1. The Treasury Department report for modernizing the financial system made several recommendations for safer and more competitive banks. FDICIA of 1991 was born from the recommendations. Give a brief description of FDICIA and discuss the meaning of defacto insure?
2. Calculate the risk-adjusted asset base for a bank with:
a. Cash of $20 million, 0%
b. Gen. Obligation municipal security of $100 million, 20%
c. Singe family home mortgages of $500 million, 50%
d. Commercial loans of $300 million, 100%.
4a. If the bank has no off-balance sheet activity what is the bank=s minimum required level of Tier1 and Tier 2 capital?
4b. If the bank has Tier 1 capital of $25 million and Tier 2 capital of $15 million does the bank comply with its capital requirement.
4c. Also, explain how the addition of off-balance sheet activities might impact the capital requirement of the bank.
3. What is meant by prompt corrective action and how is it implemented in the current
regulatory environment. What role does capital play in prompt corrective action?
How do we categorize capital under this approach and how do we know the wire has been
"tripped". Also want is meant by CAMEL. Please be very specific.
4. What are the three pillars of BASEL 2? Under Basel 2 what external agency monitors the credit risk of large international banks? Give an example of the use of market discipline under Basel 2 and explain the difference between market discipline from the bond and equity markets.
5. Give a brief discussion of the Graham Leach Bliley Act. In your answer discuss the difference between a bank holding company (BHC) and a financial services holding company (FHC). In your answer describe the requirements to be a FHC.
Also, what is the Glass-Steagall Act and how did Graham Leach Bliley Act impact it?
6. Give a brief description of the Dodd Frank Wall Street Reform and Consumer Protection Act.
Please name all the voting regulatory agencies involved and what new role the FDIC plays in
the resolution of systemic institutions. In your answer discuss the concept of the living will and the bridge institution that may be necessary to resolve too big or complex institutions to fail.
7. What is the difference in the core tier 1 capital requirements of Basel 3 to Basel 2? Also under Basel 3 what is the designated capital conservation buffer for capital in 2019? Also give the definition of the liquidity coverage ratio and the net stable funding ratio.
8. What is contingent capital and how can it be beneficial to help solve the debt over hang problem faced by banks during a financial crisis. ?
9 What is meant by corporate separateness and why is it important?
What are the implications for market discipline and capital rationing if corporate separateness is impaired for a bank holding company ? Also, in your answer illustrate corporate separateness by a diagram.
10. What is the "basic definition" of traditional banking and how does the Volcker Rule try to protect banking deposits from systemic risk?