Chapter_15 - Rose/Hudgins, Bank Management and Financial...

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Unformatted text preview: Rose/Hudgins, Bank Management and Financial Services, 7/e 241 Chapter 15 The Management of Capital Fill in the Blank Questions 1 . T h e r i s k t h a t h a s t o d o w i t h b a n k s t r a d i n g i n f o r e i g n c u r r e n c i e s i s c a l l e d _________________________. Answer: exchange risk 2 . T h e r i s k t h a t h a s t o d o w i t h f r a u d , embezzlement and bank robberies is called __________________. Answer: crime risk 3 . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ i s m e a s u r e d b y t h e p a r v a l u e o f t h e s h a r e s o f c o m m o n e q u i t y outstanding. Answer: Common stock 4 . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ is the amount in excess of par value paid by the bank's shareholders. Answer: Surplus 5 . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ a r e t h e n e t e a r n i n g s o f t h e b a n k w h i c h h a v e b e e n k e p t b y t h e b a n k rather than distributed as dividends to stockholders. Answer: Undivided Profits (or retained earnings) 6 . C o r e c a p i t a l s u c h a s c o m m o n s t o c k , s u r p l u s , u n d i v i d e d p r o f i t s , q u a l i f y i n g n o n c u m u l a t i v e preferred stock, etc. is referred to as __________________ capital as defined by the Basel agreement. Answer: Tier 1 7 . T h e i n t e r n a t i o n a l t r e a t y i n v o l v i n g t h e U . S . a n d 1 1 o t h e r l e a d i n g i n d u s t r i a l i z e d c o u n t r i e s t o i m p o s e common capital requirements on all banks is known as the _________________________. Answer: Basel Agreement 8 . S u p p l e m e n t a l c a p i t a l s u c h as the allowance for loan losses, subordinated debt, mandatory convertible debt, intermediate-term preferred stock, cumulative preferred perpetual stock and equity notes is more commonly known as _________________________. Answer: Tier 2 capital Test Bank, Chapter 15 242 9 . W h e n i t e m s o n a b a n k ' s b a l a n c e s h e e t a r e m u l t i p l i e d by the appropriate risk-weighting factor they are often called _________________________. Answer: risk-weighted assets 10. The fact that a bank may suffer deficiencies in quality control, inefficiencies in producing and delivering of services, weather damage, aging or faulty computer systems, errors in judgment by management and fluctuations in economy that could adversely affect the bank's performance is known as _________________________ risk. Answer: operational 11. One defense against risk for the bank is to spread out a bank's credit accounts and deposits among a wide variety of customers, including large and small accounts different industries, etc. This defense is known as _________________________....
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This note was uploaded on 04/06/2010 for the course FIN 3475 taught by Professor Ghai during the Spring '10 term at Abu Dhabi University.

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Chapter_15 - Rose/Hudgins, Bank Management and Financial...

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