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Money, Banking, and Financial Markets Practice Test: Financial Regulation
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Financial regulation is a type of supervision that places certain requirements, guidelines, and restrictions on financial institutions. The goal of financial regulation is to maintain the financial system's integrity and stability. The objectives of financial regulators are usually to: Maintain market confidence, Contribute to the financial system's stability, Protect consumers, Reduce financial crime, and Regulate foreign participation.  Financial regulation is one of the three legal categories that make up financial law, along with case law and market practices. These regulations are... Show more
Money, Banking, and Financial Markets Practice Test: Financial Regulation
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25 Questions

1. Who has regulatory responsibility when a bank operates branches in many countries?
2. Competition between banks
3. A bank failure is less likely to occur when
4. Regular bank examinations and restrictions on asset holdings help to indirectly reduce the________ problem because, given fewer opportunities to take on risk, risk-prone entrepreneurs will be discouraged from entering the banking industry.
5. The Federal Deposit Insurance Corporation Improvement Act of 1991
6. Regulations designed to provide information to the marketplace so that investors can make informed decisions are called
7. The Basel Committee ruled that regulators in other countries can ________ the operations of a foreign bank if they believe that it lacks effective oversight.
8. The collapse of the Bank of Credit and Commerce International, BCCI, showed the difficulty of international banking regulation. BCCI operated in more than ________ countries and was supervised by the small country of ________.
9. Moral hazard is an important concern of insurance arrangements because the existence of insurance
10. A problem with the too-big-to-fail policy is that it ________ the incentives for ________ by big banks.
11. The Federal Home Loan Bank Board and the FSLIC, both of which failed in their regulatory tasks, were abolished by the
12. Consumer protection legislation includes legislation to
13. Deposit insurance has not worked well in countries with
14. The contagion effect refers to the fact that
15. Depositors have a strong incentive to show up first to withdraw their funds during a bank crisis because banks operate on a
16. Banks are required to file ________ usually quarterly that list information on the bankʹs assets and liabilities, income and dividends, and so forth.
17. ʺBureaucratic gamblingʺ refers to
18. Moral hazard and adverse selection problems increased in prominence in the 1980s
19. Agreements such as the ________ are attempts to standardize international banking regulations.
20. That several hundred S&Ls were not even examined once in the period January 1984 throughJune 1986 can be explained by
21. Overseeing who operates banks and how they are operated is called ________.
22. When regulators chose to allow insolvent S&Ls to continue to operate rather than to close them, they were pursuing a policy of ________.
23. The Depository Institutions Deregulation and Monetary Control Act of 1980
24. Which of the following is not a reason financial regulation and supervision is difficult in real life?
25. Since depositors, like any lender, only receive fixed payments while the bank keeps any surplus profits, they face the ________ problem that banks may take on too ________ risk.

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