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Chapter 16

Terms in this set (49)

62. A limited service facility that can market services supplied by the home office of an international bank and identify new customers is known as a:
Representative office
63. Separate corporate entities affiliated either with a U.S. bank or with a foreign bank operating in the U.S. that can cross state lines, but must devote the majority of their accounts to international activities are known as:
D) Edge Act Corporations
64. An organizational form used by international banks that was created by U.S. regulations enforced by the Federal Reserve Board and consists of computerized account records is known as:
A) International Banking Facility (IBF)
65. These specialized firms can be operated by U.S. banking companies and Edge Act Corporations and must receive over half their income from their roles in assisting exporting activities from the U.S. are called:
B) Export Trading Company (ETC)
66. Organizational devices used by international banks to take deposits offshore and avoid regulations (such as deposit insurance assessments) are known as:
C) Shell branches
67. International banking activities are regulated for many of the same reasons that shape domestic banking regulation. These common reasons for regulation include:
A) Restricting bank risk exposure.
B) Limiting non-banking business activity.
C) Promoting stable growth in money and credit.
D) Specifying minimum amounts of owners' equity capital.
E) All of the above.
Answer: E
68. International banking regulations that do not apply to most domestic banking activity include:
A) Foreign exchange controls.
B) Restricting the outflow of scarce capital.
C) Protecting domestic financial institutions and markets from foreign competition.
D) All of the above.
E) B and C only.
Answer: D
69. The key components of the International Banking Act (IBA) of 1978 include which of the following:
A) Required foreign banks to follow the same branching laws as U.S. banks.
B) Required legal reserves against deposits accepted at U.S. branch or agency offices of foreign banks with consolidated assets of $1 billion or more.
C) Required U.S. branches of foreign banks to obtain deposit insurance.
D) All of the above.
E) A and B only.
Answer: E
70. The Foreign Bank Supervision Enhancement Act of 1991 places the responsibility for supervising U.S. branches of foreign banks with the:
B) Federal Reserve Board.
71. A call currency option:
B) Gives the holder the right to purchase currency or currency futures contracts at a fixed price any time before the option expires.
72. Business Corporations that are subsidiaries of a bank organized under Section 25 of the Federal Reserve Act and that must devote the bulk of their activities to serving international customers and carrying out international transactions are known as:
D) Agreement Corporations
73. Often used to protect a nation against loss of its foreign currency reserves, which might damage its prospects for repaying international loans and purchasing goods and services abroad, are:
B) Foreign exchange reserves
74. Which U.S. federal law required branches and agency offices of foreign banks to secure federal licenses for their U.S. operations for the first time?
A) The International Banking Act
75. Under current U.S. law the Federal Reserve Board must be notified a minimum of __________ days in advance if a foreign bank wishes to close any of its U.S. offices.
A) 30
76. A foreign currency contract that obligates the holder of the contract to take delivery of a foreign currency some time in the future is called a(n):
C) Long hedge currency futures contract
77. A foreign currency contract that obligates the holder of the contract to make delivery of a foreign currency some time in the future is called a(n):
D) Short hedge currency futures contract
78. A foreign currency contract that gives the holder of the contract the right to purchase a foreign currency is called a(n):
A) Call currency option
79. A foreign currency contract that give the holder of the contract the right to sell a foreign currency is called a(n):
B) Put currency option
80. A foreign currency contract where one party trades currencies with another and trades it back at the end of the contract is called a(n):
C) Currency swap contract
81. Banks have been heavily involved in selling their services across national boundaries since:
A) The industry's very beginnings
82. A full-service facility operated by a bank away from its home office but offering many of the same services as the home office is known as a(n):
A) Branch office
83. Which of the following is one of the customer services supplied by banks in international markets?
C) Helping customers hedge against foreign currency risk
84. Which of the following is a risk evaluation system in international lending today?
C) The Delphi Method
85. The Hagard Mercantile Company has made a $30 million investment in a mill in Germany and fears a substantial decline in the mark's current spot rate from $0.63 to $0.56 lowering the value of the company's investment in the mill. Which of the following currency contracts can help Hagard solve this problem?
B) Put currency option
86. The Goudge Grilling Company has just ordered a shipment of grills from Frankfurt. Payment for the grills must be in euros when the grills are delivered. Euros have changed in value in the last 30 days. They have gone from $1.42 to $1.40. If this trend continues which of the following currency contracts can help the Goudge Grilling Company hedge their currency risk?
C) Long currency futures contract
87. As the text suggests all of the following areas of the world have significant opportunities for foreign banks except:
Japan
88. The primary source for international bank statistics is:
C) The BIS
89. The market for banking in China exhibits all of the following except:
D) A general lack of access from outside the country
90. The biggest problem for international banks at the beginning of the 21st century is:
D) Nonperforming loans
91. The First National Bank of Summerville has opened an office in Turkey. This is a limited service office that can market services of the home office to Turkey and can identify Turkish customers but does not take deposits or book loans. What type of office did the First National Bank of Summerville open in Turkey?
A) A Representative Office
92. The Third State Bank of Laramie has opened an office in Morocco. This office does not take deposits but makes commitments to make loans, issues letters of credit and provides technical assistance to companies in Morocco. What type of office did the Third State Bank of Laramie open in Morocco?
B) An Agency Office
93. The Second National Bank of Guthrie has opened an office in Chile. This office offers a full line of services and is not a separate legal entity from the Second National Bank of Guthrie. What type of office did the Second National Bank of Guthrie open in Chile?
C) A Branch Office
94. The State Bank of Virginia owns 55% of the shares of the Bank of Budapest. What type of arrangement is this?
D) A Subsidiary
95. The State Bank of Nebraska owns a company that has more than half of its income from activities associated with exporting goods and services from the U.S. This company offers export insurance, transportation and warehousing in Europe, trade financing and other services. What type of company does the State Bank of Nebraska own?
E) An Export Trading Company
96. If Denmark requires that all foreign banks operating in Denmark have at least ten percent capital, what reason for regulating international banks is this most likely in support of?
A) Protecting the safety of depositor funds
97. Suppose banks operating in Venezuela have to meet the same legal reserve requirements as domestic banks. This would be in support of which reason for regulating international banks?
B) Promoting stable growth in money and credit
98. Suppose Brazil decides to restrict the export of the real by international banks so that the real does not leave the country and reduce currency reserves for repayment of Brazilian debt. This would be in support of which reason for regulating international banks?
C) Providing foreign currency controls
99. Suppose India restricts entry into India by foreign banks until the end of the decade. This would be in support of which reason for regulating international banks?
D) Protecting domestic financial institutions
100. Suppose South Korea limits the amount of deposits made in South Korea that can be used to make loans in other countries. This would be in support of which reason for regulating international banks?
E) Restricting the outflow of scarce capital
101. Suppose Bank of America holds assets denominated in yen of 150 million and liabilities denominated in yen of 90 million. They also have yen purchases of 70 million and yen sales of 50 million. What is Bank of America's net exposure to currency risk?
C) +80 million yen
102. Suppose Bank of America holds assets denominated in yen of 150 million and liabilities denominated in yen of 90 million. They also have yen purchases of 70 million and yen sales of 50 million. When would Bank of America experience a loss in the currency market?
A) When the yen declines in value relative to U.S. dollars
103. Suppose Citibank holds assets denominated in euros of 120 million and liabilities denominated in euros of 180 million. They also have euro purchases of 40 million and euro sales of 70 million. What is Citibank's net exposure to currency risk?
B) -90 million euros
104. Suppose Citibank holds assets denominated in euros of 120 million and liabilities denominated in euros of 180 million. They also have euro purchases of 40 million and euro sales of 70 million. When would Citibank experience a loss in the currency market?
D) When the euro increases in value relative to the dollar
105. Suppose a U.S. bank borrows money in London while a British company borrows money in New York. At the end of the loan period the U.S. company needs pounds to repay their loan and the British company needs dollars to repay their loan. Which of the following might be a good tool for these companies to reduce their currency risk?
E) Currency swap contract
106. Which of the following is a reason for the growth of the currency swap market in recent years?
E) All of the above are reasons for the growth of the currency swap market in recent years
107. A multinational company issues short-term credit through London's financial district. They are most likely using:
A) Eurrocommercial paper (ECP)
108. Suppose Bank of America provides a 5 year credit guarantee for Dillard's Department Stores. Dillard's Department Stores periodically issues short term notes with due dates 90 days after they are issued in the international market. Bank of American has most likely provided a(n):
C) Note Issuance Facility
109. A broker has purchased stock in Sony Corporation and has asked to Citibank act as a custodian of this stock. Citibank has issued a negotiable instrument representing ownership interest in the stock. These negotiable instruments are denominated in dollars and not in yen. This is an example of a(n):
B) Depository receipt (DR)
110. Which of the following is a way a bank can deal with a troubled international loan?
E) All of the above are ways to deal with a troubled international loan
THIS SET IS OFTEN IN FOLDERS WITH...