In this pack of ECO 316 Week 3 Chapter 16 Banking in the International Economy you will find the answers to the following questions:
16.1 Multiple Choice Questions
1) Before World War II
2) Before World War II
3) Which of the following is NOT true of the U.S. economy before World War II?
4) By 2006, international bank lending in the United States, Western Europe, and Japan amounted to
5) The principal activities of international banking are
6) Which of the following is NOT one of the three leading financial centers in the world?
7) Which of the following countries has the longest history of international banking?
8) Participation in international banking by U.S. banks has
9) Which of the following is of greatest importance in explaining the rapid growth of international banking activities by Japanese banks during the 1980s?
10) During the 1990s, the share of international bank loans held by Japanese banks
11) An “offshore market” is
12) Which of the following does NOT represent an important offshore market?
13) Branches of U.S. banks in which city control the most assets?
14) Edge Act Corporations are
15) Which of the following may an Edge Act Corporation NOT do?
16) The activities of a U.S. bank holding company that owns a controlling interest in a foreign financial services company are governed by
17) IBFs are
18) Which of the following is NOT a reason that IBFs have been desirable to banks?
19) What percentage of total U.S. bank assets is held by foreign banks?
20) Experts studying the lending patterns of Japanese and other foreign-owned banks in the United States have found that these banks
21) An agency office of a foreign bank
22) Which of the following is true of an agency office of a foreign bank?
23) A foreign branch bank
24) The Riegle-Neal Act of 1994
25) A U.S. subsidiary of a foreign bank
26) The International Banking Act of 1978
27) The Foreign Bank Supervision Enhancement Act of 1991 was passed as a result of
28) The Foreign Bank Supervision Enhancement Act of 1991
29) As of 1997, about what percentage of Citicorp’s assets are held abroad?
30) In which of the following countries has the Bank of China NOT shown significant expansion?
31) Banks are subject to exchange rate risk when
32) The Bank of Credit and Commerce International failed because of
33) A U.S. bank has ?50 million in deposits and makes a loan of ?100 million when the exchange rate is $1 = ?1. 5. If the exchange rate changes to $1 = ?2, then the bank’s net worth will change by
34) A U.S. bank has ?75 million in deposits and makes a loan of ?90 million when the exchange rate is $1 = ?1. 5. If the exchange rate changes to $1 = ?1, then the bank’s net worth will change by
35) How can a bank avoid exchange rate risk?
36) What is the approximate daily volume of foreign-exchange trading?
37) Most of the foreign-exchange trading volume of banks is with
38) Most of the foreign-exchange trading of banks is carried out in order to facilitate
39) A currency swap is
40) How may a U.S. bank keep its balance sheet entirely in U.S. dollars?
41) Why is credit risk in international commerce magnified?
42) A bankers’ acceptance is
43) When were U.S. banks authorized to use bankers’ acceptances for short-term financing of their customers’ foreign and domestic trade?
44) The use of bankers’ acceptances is most useful in reducing
45) Which of the following statements concerning the volume of outstanding bankers’ acceptances in the United States since the 1920s is accurate?
46) Which of the following is true of bankers’ acceptances?
47) Before World War II what was the leading global financial and commercial center?
48) What is the international transaction currency?
49) What was the international transaction currency before World War II?
50) The Eurodollar arose from
51) Eurodollars are
52) Which of the following was NOT an important factor in the rise of the Eurodollar market?
53) Eurocurrency deposits are
54) What is the dominant currency in the Euromarkets?
55) Since the late 1980s, the share of eurocurrency deposits denominated in dollars
56) A key reason the commercial paper market developed later in Europe than in the United States is that
57) Booking sites are
58) Through the early 1970s the largest borrowers on Euromarkets were
59) From the mid-1970s to the late 1980s the largest source of deposits in Euromarkets was
60) Today, the countries with large trade surpluses to deposit in Eurodollar accounts are
61) The LIBOR is the
62) The typical Eurodollar loan
63) What is the primary motivation for loan syndication in the Euroloan market?
64) Why did the volume of ly syndicated loans in Euromarkets decline during the 1970s and 1980s?
66) The effect of evolving financial market regulation has been to
67) International coordination of minimum capital requirements for commercial banks began in
68) A key difficulty that banks encounter in lending to foreign governments is that
69) From 1970 until the early 1980s the creditworthiness of many developing nations was improving because
70) Currently, U.S. banks pay deposit insurance premiums on
71) Central banks have met to discuss their roles as lender of last resort several times at the
72) Discussion of the possibility of setting up an international lender of last resort began following the
73) In which of the following countries was a deposit insurance fund first established?
74) Recent research has found that deposit insurance
75) The most likely direction of bank regulation internationally will be to
76) Which of the following is likely to be true as the international coordination of bank regulation continues?
77) The growth of Islamic banking in recent years has occurred for all of the following reasons EXCEPT
78) A problem facing Islamic banking is
79) The bulk of financing by Islamic banks involves
80) In the Islamic religion, it is forbidden to
16.2 Essay Questions
1) Why was international banking unimportant for U.S. banks, savers, and borrowers before World War II? Is it likely that its importance may ever recede to a low level again?
2) Which countries are the most important centers of international banking? Why is international banking concentrated in these countries?
3) What is a Euroloan? What are its typical characteristics? Why is it very likely to be syndicated?
4) Suppose your bank has made a loan of 50 million euros, but has deposits of only 25 million euros. If the exchange rate was $1 = 0.75 euro at the time the loan was made, but subsequently changes to $1 = 0.90 euro, what is the impact on the net worth of your bank? Suppose the exchange rate changes to $1 = 0.65 euro?