ON TEN A bank is an entity that conducts profit-oriented business. Which of the following is the reason why it is difficult for a bank to play its role as social finance? A ) Small and medium-sized enterprises (SMEs) do not have clear business strategies. B ) Small and medium-sized enterprises (SMEs) lack business knowledge, which increases the risk of default loans C ) Financial portfolio by commercial banks is too complicated for small and medium-sized enterprises (SMEs). D ) Without a proper financial recor

ON TEN A bank is an entity that conducts profit-oriented business. Which of the following is the reason why it is difficult for a bank to play its role as social finance? A ) Small and medium-sized enterprises (SMEs) do not have clear business strategies. B ) Small and medium-sized enterprises (SMEs) lack business knowledge, which increases the risk of default loans C ) Financial portfolio by commercial banks is too complicated for small and medium-sized enterprises (SMEs). D ) Without a proper financial recor

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter13: Other Financing Alternatives

Section: Chapter Questions

Problem 6DQ

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The concept of too big to fail creates a problem for? a. Bank manager b. Regulators c. Bank managers , consumers and regulators d. Consumers
A bank that grants loans to firms in a many different lines of business: will increase its information cost and decrease its credit risk will increase both its information cost and its credit risk will decrease its information cost and decerase its credit risk will decrease its information costs and increase its credit risk
What are the advantages and disadvantages of direct lending for the bank? How are banks reducing the effect of the disadvantages?
Select all that are true regarding credit risk for a bank. O This risk is an estimate of future uncollectibility that results in a provision expense on the bank's income statement. O Changes in the business cycle affect all firms the same, so credit risk is pro-cyclical. O Despite it's significance to banks, the housing market is a small part of the economy and has little effect elsewhere so there is no impact to credit risk. Material changes in the housing market impacts banks and their credit risk significantly due to the relative size of the mortgage portfollos. O Business cycles create variations in this risk, but affect each borrower differently.
Which of the following is a reason for financial regulation? a. To ensure market dominance by strong financial institutions. b. The failure of any financial institution may have a serious negative impact on individuals and economies. c. Banks cannot be trusted. d. To ensure government control of the economy.
Size impacts the types of products and services a commercial bank offers and the type of activities it conducts. Which of the following is true about small banks? hold fewer off-balance sheet assets O have easy access to capital markets participate in derivative markets diversify operations and services
Which of the following is not a reason for banks to be regulated? a.To protect depositors. b.To achieve social goals. c.To prevent disruption to the economy. d.To ensure profitability.
Minimum capital requirement is a popular tool for bank regulation around the world. Some commented argue for differential capital requirements with the size and the systemic importance of financial institutions as the key discriminating factor. What are the basic arguments for increasing capital requirements at large commercial banks? In what ways will depositors, stockholders, and society in general benefit? How might each group be disadvantaged? As commercial banks enter new lines of business such as brokerage, how much additional capital should be required? Should these new lines of business be insured under a depository insurance scheme? Why or why not? Give examples from today's financial marketplace.
19 Which one is NOT the reason to regulate financial system? Select one: Regulation encourages fair competition in the industry Regulation ensure that banks reduce their liabilities risk and protect customers’ deposit Supervision and monitoring the practices of banks ensure good corporate governance Regulation will make public less confident with financial system
Why do commercial banks, like Westpac and ANZ, engage in credit risk transformation? O a. The commercial can quickly convert financial assets into cash at close to the current market price. O b. The commercial bank pools together savers' short-term deposits and make long-term loans. Oc. All of the options are correct. Od. The commercial bank obtains cost advantages owing to their size and business volumes transacted. Oe. The commercial bank can develop expertise in lending and diversifying loans.
Which statement is incorrect? a. Information and transaction costs related to financial market transactions would be higher if there is no participation of financial intermediaries. b. The common trait of savings banks, commercial banks, credit unions and savings and loan associations is that all of them accept deposits from SSUs and provide credit to DSUs through loans and purchases of securities. c. Finance companies act as a factor by purchasing a firm's receivables at a discount and subsequently processing and collecting the balances of these accounts. d. A lending company operating in the Philippines cannot charge more than 12% annual interest on the loans it grants to borrowers. e. none of the above
3. Compare and contrast banking to non-banking institution. How these greatly affect the business industry as well as the consumer/ individuals?