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Other Lending Institutions Quiz

Total questions: 42

Worksheet time: 21mins

Name
Class
Date
1.

Prior to 1986, Regulation Q limited the interest rate that depository institutions could pay on deposits and allowed savings institutions to pay a slightly higher rate than banks.

a)

True

b)

False

2.

Of all the depository institutions, as a percentage of assets, credit unions rely the most on deposit sources of funds.

a)

True

b)

False

3.

The policy employed in the 1980s of not closing economically insolvent savings institutions was called regulatory forbearance.

a)

True

b)

False

4.

After deposits, the second largest source of funds at savings institutions is FHLB loans.

a)

True

b)

False

5.

Savings institutions must have at least 65% of their assets in mortgage related areas in order to maintain their favorable tax status and obtain FHLB loans.

a)

True

b)

False

6.

In a mutual organization, the depositors are owners of the institution.

a)

True

b)

False

7.

Traditionally, most credit union members had a common employer, but increasingly the required commonality is a common location of either residence or workplace.

a)

True

b)

False

8.

Savings institution deposits and bank deposits are backed by two different insurance funds.

a)

True

b)

False

9.

Credit unions are not taxed, as a result well-run credit unions are often able to charge lower loan rates and pay slightly higher deposit rates than banks.

a)

True

b)

False

10.

The National Credit Union Administration is the primary regulator of federally chartered credit unions.

a)

True

b)

False

11.

A loan agreement between Ford Motor Credit and a local Ford dealer is an example of

a)

floor planning

b)

business equipment loan

c)

factoring of receivables

d)

depreciation loan

e)

none of the above

12.

Home equity loans are popular with finance companies. Which one of the following statements about home equity loans is not correct?

a)

These loans allow customers to borrow on a line of credit secured with a second mortgage.

b)

Interest payments on home equity loans are not tax deductible.

c)

Bad debt expense on home equity loans are lower than on many other types of finance company loans.

d)

The average outstanding balance on home equity loans was $85,472 in 2007.

e)

If the borrower defaults on the home equity loan, the finance company can seize the house.

13.

For the finance company industry as a whole, the largest single loan type is

a)

business loans

b)

consumer loans

c)

real estate loans

d)

high-risk consumer loans

e)

credit card loans

14.

Aggregate finance company profitability was poor in the late 2000s primarily due to which segment of the finance company industry?

a)

Business factoring

b)

Equipment loans

c)

Equipment leasing

d)

Securitization of auto loans

e)

Subprime lending

15.

Which one of the following utilizes the least amount of deposits as a source of funds?

a)

Banks

b)

Credit unions

c)

Finance companies

d)

Savings associations

e)

Savings banks

16.

Which of the following trends in the number and industry assets of savings institutions is/are correct?

I. The number of savings institutions has fallen over time.

II. The number of savings institutions has increased over time.

III. Total industry assets fell during the recession of the late 2000s.

IV. Total industry assets are falling over time.

V. Total industry assets are stable but the number of savings institutions has fallen.

a)

II and III only

b)

I and III only

c)

I and IV only

d)

II and IV only

e)

V only

17.

The QTL test requires that thrifts

a)

limit the amount of mortgage-related assets on the balance sheet to improve diversification.

b)

invest in a minimum percentage of government-backed securities to protect their mortgage loans.

c)

lend no more than 80% of the value of a home to a borrower to ensure mortgage safety.

d)

keep 35% of their assets in safe liquid investments to ensure adequate deposit liquidity.

e)

invest at least 65% of their assets in mortgages or mortgage-related assets.

18.

Which one of the following has the highest concentration of mortgage-related assets on the balance sheet?

a)

Savings institutions

b)

Commercial banks

c)

Credit unions

d)

Finance companies

e)

Pension funds

19.

After 1989, savings institutions have primarily been regulated by

a)

Federal Home Loan Bank Board

b)

Federal Deposit Insurance Corporation

c)

Office of Thrift Supervision

d)

National Credit Union Administration

20.

In 2010, the largest U.S. savings institution was

a)

ING Bank

b)

Washington Mutual

c)

Navy Federal

d)

Hudson City Bancorp

e)

HSBC Financial

21.

The predominant liabilities for savings institutions are

a)

commercial deposits and FHLB borrowings.

b)

wholesale money market notes and reserves at the Fed.

c)

small time and savings deposits and FHLB borrowings.

d)

checking accounts and money market mutual funds.

22.

Historically, most savings institutions were established as

a)

mutual organizations

b)

stockholder organizations

c)

partnerships

d)

charitable organizations

e)

banks

23.

Deposits at savings banks are backed by the _______________ and deposits at savings institutions are backed by the ______________.

a)

BIF; BIF

b)

BIF; SAIF

c)

SAIF; BIF

d)

SAIF; SAIF

e)

DIF; DIF

24.

Credit unions are:

I. Mutual associations.

II. Not open to the general public.

III. For profit institutions

a)

I only

b)

II only

c)

I and II only

d)

I, II, and III

e)

II and III only

25.

The U.S. central credit union and the corporate credit union

a)

are the primary regulators of the credit union industry.

b)

pool funds and provide investment services to local credit unions.

c)

serve as the trade organization for the industry.

d)

charter credit unions.

e)

provide deposit insurance for credit unions.

26.

Credit unions have several advantages over banks. These include:
I. Credit unions are not taxed.

II. Credit unions are better diversified than banks.

III. Credit unions can collectively pool funds.

IV. Due to regulations, credit unions have better economies of scale and scope than banks.

V. Because of their ties to employers credit unions have better personnel expertise than banks.

a)

I and II only

b)

I and III only

c)

III and IV only

d)

III, IV, and V only

e)

I, III, and V only

27.

As a percentage of total assets, credit unions invest _______________ in securities than banks and ______________ in consumer loans than banks.

a)

more; more

b)

less; less

c)

more; less

d)

less; more

e)

less; about the same

28.

SI profitability declined in the mid-2000s due to:

I. the yield curve becoming more positively sloped.

II. decreases in the NIM ratio.

III. increases in the NIM ratio.

IV. the yield curve becoming flatter and even inverted.

a)

I and II only

b)

II and III only

c)

II and IV only

d)

III and IV only

e)

I and III only

29.

Rank the following from greatest to smallest in terms of industry asset size in 2010:

I. Banks

II. Savings institutions

III. Credit unions

IV. Finance companies

a)

IV, I, II, III

b)

I, IV, II, III

c)

I, II, IV, III

d)

I, II, III, IV

e)

II, IV, III, I

30.

In 2010, _______________ had on average the greatest amount of equity as a percentage of assets and ______________ had the lowest.

a)

savings institutions; credit unions

b)

banks; credit unions

c)

credit unions; finance companies

d)

finance companies; credit unions

e)

finance companies; banks

31.

There are more credit unions than other types of thrifts, but credit unions are generally smaller than other types of thrifts.

a)

True

b)

False

32.

The largest U.S. banks are larger than the entire credit union industry

a)

True

b)

False

33.

Because of the differences in the makeup of their major loan types, finance companies typically have shorter-term loans than banks.

a)

True

b)

False

34.

Sales finance institutions specialize in loan sales to banks and thrifts.

a)

True

b)

False

35.

_____________ are the most diversified of depository institutions and ______________ are on average the largest depository institutions.

a)

Banks; savings institutions

b)

Credit unions; banks

c)

Credit unions; credit unions

d)

Banks; banks

e)

Saving institutions; banks

36.

Factoring is

a)

equipment leasing

b)

servicing mortgage factors

c)

purchasing corporate account receivables at a discount

d)

financing automobile purchases

e)

making installment loans to customers

37.

Sales finance companies

a)

specialize in making loans to customers of a specific retailer or manufacturer.

b)

specialize in making installments and other loans to whatever consumers are interested.

c)

specialize in providing loans to businesses.

d)

specialize in international factoring and forfaiting.

e)

none of the above

38.

A finance company that makes loans to high risk customers is called a

a)

subprime lender

b)

commercial bank

c)

factor

d)

warehouse

e)

credit lender

39.

Finance companies enjoy several advantages over banks. These include all but which one of the following?

a)

Finance companies can offer various types of products and services without regulatory interference.

b)

Many finance companies have considerable knowledge and expertise about specific industries and products

c)

Finance companies can accept riskier customers than banks.

d)

Finance companies generally have lower overhead than banks.

e)

Finance companies have lower funds costs than banks.

40.

A captive finance company is one that

a)

is owned by a retailer or manufacturer.

b)

is owned by a bank holding company.

c)

is owned by its depositors.

d)

lends only to high-risk individuals that cannot obtain loans elsewhere (i.e., captives).

e)

is regulated at the federal level.

41.

Finance companies obtain a significant portion of their short-term financing from

a)

time and savings deposits

b)

transaction accounts

c)

long-term bonds

d)

issuing commercial paper

e)

equity

42.

Which one of the following institutions is the least regulated?

a)

Banks

b)

Credit unions

c)

Finance companies

d)

Saving associations

e)

Saving banks

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