Reference no: EM131022244
Handout
The following is a guided set of material that you need to work through and research to help cover material on bank legislation and bank regulation.
Through working through this exercise it is hoped that you will develop a fuller understanding of the chronology of bank legislation/regulation as well as some of the implications and innovations that arose out of bank legislation and bank regulation.
Goals:
- Review bank legislation
- Review bank regulation issues
- Develop a chronology of bank legislation
- Think about implications of regulation and legislation
- Think about innovations arising out of regulation and legislation
1. Fill in the following chart:
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Year
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Legislation
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Alternative Name
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National Banking Act
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X
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Federal Reserve Act
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X
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McFadden Act
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X
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Glass-Steagall Act
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Banking Act of 1935
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X
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Bank Holding Company Act and Douglas Amendment
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X
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DIDMCA
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Garn-St. Germain Act
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Competitive Equality in Banking Act
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FIRREA
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FDICIA
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Riegle-Neal Interstate Banking and Branching and Efficiency Act
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X
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Gramm-Leahy-Bliley Financial Services Modernization Act
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X
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2. Define the following terms:
Bank of the U.S.
Second Bank of the U.S.
Dual Banking System
Bank Charters
Federal Reserve System
FDIC
FSLIC
Comptroller of the Currency
CAMELS System
Bank Holding Companies
Nonbank Banking
Forbearance
Too big to fail
Leverage Ratio
Off-balance Sheet Activities
Adverse Selection
Moral Hazard
Money Center Banks
Return on Assets
Return on Equity
Equity Multiplier
Compensating Balances
Credit Rationing
Financial Disintermediation
Deposit Rate Ceilings
NOW Account
Sweep Account
Superregional Banks
Junk Bonds
Securitization
Commercial Paper Market
Money Market Mutual Funds
Disintermediation
Regulation Q
Lender of last resort
Systemic risk
Regulatory forbearance
Call Reports
3. Fill in the following table.
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Institution
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Regulatory Agency with responsibility for regulation of institution
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Regulatory Agency that conducts on-site examinations (post FDICIA)
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National Banks
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State Banks that are members of the Federal Reserve System
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State Banks that are not members of the Federal Reserve System but carry FDIC insurance
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State Banks that are not members of the Federal Reserve System and that do not carry FDIC insurance
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Bank Holding Companies
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4. In this question you are asked to identify the financial innovation(s) that occurred as a result of a regulatory restriction and/or a change in the economic environment. For each of the following situations identify the financial innovation that occurred.
a. Restrictions on interest being earned on deposits
b. Avoidance of reserve requirements
c. Use of liabilities by banks to provide banks with reserves and liquidity
d. Responding to the volatility of interest rates
e. Improvement in computer and telecommunications technology
f. Restrictions with regard to branching
g. Loosening of restrictions with regard to interstate branching
5. Discuss four different financial innovations that have contributed to the decline of traditional banking activities. How have they contributed to this decline?
6. A. What does the term "loophole mining" mean?
B. Identify the three broad sets of regulations that have particularly led to loophole mining on the part of the banking industry.
C. Discuss four examples of loophole mining.
7. Here are eight possible matches for the following phrases:
a. Competitive Equality Bank Act of 1987
b. McFadden Act
c. Glass-Steagall Act of 1933
d. Riegle-Neal Interstate Banking and Branching Efficiency Act
e. Office of the Comptroller of the Currency
f. Junk Bonds
g. Gramm-Leach-Bliley Financial Services Modernization Act of 1999
h. Commercial Paper
Identify out of the above list the best match for the following:
1. Short-term debt security ______
2. Moratorium on new nonbank banks _____
3. Fallen angels _____
4. Expansion of regional compacts to the entire nation _____
5. Prohibition of interstate banking _____
6. Legislative Act that encouraged bank consolidation _____
7. Prohibition for banks underwriting corporate securities _____
8. Regulator for bank subsidiaries that underwrite securities _____
9. Separation of banking and other financial services industries _____
10. Purchase of banks by securities firms and insurance companies allowed _____
11. Prohibition of banks engaging in brokerage services _____
8. What is the payoff method? What is the purchase and assumption method? Compare and contrast these two methods the FDIC uses to handle a failed bank.
9. Explain why the too-big-to-fail policy creates a moral hazard problem.
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What is disintermediation
: Describe how each of the factors contributes to financial innovation: advances in technology, changes in regulation, increased competition, increased price volatility.
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Explain how are hydraulic or pneumatic system made fail safe
: Using an application, explain how are hydraulic or pneumatic systems made fail safe? Provide a circuit diagram for your chosen application.
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How does this affect the amount of induced voltage
: Assume that a conductor being cut by the flux of an expanding magnetic field has 10 V induced with the top end positive. Now analyze the effect of the following changes: The magnetic flux continues to expand, but at a slower rate. How does this affec..
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What was the real interest rate
: When calculating its CPI, Econville uses a market basket that includes 4 apples and 2 bananas. If Ellen, a resident of Econville, had her money in the bank earning an annual interest rate of 1.5%during that time, what was the real interest rate app..
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What is the purchase and assumption method
: What is the payoff method? What is the purchase and assumption method? Compare and contrast these two methods the FDIC uses to handle a failed bank.
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How can the polarity be reversed
: State the rule for determining the magnetic polarity of a solenoid. How can the polarity be reversed? Why are there no magnetic poles when the current through the coil is zero?
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Alfarsi industries uses the net present value method
: Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments.
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Where do the two fields aid
: Draw a diagram showing two conductors conneting a battery to a load resistance through a closed switch. Show the magnetic field of the current in the negative side of the line and in the positive side.
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Find any values outside the range and remove them
: Obviously, this data is useless, now you'll need to fix it. Find any values outside this range, remove them, and plot the data again. Be sure to include appropriate labels.
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