockholders, and other stakeholders.
________________________________________
14. ___________________________ is the idea that as the output grows, cost of production per unit of goods
and services will grow at a lower rate.
________________________________________
15. ______________________ is the idea that cost of producing multiple services, using the same organization
and resources, will grow at a lower rate as the product mix expands.
________________________________________
16. ___________________ is the committee selected by stockholders to set policies and monitor the
performance of a bank.
________________________________________
True / False Questions
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
17. Bank size is not considered a significant factor in determining how banks are organized.
True
False
18. Nearly three quarters of all U.S. banks exceed $100 million in asset size apiece.
True
False
19. Nearly all U.S. banks with federal or state charters have their deposits insured by the Federal Deposit
Insurance Corporation.
True
False
20. State-chartered banks in the United States represent about a quarter of all U.S.-chartered banks, while
national banks account for approximately three quarters of all U.S. chartered banks.
True
False
21. The majority of all U.S. banks are members of the Federal Reserve System.
True
False
22. A banking corporation, chartered by either federal or state governments, that operates only one full-service
office is called a unit bank.
True
False
23. Over half of all U.S. states today limit branching activity.
True
False
24. An average U.S. bank is larger in size (in terms of number of branch offices) than an average Canadian
bank.
True
False
25. Despite the rapid growth of automation in U.S. banking, there are more full-service branch banking offices
than automated teller machines across the whole U.S.
True
False
26. In the United States there are more one-bank holding companies than multi-bank holding companies.
True
False
27. Financial holding companies hold more than 90 percent of the industry's assets in the United States.
True
False
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
28. Research evidence suggests that banks taken over by interstate banking organizations have generally
increased their market share over their competitors within the same state and are generally more profitable
than their competitors.
True
False
29. The concentration of bank deposits at the local level (that is in urban communities and rural counties) has
displayed only moderate changes in recent years.
True
False
30. There is evidence that branch banks charge higher service fees for some banking services than unit banks,
which reflects greater knowledge on the part of larger banks concerning true cost of service.
True
False
31. A unit branch faces the risk of variability in earnings if the surrounding economy weakens and people and
businesses move away to other market areas.
True
False
32. Recent research suggests that branch banks tend to be more profitable than either unit or holding company
banks, while interstate banks tend to be the most profitable of all.
True
False
33. Less than 10 percent of the largest banks in the U.S. control almost 90 percent of the industry assets.
True
False
34. Agency theory suggests that bank management will always pursue the goal of maximizing returns of the
bank's shareholders.
True
False
35. Recent research suggests that the relationship between bank size and the cost of production per unit of
output is roughly U shaped.
True
False
36. Bank holding companies that want to achieve some reduction in earnings risk through interstate banking,
can achieve the same level of risk reduction by entering any of the fifty states.
True
False
37. Bank holding companies are allowed to own nonbank businesses as long as those businesses offer services
closely related to banking.
True
False
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
38. Banks tend to have a higher proportion of outside directors than a typical manufacturing firm.
True
False
39. Banks which operate entirely on the web are known as invisible banks.
True
False
40. Banks acquired by holding companies are referred to as affiliated banks.
True
False
41. Bank organizational structure has become more complex in recent years.
True
False
42. There are only a very small number of unit banks in the U.S. today.
True
False
43. Traditional brick-and-mortar bank branch offices are on the decline in the U.S. today.
True
False
44. Community banks are usually smaller banks that are devoted principally to the markets for smaller, local
deposits and loans.
True
False
45. X-efficiency is a concept which measures the divergence between the actual operating costs and the lowest
possible operating costs of a financial services firm if it is operating under maximum efficiency.
True
False
Multiple Choice Questions
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
46. In banking, organizational form follows _________, because banks usually are organized in such a way as
to carry out the tasks and supply the services demanded of them.
A. bank size
B. management's decision
C. function
D. regulation
E. location
47. Which of the following is charged with setting policies and overseeing the performance of a bank?
A. Stockholders
B. Board of directors
C. Regulators
D. Depositors
E. None of the options are correct
48. According to the textbook, large banks possess some potential advantages over small and medium-size
banks. Which of the following is not such an advantage?
A. Greater diversification, geographically and by product line
B. Availability of financial capital at lower cost
C. Greater professional expertise to allocate capital to the most promising products and services
D. Better positioned to take advantage of the opportunities afforded by interstate banking
E. All the options are advantages typically possessed by large banks
49. Before offering any financial service to the public, a bank in the United States must have a:
A. certificate of deposit insurance.
B. charter of incorporation.
C. list of established customers.
D. new building constructed to be the bank's permanent home.
E. None of the options are correct.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
50. A typical branch banking organization:
A. has complete centralization of authority.
B. has complete decentralization of authority.
C. has partial decentralization of authority.
D. is completely operated by regulators.
E. is completely operated by shareholders.
51. Which of the following is one of the few states that has opted out of interstate banking?
A. New York
B. Ohio
C. Texas
D. Montana
E. None of the options are correct
52. The concentration of U.S. bank deposits in the hands of the largest banks has _________ recently.
A. declined
B. increased
C. remained essentially unchanged
D. exhibited large fluctuations in both directions
E. None of the options are correct
53. Which of the following is one of the several advantages that bank holding company organizations have
over other types of banking organizations?
A. Greater access to capital markets
B. Tax advantage
C. Product-line diversification
D. Ability to use higher leverage
E. All the options are correct
54. A company which owns stocks of three different banks is categorized as a(n):
A. unit bank.
B. interstate bank.
C. investment bank.
D. multi-bank holding company.
E. None of the options are correct.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
55. Which of the following is considered to be an advantage of branch banking?
A. Increased availability and convenience of services
B. Decreased chance of failure
C. Reduced transaction costs
D. Decreased chance of failure and reduced transaction costs
E. All the options are correct
56. Which of the following is a type of nonbank businesses a bank holding company can own?
A. Retail Computer Store
B. Security Brokerage Firm
C. Retail Grocery Store
D. Wholesale Electronic Distribution Company
E. All the options are correct
57. A bank which offers its full range of services from only one office is known as a:
A. unit bank.
B. branch bank.
C. correspondent bank.
D. bank holding company.
E. None of the options are correct.
58. Which of the following is a reason that many states and the federal government finally enact interstate
banking laws?
A. The need for new capital in order to revive struggling local economies
B. The expansion of service offerings by nonbank financial institutions
C. The belief among regulators that larger firms may be more efficient and stable
D. Advances in technology which allowed banks to service customers in broader geographic areas
E. All the options are reasons for the passage of interstate banking laws
59. What is a bank holding company?
A. It is a bank that offers all of its services out of one office
B. It is a bank that offers all of its services out of several offices
C. It is a corporation formed to hold the stock of one or more banks
D. It is a merchant bank
E. None of the options are correct
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
60. Which of the following is a type of service that a bank holding company is not allowed to own?
A. Merchant banking company
B. Savings and loan association
C. Retail electronics equipment sales company
D. Security brokerage firm
E. Insurance agency
61. Over the last half-a-decade, the number of banks in the U.S. has __________ and the number of branches
has ________.
A. declined; increased
B. grown; increased
C. grown; decreased
D. declined; decreased
E. stabilized; stabilized
62. Websites known as electronic branches offer all of the following except:
A. Internet banking services.
B. ATMs.
C. point of sale terminals.
D. computer and phone services connecting customers.
E. traveler's checks.
63. Relative to manufacturing firms, banks tend to have ___________ number of board members.
A. same
B. larger
C. smaller
D. insignificant
E. None of the options are correct
64. About a quarter of all commercial banks in the U.S. are:
A. investment banks
B. branch banks
C. unit banks
D. virtual banks
E. bank holding companies
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
65. A ‘typical' community bank is committed to:
A. attracting deposits from large companies.
B. attracting deposits from high net-worth individuals.
C. making loans to large corporates.
D. making loans to small households.
E. None of the options are correct.
66. A "typical" money center bank:
A. has a complex organizational chart.
B. is often plagued by span of control.
C. is owned by a bank holding company.
D. is well diversified—both geographically and by product line.
E. All the options are correct.
67. Majority of banks today are:
A. federally chartered.
B. uninsured.
C. state chartered.
D. national banks.
E. All the options are correct.
68. Member banks are:
A. members of the FDIC.
B. national banks.
C. unit banks.
D. members of the Federal Reserve System in the U.S.
E. All the options are correct.
69. ____________ and ___________ banks tend to be larger and hold more of the public's deposits in the
United States.
A. National, member
B. State, nonmember
C. National, uninsured
D. State, insured
E. None of the options are correct
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
70. Which of the following is a reason for the rapid growth in branch banks?
A. Exodus of population from cities to suburban areas
B. Bank convergence
C. Business failures
D. Decreased costs of brick-and-mortar
E. All the options are correct
71. Under the Bank Holding Company Act, control of a bank is assumed to exist only if:
A. The bank holding company acquires 100% of at least one bank's outstanding stock
B. The bank holding company acquires 50% or more of at least one bank's outstanding stock
C. The bank holding company acquires 25% or more of at least one bank's outstanding stock
D. The bank holding company acquires at least three banks
E. None of the options are correct
72. When a bank holding company acquires a nonbank business it must be approved by the:
A. FDIC.
B. Comptroller of the Currency.
C. Federal Reserve.
D. SEC.
E. All the options are correct
73. Many financial experts believe that the customers most likely to be damaged by decreased competition
include:
A. large corporations in large cities.
B. households and business in smaller cities and towns.
C. households that earn more than a million dollars a year.
D. students away at college.
E. None of the options are correct.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
74. According to Levonian and Rose, in order to achieve some reduction in earnings risk, interstate banks
must:
A. expand into different product lines.
B. expand into a number of different regions.
C. increase the number of people in the management.
D. increase the number of employees.
E. buy smaller banks.
75. Consolidation, particularly among saving associations, finance companies, credit unions, security firms,
and insurance companies, is:
A. occurring at a rapid pace.
B. non-existent.
C. occurring at a slow pace.
D. disapproved of by the regulators.
E. None of the options are correct.
76. Of the following countries in Europe, which one has the largest number of banks?
A. Belgium
B. France
C. Germany
D. Great Britain
E. None of the options are correct
77. Which of the following country's banks were owned by the state until the 1990's?
A. Belgium
B. France
C. Germany
D. Italy
E. None of the options are correct
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
78. When different financial service providers offer a similar range of services including banking, insurance
and securities services, it is known as:
A. consolidation.
B. convergence.
C. economies of scale.
D. e-efficiencies.
E. None of the options are correct.
79. Gradual evolution of markets and institutions such that geographic boundaries do not restrict financial
transactions is known as:
A. deregulation.
B. integration.
C. re-regulation.
D. globalization.
E. moral suasion.
80. Banks with _______ in assets are generally called community banks.
A. more than $1 billion
B. less than $1 billion
C. more than $5 million
D. less than $1 trillion
E. more than $1 trillion
81. Nonbank financial firms that supply insurance coverage to customers borrowing money to guarantee
repayment of a loan are referred to as:
A. merchant bankers.
B. factoring companies.
C. savings associations.
D. investment bankers.
E. credit insurance underwriters.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
82. A financial holding company (FHC), defined as a special type of holding company that may offer the
broadest range of financial services such as securities and insurance activities, was allowed under which
act?
A. Riegle-Neal Interstate Banking and Branching Efficiency Act
B. The Competitive Equality in Banking Act
C. The Basel Agreement
D. The FDIC Improvement Act
E. The Gramm-Leach-Bliley (Financial Services Modernization) Act
83. A bank devoted principally to the markets for smaller, locally based deposits and loans is often referred to
as a(n):
A. wholesale bank.
B. retail bank.
C. commercial bank.
D. investment bank.
E. social bank.
84. Senior management of a community bank reports periodically to the:
A. management.
B. managing director.
C. CEO.
D. board of directors.
E. stockholders.
85. A money center bank is typically owned by:
A. private equity companies.
B. bank holding companies.
C. foreign banks.
D. hedge funds.
E. mutual funds.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
86. In recent years, organizational hierarchy in banks is increasingly becoming more:
A. simpler.
B. complex.
C. vertical.
D. horizontal.
E. flat.
87. One reason for the fairly large number of unit banks in the United States is:
A. de-merger of branch banks.
B. low profitability in larger banks.
C. continuous formation of new banks.
D. regulations prohibiting formation of branch banks.
E. All the options are correct.
88. Outside the United States, the holding company form:
A. is usually legal and very popular.
B. is usually legal but not often used.
C. is not legal.
D. is not legal yet popular.
E. is legal but never used.
89. A bank holding company that wishes to acquire _________ or more of equity shares of an additional bank
must seek approval from the Federal Reserve Board.
A. 5 percent
B. 10 percent
C. 15 percent
D. 25 percent
E. 51 percent
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
90. ________________ manage and care for the property of businesses, individuals, and non-profit
organizations.
A. Insurance companies
B. Holding companies
C. Real estate companies
D. Trust companies
E. Factoring companies
91. ____________ offer savings deposit plans and housing related credit, predominantly to individuals and
families.
A. Insurance companies
B. Real estate companies
C. Trust companies
D. Factoring companies
E. Savings associations
92. In theory, if an interstate organization can acquire banks in states where bank earnings have a
______________ with bank earnings in those states where the interstate company is already represented, a
"portfolio effect" may occur.
A. perfectly positive correlation
B. negative correlation
C. zero correlation
D. zero covariance
E. positive covariance
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Chapter 03 The Organization and Structure of Banking and the FinancialServices Industry Answer Key
Fill in the Blank Questions
1.
A(n) ___________________ is a machine located at the merchant's place of business which allows
depositors to use their debit card to pay for purchases directly.
POS
2.
A(n) _____________________ is one which offers its full range of banking services from several
locations.
branch bank
3.
A(n) _____________________ is one which offers its full range of banking services from only one
location.
unit bank
4.
A(n) ________________________ is a corporation chartered for the specific purpose of holding the
stock of one or more banks, often along with other businesses.
bank holding company
5.
Managers who value fringe benefits, plush offices, and ample travel budgets over the pursuit of
maximum returns for stockholders are exhibiting signs of _________________________.
expense preference behavior
6.
A(n) __________________________ can invest in corporate stock as well as loan money to help
finance the start of new ventures or support the expansion of existing businesses.
merchant bank
7.
A bank which operates exclusively over the internet is known as a ___________ bank.
virtual
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
8.
A(n) _____________________ is a special type of holding company that may offer the broadest range
of financial services, including dealing in and underwriting securities, and selling and underwriting
insurance.
Financial Holding Company (FHC)
9.
The key problem in a large money center bank is ________________. Managers may be knowledgeable
about banking practices but may be less informed about products and services of subsidiary companies.
span of control
10.
The Gramm-Leach-Bliley Act moved the U.S. banking industry closer to the concept of ___________
banking in which banks merge with security and insurance firms and various other financial products.
universal
11.
A bank that is not owned by a holding company is called a(n) ______________ bank.
independent
12.
___________________ is a larger view of how modern corporations operate, and analyzes the
relationship between a firm's owners and its managers.
Agency theory
13.
Many experts believe that lower agency costs and better company performance depend upon the
effectiveness of ____________ the relationship that exists among managers, the board of directors,
stockholders, and other stakeholders.
corporate governance
14.
___________________________ is the idea that as the output grows, cost of production per unit of
goods and services will grow at a lower rate.
Economies of scale
15.
______________________ is the idea that cost of producing multiple services, using the same
organization and resources, will grow at a lower rate as the product mix expands.
Economies of scope
16.
___________________ is the committee selected by stockholders to set policies and monitor the
performance of a bank.
Board of directors
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
True / False Questions
17.
Bank size is not considered a significant factor in determining how banks are organized.
FALSE
18.
Nearly three quarters of all U.S. banks exceed $100 million in asset size apiece.
FALSE
19.
Nearly all U.S. banks with federal or state charters have their deposits insured by the Federal Deposit
Insurance Corporation.
TRUE
20.
State-chartered banks in the United States represent about a quarter of all U.S.-chartered banks, while
national banks account for approximately three quarters of all U.S. chartered banks.
FALSE
21.
The majority of all U.S. banks are members of the Federal Reserve System.
FALSE
22.
A banking corporation, chartered by either federal or state governments, that operates only one fullservice office is called a unit bank.
TRUE
23.
Over half of all U.S. states today limit branching activity.
FALSE
24.
An average U.S. bank is larger in size (in terms of number of branch offices) than an average Canadian
bank.
FALSE
25.
Despite the rapid growth of automation in U.S. banking, there are more full-service branch banking
offices than automated teller machines across the whole U.S.
FALSE
26.
In the United States there are more one-bank holding companies than multi-bank holding companies.
TRUE
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
27.
Financial holding companies hold more than 90 percent of the industry's assets in the United States.
TRUE
28.
Research evidence suggests that banks taken over by interstate banking organizations have generally
increased their market share over their competitors within the same state and are generally more
profitable than their competitors.
FALSE
29.
The concentration of bank deposits at the local level (that is in urban communities and rural counties)
has displayed only moderate changes in recent years.
TRUE
30.
There is evidence that branch banks charge higher service fees for some banking services than unit
banks, which reflects greater knowledge on the part of larger banks concerning true cost of service.
TRUE
31.
A unit branch faces the risk of variability in earnings if the surrounding economy weakens and people
and businesses move away to other market areas.
TRUE
32.
Recent research suggests that branch banks tend to be more profitable than either unit or holding
company banks, while interstate banks tend to be the most profitable of all.
FALSE
33.
Less than 10 percent of the largest banks in the U.S. control almost 90 percent of the industry assets.
TRUE
34.
Agency theory suggests that bank management will always pursue the goal of maximizing returns of the
bank's shareholders.
FALSE
35.
Recent research suggests that the relationship between bank size and the cost of production per unit of
output is roughly U shaped.
TRUE
36.
Bank holding companies that want to achieve some reduction in earnings risk through interstate
banking, can achieve the same level of risk reduction by entering any of the fifty states.
FALSE
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
37.
Bank holding companies are allowed to own nonbank businesses as long as those businesses offer
services closely related to banking.
TRUE
38.
Banks tend to have a higher proportion of outside directors than a typical manufacturing firm.
TRUE
39.
Banks which operate entirely on the web are known as invisible banks.
FALSE
40.
Banks acquired by holding companies are referred to as affiliated banks.
TRUE
41.
Bank organizational structure has become more complex in recent years.
TRUE
42.
There are only a very small number of unit banks in the U.S. today.
FALSE
43.
Traditional brick-and-mortar bank branch offices are on the decline in the U.S. today.
FALSE
44.
Community banks are usually smaller banks that are devoted principally to the markets for smaller,
local deposits and loans.
TRUE
45.
X-efficiency is a concept which measures the divergence between the actual operating costs and the
lowest possible operating costs of a financial services firm if it is operating under maximum efficiency.
TRUE
Multiple Choice Questions
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
46.
In banking, organizational form follows _________, because banks usually are organized in such a way
as to carry out the tasks and supply the services demanded of them.
A.
B.
C.
D.
E.
47.
Which of the following is charged with setting policies and overseeing the performance of a bank?
A.
B.
C.
D.
E.
48.
Stockholders
Board of directors
Regulators
Depositors
None of the options are correct
According to the textbook, large banks possess some potential advantages over small and medium-size
banks. Which of the following is not such an advantage?
A.
B.
C.
D.
E.
49.
bank size
management's decision
function
regulation
location
Greater diversification, geographically and by product line
Availability of financial capital at lower cost
Greater professional expertise to allocate capital to the most promising products and services
Better positioned to take advantage of the opportunities afforded by interstate banking
All the options are advantages typically possessed by large banks
Before offering any financial service to the public, a bank in the United States must have a:
A.
B.
C.
D.
E.
certificate of deposit insurance.
charter of incorporation.
list of established customers.
new building constructed to be the bank's permanent home.
None of the options are correct.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
50.
A typical branch banking organization:
A.
B.
C.
D.
E.
51.
Which of the following is one of the few states that has opted out of interstate banking?
A.
B.
C.
D.
E.
52.
declined
increased
remained essentially unchanged
exhibited large fluctuations in both directions
None of the options are correct
Which of the following is one of the several advantages that bank holding company organizations have
over other types of banking organizations?
A.
B.
C.
D.
E.
54.
New York
Ohio
Texas
Montana
None of the options are correct
The concentration of U.S. bank deposits in the hands of the largest banks has _________ recently.
A.
B.
C.
D.
E.
53.
has complete centralization of authority.
has complete decentralization of authority.
has partial decentralization of authority.
is completely operated by regulators.
is completely operated by shareholders.
Greater access to capital markets
Tax advantage
Product-line diversification
Ability to use higher leverage
All the options are correct
A company which owns stocks of three different banks is categorized as a(n):
A.
B.
C.
D.
E.
unit bank.
interstate bank.
investment bank.
multi-bank holding company.
None of the options are correct.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
55.
Which of the following is considered to be an advantage of branch banking?
A.
B.
C.
D.
E.
56.
Which of the following is a type of nonbank businesses a bank holding company can own?
A.
B.
C.
D.
E.
57.
unit bank.
branch bank.
correspondent bank.
bank holding company.
None of the options are correct.
Which of the following is a reason that many states and the federal government finally enact interstate
banking laws?
A.
B.
C.
D.
E.
59.
Retail Computer Store
Security Brokerage Firm
Retail Grocery Store
Wholesale Electronic Distribution Company
All the options are correct
A bank which offers its full range of services from only one office is known as a:
A.
B.
C.
D.
E.
58.
Increased availability and convenience of services
Decreased chance of failure
Reduced transaction costs
Decreased chance of failure and reduced transaction costs
All the options are correct
The need for new capital in order to revive struggling local economies
The expansion of service offerings by nonbank financial institutions
The belief among regulators that larger firms may be more efficient and stable
Advances in technology which allowed banks to service customers in broader geographic areas
All the options are reasons for the passage of interstate banking laws
What is a bank holding company?
A.
B.
C.
D.
E.
It is a bank that offers all of its services out of one office
It is a bank that offers all of its services out of several offices
It is a corporation formed to hold the stock of one or more banks
It is a merchant bank
None of the options are correct
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
60.
Which of the following is a type of service that a bank holding company is not allowed to own?
A.
B.
C.
D.
E.
61.
Over the last half-a-decade, the number of banks in the U.S. has __________ and the number of
branches has ________.
A.
B.
C.
D.
E.
62.
Internet banking services.
ATMs.
point of sale terminals.
computer and phone services connecting customers.
traveler's checks.
Relative to manufacturing firms, banks tend to have ___________ number of board members.
A.
B.
C.
D.
E.
64.
declined; increased
grown; increased
grown; decreased
declined; decreased
stabilized; stabilized
Websites known as electronic branches offer all of the following except:
A.
B.
C.
D.
E.
63.
Merchant banking company
Savings and loan association
Retail electronics equipment sales company
Security brokerage firm
Insurance agency
same
larger
smaller
insignificant
None of the options are correct
About a quarter of all commercial banks in the U.S. are:
A.
B.
C.
D.
E.
investment banks
branch banks
unit banks
virtual banks
bank holding companies
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
65.
A ‘typical' community bank is committed to:
A.
B.
C.
D.
E.
66.
A "typical" money center bank:
A.
B.
C.
D.
E.
67.
federally chartered.
uninsured.
state chartered.
national banks.
All the options are correct.
Member banks are:
A.
B.
C.
D.
E.
69.
has a complex organizational chart.
is often plagued by span of control.
is owned by a bank holding company.
is well diversified—both geographically and by product line.
All the options are correct.
Majority of banks today are:
A.
B.
C.
D.
E.
68.
attracting deposits from large companies.
attracting deposits from high net-worth individuals.
making loans to large corporates.
making loans to small households.
None of the options are correct.
members of the FDIC.
national banks.
unit banks.
members of the Federal Reserve System in the U.S.
All the options are correct.
____________ and ___________ banks tend to be larger and hold more of the public's deposits in the
United States.
A.
B.
C.
D.
E.
National, member
State, nonmember
National, uninsured
State, insured
None of the options are correct
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
70.
Which of the following is a reason for the rapid growth in branch banks?
A.
B.
C.
D.
E.
71.
Under the Bank Holding Company Act, control of a bank is assumed to exist only if:
A.
B.
C.
D.
E.
72.
The bank holding company acquires 100% of at least one bank's outstanding stock
The bank holding company acquires 50% or more of at least one bank's outstanding stock
The bank holding company acquires 25% or more of at least one bank's outstanding stock
The bank holding company acquires at least three banks
None of the options are correct
When a bank holding company acquires a nonbank business it must be approved by the:
A.
B.
C.
D.
E.
73.
Exodus of population from cities to suburban areas
Bank convergence
Business failures
Decreased costs of brick-and-mortar
All the options are correct
FDIC.
Comptroller of the Currency.
Federal Reserve.
SEC.
All the options are correct
Many financial experts believe that the customers most likely to be damaged by decreased competition
include:
A.
B.
C.
D.
E.
large corporations in large cities.
households and business in smaller cities and towns.
households that earn more than a million dollars a year.
students away at college.
None of the options are correct.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
74.
According to Levonian and Rose, in order to achieve some reduction in earnings risk, interstate banks
must:
A.
B.
C.
D.
E.
75.
Consolidation, particularly among saving associations, finance companies, credit unions, security firms,
and insurance companies, is:
A.
B.
C.
D.
E.
76.
occurring at a rapid pace.
non-existent.
occurring at a slow pace.
disapproved of by the regulators.
None of the options are correct.
Of the following countries in Europe, which one has the largest number of banks?
A.
B.
C.
D.
E.
77.
expand into different product lines.
expand into a number of different regions.
increase the number of people in the management.
increase the number of employees.
buy smaller banks.
Belgium
France
Germany
Great Britain
None of the options are correct
Which of the following country's banks were owned by the state until the 1990's?
A.
B.
C.
D.
E.
Belgium
France
Germany
Italy
None of the options are correct
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
78.
When different financial service providers offer a similar range of services including banking, insurance
and securities services, it is known as:
A.
B.
C.
D.
E.
79.
Gradual evolution of markets and institutions such that geographic boundaries do not restrict financial
transactions is known as:
A.
B.
C.
D.
E.
80.
deregulation.
integration.
re-regulation.
globalization.
moral suasion.
Banks with _______ in assets are generally called community banks.
A.
B.
C.
D.
E.
81.
consolidation.
convergence.
economies of scale.
e-efficiencies.
None of the options are correct.
more than $1 billion
less than $1 billion
more than $5 million
less than $1 trillion
more than $1 trillion
Nonbank financial firms that supply insurance coverage to customers borrowing money to guarantee
repayment of a loan are referred to as:
A.
B.
C.
D.
E.
merchant bankers.
factoring companies.
savings associations.
investment bankers.
credit insurance underwriters.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
82.
A financial holding company (FHC), defined as a special type of holding company that may offer the
broadest range of financial services such as securities and insurance activities, was allowed under which
act?
A.
B.
C.
D.
E.
83.
A bank devoted principally to the markets for smaller, locally based deposits and loans is often referred
to as a(n):
A.
B.
C.
D.
E.
84.
wholesale bank.
retail bank.
commercial bank.
investment bank.
social bank.
Senior management of a community bank reports periodically to the:
A.
B.
C.
D.
E.
85.
Riegle-Neal Interstate Banking and Branching Efficiency Act
The Competitive Equality in Banking Act
The Basel Agreement
The FDIC Improvement Act
The Gramm-Leach-Bliley (Financial Services Modernization) Act
management.
managing director.
CEO.
board of directors.
stockholders.
A money center bank is typically owned by:
A.
B.
C.
D.
E.
private equity companies.
bank holding companies.
foreign banks.
hedge funds.
mutual funds.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
86.
In recent years, organizational hierarchy in banks is increasingly becoming more:
A.
B.
C.
D.
E.
87.
One reason for the fairly large number of unit banks in the United States is:
A.
B.
C.
D.
E.
88.
de-merger of branch banks.
low profitability in larger banks.
continuous formation of new banks.
regulations prohibiting formation of branch banks.
All the options are correct.
Outside the United States, the holding company form:
A.
B.
C.
D.
E.
89.
simpler.
complex.
vertical.
horizontal.
flat.
is usually legal and very popular.
is usually legal but not often used.
is not legal.
is not legal yet popular.
is legal but never used.
A bank holding company that wishes to acquire _________ or more of equity shares of an additional
bank must seek approval from the Federal Reserve Board.
A.
B.
C.
D.
E.
5 percent
10 percent
15 percent
25 percent
51 percent
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
90.
________________ manage and care for the property of businesses, individuals, and non-profit
organizations.
A.
B.
C.
D.
E.
91.
____________ offer savings deposit plans and housing related credit, predominantly to individuals and
families.
A.
B.
C.
D.
E.
92.
Insurance companies
Holding companies
Real estate companies
Trust companies
Factoring companies
Insurance companies
Real estate companies
Trust companies
Factoring companies
Savings associations
In theory, if an interstate organization can acquire banks in states where bank earnings have a
______________ with bank earnings in those states where the interstate company is already
represented, a "portfolio effect" may occur.
A.
B.
C.
D.
E.
perfectly positive correlation
negative correlation
zero correlation
zero covariance
positive covariance
Chapter 3
The Organization and Structure of Banking and the Financial-Services
Industry
Fill in the Blank Questions
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
1.
A(n) ___________________ is a machine located at the merchant's place of business which allows
depositors to use their debit card to pay for purchases directly.
Answer: POS
2.
A(n) _____________________ is a bank which offers its full range of services from several
locations.
Answer: branch bank
3.
A(n) _____________________
location.
is a bank which offers its full range of services from only one
Answer: unit bank
4.
A(n)________________________ is a corporation chartered for the express purpose of holding
the stock of one or more banks.
Answer: Bank Holding Company
5.
Managers who value fringe benefits, plush offices and ample travel budgets over the pursuit of
maximum returns for stockholders are exhibiting signs of __________________________.
Answer: Expense Preference Behavior
6.
A(n)
__________________________
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
can invest in corporate stock as sell as loan money to help
finance the start of new ventures or support the expansion of existing businesses
.
Answer: Merchant bank
7.
A bank which operates exclusively over the internet is known as a ___________ bank.
Answer: Virtual
8.
One new 21
st
century bank organizational structures is _____________________ . This is a
special type of holding company that may offer the broadest range of financial services.
Answer: Financial Holding Company (FHC)
Rose/Hudgins, Bank Management and Financial Services, 8/e
9.
The key problem in a large money center bank is
. Managers may be
knowledgeable about banking practices but may be less informed about products and
services of
subsidiary companies.
Answer: span of control
10.
The Gramm-Leach-Bliley Act moved the U.S. banking industry closer to
banking in
which banks may provide securities, insurance, and other financial products.
Answer: universal
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
11.
A bank that is not associated with a bank holding company is called a(n)
bank.
Answer: independent
12.
is a view of how modern corporations
operate which analyzes the
relationship between a firm’s owners and it
s managers.
Answer: Agency theory
13.
Many experts believe that
, the
relationships that exist between managers,
the board of directors and stockholders, is more complicated in financial institutions.
Answer:
Because of government regulations.
14.
is the idea that there
will be a lower cost of production per
unit as the firm gets larger.
Answer: Economies of scale
15.
is the idea that there will
be lower cost of producing multiple
services using the same organization and resources.
Answer: Economies of scope
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
16.
Over the years, managers of banks and other financial institutions have evolved different
organizational forms to address changes in the industry. Indeed, these firms are organized
to carry
out various roles in the most efficient way. This is referred to as
_________________________.
Answer: Organizational form follows function
True/False Questions
T
F
17.
Bank size is not considered a significant factor in determining how banks are organized.
Answer: False
T
F
18.
Nearly three quarters of all U.S. banks exceed $100 million in asset size apiece.
Answer: False
Test Bank, Chapter 3
30
T
F
19.
Nearly all U.S. banks with federal or state charters have their deposits insured by the
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Federal Deposit Insurance Corporation.
Answer: True
T
F
20.
State-chartered banks in the United States represent about a quarter of all U.S.-chartered
banks, while national banks account for approximately three quarters of all U.S. chartered
banks.
Answer: False
T
F
21.
The majority of all U.S. banks are members of the Federal Reserve System.
Answer: False
T
F
22.
A banking corporation chartered by either federal or state governments that operates only
one full-service office is called a unit bank.
Answer: True
T
F
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
23.
Over half of all U.S. states today limit branching activity.
Answer: False
T
F
24.
The average U.S. bank is larger in size (in terms of number of branch offices) than the
average Canadian bank.
Answer: False
T
F
25.
Despite the rapid growth of automation in U.S. banking, there are more full-service branch
banking offices than automated teller machines across the whole U.S.
Answer: False
T
F
26.
In the United States there are more one-bank holding companies than multi-bank holding
companies.
Answer: True
T
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
F
27.
Bank holding companies hold more than 9
0 percent of the industry’s assets
in the United
States.
Answer: True
T
F
28.
Research evidence suggests that banks taken over by interstate banking organizations have
generally increased their market shares over their competitors within the same state and
generally are more profitable than their competitors.
Answer: False
Rose/Hudgins, Bank Management and Financial Services, 8/e
31
T
F
29.
The concentration of bank deposits at the local level (that is in urban communities and
rural
counties) has displayed only moderate changes in recent years.
Answer: True
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
T
F
30.
There is evidence that branch banks charge higher fees for some banking services than do
unit banks.
Answer: True
T
F
31.
Branch banks tend to offer a wider menu of services than unit banks.
Answer: False
T
F
32.
Recent research suggests that branch banks tend to be more profitable than either unit or
holding company banks, while interstate banks tend to be the most profitable of all.
Answer: False
T
F
33.
Less than 10 percent of the largest banks in the U.S. control almost 90 percent of the
industry assets.
Answer: True
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
T
F
34.
Agency theory suggests that bank management will always pursue the goal of maximizing
the return of the bank's shareholders.
Answer: False
T
F
35.
Recent research suggests that the relationship between bank size and the cost of
production
per unit is roughly U shaped.
Answer: True
T
F
36.
Bank holding companies that want to achieve the goal of risk reduction in earnings risk
through interstate banking can achieve the same level of risk reduction by entering any of
the fifty states.
Answer: False
T
F
37.
Bank holding companies are allowed to own nonbank businesses as long as those
businesses offer services closely related to banking.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Answer: True
T
F
38.
Banks tend to have a higher proportion of outside directors than a typical manufacturing
firm.
Answer: True
39.
Banks which operate entirely on the web are known as
invisible
banks.
Answer: False
T
F
40.
Banks acquired by holding companies are referred to as
affiliated banks
.
Answer: True
T
F
41.
Bank organizational structure has become more complex in recent years.
Answer: True
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
T
F
42.
There are only a very small number of unit banks in the U.S. today.
Answer: False
T
F
43.
Traditional brick-and-mortar bank branch offices are on the decline in the U.S. today.
Answer: False
T
F
44.
Community banks are usually smaller banks that are devoted principally to the markets for
smaller, locally based deposits and loans.
Answer: True
T
F
45.
The question of whether financial firms operate as efficiently as possible requires
researchers to look into the issue of x-efficiency. The concept requires an assessment of
the
financial firm’s operating costs in relation to its cost
-efficient frontier.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Answer: True
Multiple Choice Questions
46.
In banking, organizational form follows __________ because banks usually are organized in
such a
way as to carry out the tasks and supply the services demanded of them. The term that
correctly fills
in the blank in the sentence above is:
A)
Bank size
B)
Management's decision
C)
Function
D)
Regulation
E)
Location
Answer: C
47.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Which one of the following is charged with setting policy and overseeing a bank's
performance?
A)
Stockholders
B)
Board of directors
Rose/Hudgins, Bank Management and Financial Services, 8/e
33
C)
Regulators
D)
Depositors
E)
None of the above.
Answer: B
48.
The largest banks possess some potential advantages over small and medium-size banks,
according
to the textbook. What specific advantage of the largest banks over small and medium-sized
banks is
not mentioned in the text?
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
A)
Greater diversification geographically and by product line
B)
Availability of financial capital at lower cost
C)
Greater professional expertise to allocate capital to the most promising products and
services
D)
Better positioned to take advantage of the opportunities afforded by interstate banking.
E)
All of the above were mentioned in the text as advantages typically possessed by the
largest
banks.
Answer: E
49.
Before any financial services can be offered to anyone a bank in the United States must
have a:
A)
Certificate of deposit insurance
B)
Charter of incorporation
C)
List of established customers
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
D)
New building constructed to be the bank's permanent home
E)
None of the above.
Answer: B
50.
In the United States there are close to __________ commercial banks in operation. Which
number
shown below is closest to the actual total number of U.S. banks operating in the U.S.?
A)
20,500
B)
13,500
C)
11,500
D)
9,000
E)
7,500
Answer: E
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
51.
One of the few states that has opted out of interstate banking is:
A)
New York
B)
Ohio
C)
Texas
D)
Montana
E)
None of the above
Answer: D
52.
The concentration of U.S. bank deposits in the hands of the largest banks has _________
during the
most recent period,
A)
Declined
B)
Increased
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
C)
Remained essentially unchanged
D)
Exhibited large fluctuations in both directions
E)
None of above.
Answer: B
53.
Bank holding company organizations have several advantages over other types of banking
organizations. Among the advantages mentioned in this chapter is:
A)
Greater ease of access to capital markets
B)
Tax advantage
C)
Product-line diversification
D)
All of the above.
E)
None of the above.
Answer: D
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
54.
A company which owns the stock of three different banks is known as a(n):
A)
Unit Bank
B)
Interstate Bank
C)
One Bank Holding Company
D)
Multi Bank Holding Company
E)
None of the above
Answer: D
55.
Which of the following is considered an advantage of branch banking?
A)
Increased availability and convenience of services
B)
Decreased chance of failure
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C)
Reduced transaction costs
D)
B and C above
E)
All of the above
Answer: E
56.
The types of nonbank businesses a bank holding company can own include which of the
following?
A)
Retail Computer Store
B)
Security Brokerage Firm
C)
Retail Grocery Store
D)
Wholesale Electronic Distribution Company
E)
All of the above
Answer: B
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
57.
A bank which offers its full range of services from only one office is known as a:
A)
Unit Bank
B)
Branch Bank
C)
Correspondent Bank
D)
Bank Holding Company
E)
None of the above
Answer: A
Rose/Hudgins, Bank Management and Financial Services, 8/e
35
58.
Why did so many states and the federal government finally enact interstate banking laws?
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
A)
The need for new capital in order to revive struggling economies
B)
The expansion of services by nonbank financial institutions
C)
Competition from neighboring states that already liberalized their laws
D)
Advances in technology which allowed banks to service customers in broader geographic
areas
E)
All of the above are reasons for the passage of interstate banking laws
Answer: E
59.
What is a bank holding company?
A)
It is a bank that offers all of its services out of one office
B)
It is a bank that offers all its services out of several offices
C)
It is a corporation formed to hold the stock of one or more banks
D)
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
It is a merchant bank
E)
None of the above
Answer: C
60.
Which of the following is a type of service a bank holding company is not allowed to
own?
A)
Merchant banking company
B)
Savings and loan association
C)
Retail electronics equipment sales company
D)
Security brokerage firm
E)
Insurance agency
Answer: C
61.
In the last decade, the number of banks has __________ and the number of branches has
_________.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
A)
Declined; Increased
B)
Grown; Increased
C)
Grown; Decreased
D)
Declined; Decreased
E)
Stabilized; Stabilized
Answer: A
62.
Websites known as
electronic branches
offer all of the following except:
A)
Internet banking services
B)
ATMs
C)
Point of sales terminals
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
D)
Computer and phone services connecting customers
E)
Traveler's checks
Answer: E
63.
Relative to manufacturing firms, banks tend to have a (the) ___________ number of board
members.
A)
Same
B)
Larger
C)
Smaller
D)
Unknown
E)
None of the above
Answer: B
64.
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
The percentage of unit banks in the U.S. today is approximately:
A)
10%
B)
30%
C)
50%
D)
75%
E)
100%
Answer: B
65.
The ‘typical’ community bank has:
A) $300 million in assets and is located in a smaller city in the Midwest.
B) $25 billion in assets and is located in a large city in the East
C) $100 million in assets and is located in a large city the South
D) $10 billion in assets and is located in a small city in the West
E) None of the above
Answer: A
66.
The ‘typical’ mone
y center bank has:
A) $250 million in assets and is located in a smaller city in the Midwest
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
B) $25 billion in assets and is located in a large city in the East
C) $100 million in assets and is located in a large city in the South
D) $10 billion in assets and is located in a small city in the West
E) None of the above
Answer: B
67.
The majority of banks today are:
A) Federally chartered
B) Uninsured
C) State Chartered
D) National Banks
E) All of the above
Answer: C
Rose/Hudgins, Bank Management and Financial Services, 8/e
37
68.
‘Member’ banks are:
A) Members of the FDIC
B) National Banks
C) Unit Banks
D) Members of the Federal Reserve
E) All of the above
Answer: D
69.
and
banks tend to be larger and hold more of the public’s
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
deposits.
A) National and Member
B) State and Nonmember
C) National and Uninsured
D) State and Insured
E) None of the above
Answer: A
70.
Which of the following is a reason for the rapid growth in branch banks?
A) Exodus of population from cities to suburban areas
B) Bank convergence
C) Business failures
D) Decreased costs of brick and mortar
E) All of the above
Answer: A
71.
Under the Bank Holding Company Act control of a bank is assumed to exist only if:
A) T
he bank holding company acquires 100% of the bank’s stock
B) T
he bank holding company acquires 50% or more of the bank’s stock
C) T
he bank holding company acquires 25% or more the bank’s stock
D) The bank holding company acquires three banks
E) None of the above
Answer: C
72.
When a bank holding company acquires a nonbank business it must be approved by:
A) The FDIC
B) The Comptroller of the Currency
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
C) The Federal Reserve
D) The President of the U.S.
E) All of the above
Answer: C
Test Bank, Chapter 3
38
73.
Many financial experts believe that the customers most likely to be damaged by decreased
competition include:
A) Large corporations in large cities
B) Households and business in smaller cities and towns
C) Households that earn more than a billion dollars a year
D) Students away at college
E) None of the above
Answer: B
74.
According to Levonian and Rose in order to achieve some reduction in earnings risk,
interstate banks must expand into at least:
A) 2 states
B) 4 states
C) 6 states
D) 10 states
E) 25 states
Answer: B
75.
The major competitors of banks have:
A) Fewer but much larger service providers
B) Fewer but smaller service providers
C) More but smaller service providers
D) More but larger service providers
E) None of the above
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Answer: A
76.
Of the following countries in Europe, which has the largest number of banks?
A) Belgium
B) France
C) Germany
D) Great Britain
E) None of the above
Answer: C
77.
Which country’s banks were owned by the state until the 1990’s?
A) Belgium
B) France
C) Germany
D) Italy
E) None of the above
Answer: D
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.