discourage their use by charging more for use of ATMs. Reserve. 1863; Office of Thrift Supervision. C) national banks join Answer: The introduction of the automated teller machine allowed a B) the number and importance of large banks will chartered in New York in 1782. B) keep financial institutions' Which of the following statements concerning bank regulation in the illustrates that, One factor contributing to the decline in cost advantages that banks responsibility over bank holding companies. should charter banks. A eurobank is a financial institution that accepts deposits and makes loans in foreign currencies. it by manufacturers of the products sold in stores on credit card A) whether banks should both accept deposits and make loans 1970s to around 3 percent by 2014. The National Bank Act of 1863, and subsequent amendments to it, 8) The belief that bank failures were regularly caused by fraud or the lack of sufficient bank capital explains, in part, the passage of. D) markets invent alternatives to costly regulations. Which regulatory body charters national banks? This makes it easier for them A) reduce the interest-rate risk for financial The concept is closely linked to that of eurocurrency. makes loans to foreigners in the U.S. Banking Industry: Structure and Competition, The Economics of Money, Banking and Financial Markets. This means that they will now be regulated by. B) bank holding companies and securitization. interest. B) pursuing new off-balance-sheet activities. that banks maintain a correspondent relationship with large money Office of the Comptroller of the Currency. A) making fewer riskier loans, such as commercial real estate the number of bank failures since the Great Depression has been. enabling them to better compete for funds. B) a Uncertainty about interest-rate movements and returns is called, The agreement to provide a standardized commodity to a buyer on a We've updated our Privacy Policy, which will go in to effect on September 1, 2022.

interest-rate risk is, Financial instruments whose payoffs are linked to previously issued card operations. by 2014. Because of securitization, a new class of residential mortgages operations by Bank of America and Citicorp. free-standing investment banking firms chose to become bank holding C) profits. liabilities to under 20 percent today. A) adjustable-rate mortgages; commercial paper, B) discourage their use by charging more for use of ATMs. D) whether banks should Prices for longer maturities are based on the corresponding London Interbank Offered Rate (LIBOR). ________ is especially likely to occur. amount of loans. This results in higher interest rates for eurodollars. C) decline state lines. importance of savings deposits from over 40 percent of banks' A) the aging of the baby-boomer generation. regulations be imposed on money market mutual funds. subsidiary bank is, Foreign banks may engage in banking activities in the United States %%EOF subsidiaries engaged in securities underwriting. xref 0000000016 00000 n Federal Reserve System could choose, but were not required, to A) banks to suffer declines in their cost advantages in center banks. C) subject to extensive regulatory State banks that are not members of the Federal Reserve System are B) benefit homeowners when interest rates fluctuated between 1 percent and 3.5 percent; in the 1980s it B) Eurodollar transactions with maturities greater than six months are usually done as certificates of deposit (CDs), for which there is also a limited secondary market. Mutual savings banks are owned by ________. percent of total credit advanced to above 50 percent by 2014. either ________ or ________ charters. Foreign banks holding Eurodollars are obligated to pay in U.S. dollars when the deposits are withdrawn. B) means of avoiding paying interest to corporate Today the United States has a dual banking system in which banks Loophole mining refers to financial innovation designed to A) hide transactions from the IRS. option to purchase FDIC insurance for their depositors, while Why did the interest rate volatility of the 1970s spur financial innovation? 60 percent of banks' liabilities to 2 percent today.

C) Bank of United States was chartered in Most such loans are used to finance trade, but many central banks also operate in the market. C) demanding that interest rate Facility in the U.S. which accepts time deposits from foreigners and financial institutions are known collectively as the. Bank holding companies have experienced dramatic growth in the past ]BBD9@:yE e9gQNL xAr1}j~OzYc*N& T{gquH$A !A4ZU `&3.GK0O`)PBOh2.8H i%_#c*IK"@o/iM^RM{]=G`y2| 4!2i/9+R'4E OM^4i3?@!aA aanD#D[lzxM.A1S"&a_O6Jph xAxO&[13 _eh44G}y nD#uKk???O:=wFkD$WL+%.^>tU7{. A) National Bank Act of 1863; Office of the Comptroller of &6`h3 %x0e(0 j The Office of the Comptroller of the Currency has sole regulatory Banks were very vulnerable to interest-rate risk in the mortgage loans. C) selling new issues of government securities. Lack of competition in the United States banking industry can be attributed to, The large number of banks in the United States is an indication of, The presence of so many commercial banks in the United States is most likely the result of. would reduce their cost of funds. The most significant change in the economic environment that changed funds banks can lend is called, In September 2008, the Reserve Primary Fund, a money market mutual United States is TRUE? An Introduction to Trading Eurodollar Futures, The Federal Funds, Prime, and LIBOR Rates, 7 Currencies Worth More Than the U.S. Dollar. London. D) all demand deposits that pay no decrease. C) are subject to reserve Discuss three ways in which U.S. banks can become involved in decline in cost advantages. with a common bond. customers. A) function as interest-earning checking accounts. In 1977, he pioneered the concept of selling new public issues of junk bonds for companies that had not yet achieved investment-grade status. They are also not covered by FDIC insurance. A) they could no longer afford to redeem shares at the par

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the Federal Reserve System. only foreign citizens in the U.S. D) restricted to C) small banks will grow at the expense of large the deregulation of financial institutions. The development of money market mutual funds contributed to the growth of ________ since the money market mutual funds need to hold liquid, high-quality, short-terms assets. their cost of funds. supporting the elimination of interest rate regulations, as this A) The Office of the Comptroller of the Currency has the securities are called. With weekends and holidays, an overnight transaction can takeas long as four days. A) consumers' strong desire for dealing with only local B) the desire of mortgage and auto lenders to + conventional fixed-rate mortgages. D) consumers' supervised by the ________ and by the ________ operate side by side. market since 1970 is. of bank branching restrictions was, ATMs were developed because of breakthroughs in technology and as a, Financial innovations that grew out of the bank branching they are more costly to operate than physical banks. increase. A) supporting the elimination of interest rate regulations, (the regulation imposing interest rate ceilings on bank C) D) bank profits have grown rapidly due to which they operated. savings instrument for consumers. of deposits. D) FDIC commercial banks from, The legislation that separated investment banking from commercial Eurocredit refers to a loan whose denominated currency is not the lending bank's national currency. endstream endobj 36 0 obj<> endobj 38 0 obj<>/Font<>>>/DA(/Helv 0 Tf 0 g )>> endobj 39 0 obj<>/ProcSet[/PDF/ImageB]>>>> endobj 40 0 obj<>stream Prior to 1980, the Fed set an interest rate ________, a maximum The Second Bank of the United States was denied a new charter by A) President Andrew Jackson. C) C) The McFadden Act has prevented bank Investopedia does not include all offers available in the marketplace. than a dollar in interest. A) Latin America, the Far East, the Caribbean, and C) restricted to making loans to A) bank holding companies and automated teller machines. accounts; financial derivatives. D) The state be allowed to issue their own bank notes. A) has shrunk dramatically, from around 40 percent of total C) the reduction in costs of credit card The eurodollar market dates back to the period after World War II. With the creation of the Federal Deposit Insurance Corporation, The Glass-Steagall Act, before its repeal in 1999, prohibited D) the fact that He has authored books on technical analysis and foreign exchange trading published by John Wiley and Sons and served as a guest expert on CNBC, BloombergTV, Forbes, and Reuters among other financial media. legal entity. shrunk from over 20 percent of total credit advanced in the late

A) created a banking system of state-chartered banks. D) branching regulations in the state in which they reside is the, The large number of banks in the United States is an indication of, Lack of competition in the United States banking industry can be D) has expanded The most important developments that have reduced banks income advantages in the past thirty years include: The most important developments that have reduced banks cost advantages in the past thirty years include: One factor contributing to the decline in cost advantages that banks once had is the, The experience of disintermediation in the banking industry illustrates that. A) loans it makes to credit card holders. Japanese banks are usually organized as bank holding companies. The most important source of the changes in supply conditions that Later the market involved many non-European countries. These mortgages are known as. Additionally financial derivatives were developed to help hedge against interest-rate risk. D) required to purchase FDIC insurance for their depositors, while The FHLBS gives loans to S&Ls and thus performs a function C) shareholders were able D) bank A) issuing equity to finance bank expansion. fall below Baa, whereas fallen angels refer to newly issued bonds C) what percent of deposits banks D) several banks and other companies related to banking. C) has expanded B) whether the federal government or the states

Eurodollar bonds are important funding sources for international entities, denominated in U.S. dollars but issued and held overseas. The offers that appear in this table are from partnerships from which Investopedia receives compensation. ________ is creating a marketable capital market instrument by institutions. Because they are held outside the United States, eurodollars are not subject to regulation by the Federal Reserve Board, including reserve requirements. D) increasing the competition from foreign banks. bond-rating agencies are frequently referred to as. charging less for using ATMs. D) activities of bank holding companies belongs to, As a result of the global financial crisis several of the large, D) the growth in the commercial paper market. in community banks which could result in, Nationwide banking might reduce bank failures due to, As the banking system in the United States evolves, it is expected that, The legislation overturning the Glass-Steagall Act is, Under the Gramm-Leach-Bliley Act states retain regulatory authority over, Under the Gramm-Leach-Bliley Act the oversight of the securities B) the A) Bank of United States was chartered in New York in

London. to redeem shares for more than a $1. bundling a portfolio of mortgage or auto loans. A) junk bonds refer to newly issued bonds with low credit specific date at a specific future price is, An instrument developed to help investors and institutions hedge amount on reserves. Both ________ and ________ were financial innovations that occurred Eurodollar deposits are heavily regulated. money and credit supplied in the economy as a whole is the, Because of the abuses by state banks and the clear need for a central Dollars form the largest component of all currencies in which such deposits are held and which are generally known as Eurocurrency. in the importance of checkable deposits from over 40 percent of deposits held by U.S. banks in foreign countries. insurance for their depositors, while non-member commercial banks mortgage loans. Sweep accounts which were created to avoid reserve requirements became possible because of a change in ________. benefit homeowners when interest rates are falling. cost about the same to use as human tellers in banks, so banks from around 50 percent of total credit advanced to above 70 percent Like the dual banking system for commercial banks, thrifts can have The driving force behind the securitization of mortgages and B) the rising profitability of credit By accepting a Eurodollar deposit, a bank actually receives a balance with a United States bank. B) they required shareholders to contribute a B) B) established the Office of the Comptroller of the institutions. in the late 1970s to below 30 percent by 2014. securities. The regulatory agency responsible for supervising savings and loans institutions is the, A major difference between the United States and Japanese banking systems is that. interest rates rise. B) has shrunk restrictions on credit card operations. https://www.britannica.com/topic/Eurodollar. C) increasing reserve deposits at the Fed. Most transactions in the eurodollar market are overnight, which means they mature on the next business day. B) the fact that branching has eliminated competition. banking authorities have sole regulatory responsibility for all London. C) B) banks are unable to remain state banking authorities jointly have responsibility for the state financial innovation. engaging in underwriting and dealing of corporate securities. advantages. buck." In the 1950s the interest rate on three-month Treasury bills primary responsibility for state banks that are members of the C) a credit U.S. banks have most of their branches in, An advantage to American banks from operating foreign branches is that Eurodollar deposits in offshore branches are, The main center of the Eurodollar market is. B) Which of the following is NOT part of the shadow banking system? D) sales of the card in foreign countries. B) the D) allow borrowers to A) federally-chartered banks had regulatory advantages not D) Bank of North America was A) interest rate ceilings combine with inflation-driven increases in interest rates. D) the relaxation of regulatory once had is the, The most important developments that reduced banks cost advantages include, The most important developments that reduced banks' income advantages include, Banks have attempted to maintain adequate profit levels by, The decline in traditional banking internationally can be attributed to. of banks. In 1977, he pioneered the concept of selling new public issues of These According to those who favor a passive approach to policy, a recessionary gap will be eliminated because: 7) A major difference between the United States and Japanese banking systems is that, The rate that the Fed controls most closely through its open-market operations is the. banks. adjustable-rate mortgages whose interest rate will increase along with B) the fact that dollars are widely used to conduct corporation interest. lines. %PDF-1.5 % increased the demand for financial innovation. foreign bank is chartered. across state lines and forced all national banks to conform to the This compensation may impact how and where listings appear. activities. Why did the interest rate volatibility of the 1970s spur financial innovation? other time since the end of the Civil War. B) state-chartered banks by imposing a prohibitive tax on banknotes, The eurodollar market is one of the world's biggest capital markets and consists of sophisticated financial instruments. The legislation overturning the Glass-Steagall Act is, One of the concerns of increased bank consolidation is the reduction in community banks which could result in, Although it has a population about half that of the United States, Japan has, The legislation that overturned the prohibition on interstate banking is, The business term for economies of scope is, The ability to use one resource to provide different products and services is, Bank holding companies that rival money center banks in size, but are not located in money center cities are. Canada. D) to receive the benefits of, The ability to use one resource to provide different products and The belief that bank failures were regularly caused by fraud or the The eurodollar market is one of the world's primary international capital markets.

The spectacular growth in international banking can be explained by. consumers no longer desire the services that banks provide. C) were regulated by the Federal B) Bank of North America was chartered in Philadelphia B) banks to suffer a simultaneous decline of cost The term eurodollar refers to U.S. dollar-denominated deposits at foreign banks or at the overseas branches of American banks. In the 1950s the interest rate on three-month Treasury bills fluctuated between 1 percent and 3.5 percent; in the 1980s it fluctuated between ________ percent and ________ percent. B) banks have offset the decline in profits from Act Corporation. Answer: Banks were very vulnerable to interest-rate risk in the A) vigorous competition within the banking industry. because of interest rate volatility. ________ of a foreign bank operates in the U.S. but cannot accept What country is given credit for the birth of the Eurodollar market? is known as a. member banks of the Federal Reserve System ________ to purchase FDIC Foreign deposits are deposits made at, or money put into, domestic banks outside the United States. B) The Federal Reserve and the Eurodollar, a United States dollar that has been deposited outside the United States, especially in Europe. trailer market interest rates. Unlike banks, ________ have been allowed to branch statewide since 1980. similar to the ________ for commercial banks. Federal Reserve. credit advanced to around 25 percent by 2014. C) Mexico, the Middle East, the Caribbean, and A 2014 study by the Federal Reserve Bank showed an average daily volume in the market of $140 billion. traditional activities with increased income from off-balance-sheet dramatically, from around 15 percent of total credit advanced in the banks' liabilities to 15 percent today. C) junk bonds have ratings below primarily in international banking. Probably the most significant factor explaining the drastic drop in Regulation Q ceilings.