Principle of Banking

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Chapter 1
An Overview of the Changing Financial-Services Sector

Fill in the Blank Questions

1._______________________ is a traditional service provided by banks in which the banks store the valuables of their customers and certify their true value. Answer: Safekeeping of valuables

2.The fact that financial institutions make loans based on confidential information is the _______________________ theory of banking. Answer: delegated monitoring

3._______________________ refers to when a financial institution trades one form of currency for another. An example of this would be when the bank trades dollars for yen for a fee. Answer: currency exchange

4.A(n) _______________________ is a traditional service which permits a depositor to write a draft in payment for goods and services. Answer: demand deposit (checking account)

5._______________________ is a service provided by banks where the bank lends money to individuals for the purchase of durable and other goods. Answer: Consumer lending

6.The _______________________ of a bank is a traditional service where the bank manages the financial affairs and property of individuals (and in some cases businesses). Answer: trust services

7.Companies such as Merrill Lynch and Sears which offered some but not all banking services in the 1980s were called _______________________. Answer: nonbank banks

8.The loosening of government regulation and control of financial institutions is called _______________________. Answer: deregulation

9.___________________________ is an alternative to lending in which the financial institution purchases the equipment and rents it to its customers. Answer: Equipment leasing services

10.The___________________________ is a landmark act which allows financial service providers to offer an expanded menu of financial services for the customer. This law allows banks to truly become conglomerate financial service providers. Answer: Financial Services Modernization Act (Gramm-Leach-Bliley Act)

11.The country with the most banks is _______________________. Answer: United States

12.According to Congress a ____________ is defined as any institution that can qualify for deposit insurance administered by the FDIC. Answer: Bank

13.A bank which spans regions, nations, and continents, offering the widest menu of financial services is known as a __________bank. Answer: money-center bank

14._____________ refers to the movement of businesses across industry lines in order to broaden its base. Answer: Convergence

15.Banks which serve primarily households and small firms are known as ____________ banks. Answer: retail

16.Banks that sell deposits and make loans to businesses and individuals are known as ______banks. Answer: commercial

17.Banks which underwrite issues of new securities for their corporate customers are known as ________ banks. Answer: investment

18.Banks which function under a federal charter through the Comptroller of the Currency in the United States are known as ____________ banks. Answer: National

19.Banks which supply both debt and equity capital to businesses are known as _________ banks. Answer: merchant

20.A bank that offers its services only over the internet is known as a(n) . Answer: virtual bank

21.When a local merchant sells the accounts receivables they hold against their customer to a bank this generally known as . Answer: discounting commercial notes

22.A(n) offers loans to commercial enterprises (such as appliance dealers) or to individuals using funds borrowed in the open market or from other financial institutions. Examples of this type of financial service provider...
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