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Chapter 3

The Organization and Structure of Banking and the Financial-Services Industry

Fill in the Blank Questions

1. A(n) ___________________ is a machine located at the merchant's place of business which allows

depositors to use their debit card to pay for purchases directly. Answer: POS

2. A(n) _____________________ is a bank which offers its full range of services from several

locations.

Answer: branch bank

3. A(n) _____________________ is a bank which offers its full range of services from only one

location.

Answer: unit bank

4. A(n)________________________ is a corporation chartered for the express purpose of holding the stock of one or more banks. Answer: Bank Holding Company

5. Managers who value fringe benefits, plush offices and ample travel budgets over the pursuit of

maximum returns for stockholders are exhibiting signs of __________________________. Answer: Expense Preference Behavior

6. A(n) __________________________ can invest in corporate stock as sell as loan money to help

finance the start of new ventures or support the expansion of existing businesses. Answer: Merchant bank

7. A bank which operates exclusively over the internet is known as a ___________ bank. Answer: Virtual

8. One new 21st century bank organizational structures is _____________________ . This is a

special type of holding company that may offer the broadest range of financial services. Answer: Financial Holding Company (FHC)

28 Test Bank, Chapter 3

9. The key problem in a large money center bank is . Managers may be knowledgeable about banking practices but may be less informed about products and services of subsidiary companies. Answer: span of control

10. The Gramm-Leach-Bliley Act moved the U.S. banking industry closer to banking in which banks may provide securities, insurance, and other financial products. Answer: universal

11. A bank that is not associated with a bank holding company is called a(n) bank. Answer: independent

12. is a view of how modern corporations operate which analyzes the relationship between a firm’s owners and its managers. Answer: Agency theory

13. Many experts believe that , the relationships that exist between managers, the board of directors and stockholders, is more complicated in financial institutions. Answer: Because of government regulations.

14. is the idea that there will be a lower cost of production per unit as the firm gets larger. Answer: Economies of scale

15. is the idea that there will be lower cost of producing multiple services using the same organization and resources. Answer: Economies of scope

16. Over the years, managers of banks and other financial institutions have evolved different

organizational forms to address changes in the industry. Indeed, these firms are organized to carry out various roles in the most efficient way. This is referred to as _________________________. Answer: Organizational form follows function

True/False Questions

T F 17. Bank size is not considered a significant factor in determining how banks are organized.

Answer: False

T

F 18. Nearly three quarters of all U.S. banks exceed $100 million in asset size apiece. Answer: False

Rose/Hudgins, Bank Management and Financial Services, 8/e

29

T

F 19. Nearly all U.S. banks with federal or state charters have their deposits insured by the

Federal Deposit Insurance Corporation.

Answer: True

T

F 20. State-chartered banks in the United States represent about a quarter of all U.S.-chartered

banks, while national banks account for approximately three quarters of all U.S. chartered banks.

Answer: False

T T

F 21. The majority of all U.S. banks are members of the Federal Reserve System. Answer: False

F 22. A banking corporation chartered by either federal or state governments that operates only

one full-service office is called a unit bank.

Answer: True

T

F 23. Over half of all U.S. states today limit branching activity. Answer: False

T

F 24. The average U.S. bank is larger in size (in terms of number of branch offices) than the

average Canadian bank.

Answer: False

T

F 25. Despite the rapid growth of automation in U.S. banking, there are more full-service branch

banking offices than automated teller machines across the whole U.S.

Answer: False

T

F 26. In the United States there are more one-bank holding companies than multi-bank holding

companies.

Answer: True

T

F 27. Bank holding companies hold more than 90 percent of the industry’s assets in the United

States.

Answer: True

T

F 28. Research evidence suggests that banks taken over by interstate banking organizations have

generally increased their market shares over their competitors within the same state and generally are more profitable than their competitors.

Answer: False

30 Test Bank, Chapter 3