In the mid-twentieth century, thrifts lived by the so-called “3-6-3 rule” of banking: pay 3% on deposits, lend money at 6%, and hit the golf course by 3 p.m. Would the 3-6-3 rule work in today’s banking industry with the competition and regulations that are now in place?

What is deregulation?  Who benefitted most from deregulation of the financial services industry?

M10

There are various theoretical reasons why economies of scale should occur in the banking industry: 1 Specialization of labour. There is considerable scope for this as cashiers, loan officers, account managers, foreign exchange managers, investment analysts and programmers can all increase their productivity with increased volume of output. 2 Indivisibilities. Banks make use of much computer and telecommunications technology. Larger institutions are able to use better equipment and spread fixed costs more easily. 3 Marketing. Much of this involves fixed costs, in terms of reaching a given size of market; large institutions can again spread these costs more easily. 4 Financial. Banks have to raise finance, mainly from depositors. Larger banks can do this more easily and at lower cost, meaning that they can afford to offer their depositors lower interest rates. There are also reasons why banks should gain from economies of scope; many of their products are related and banks have…

The following are protective mechanisms that have been developed by regulators to promote the safety and soundness of the banking system EXCEPT: Select one: a. encouraging banks to produce timely accounting statements and reports. b. encouraging banks to limit lending to a single customer to no more than 10% of capital. c. the periodic monitoring of banks. d. encouraging banks to rely more on deposits rather than debt or capital as a cushion against failure. e. the provision of deposit insurance.

In what ways does the savings and loan scandal represent collusion between organized crime and legitimate commerce?

Select the incorrect statement/statements about the co−operative banks in US from the given choices, using the code given below : 1. Co –operative banks are small−sized units organized in the co−operative sector, which operate both in urban and non−urban centers. 2. They are regulated by the RBI, Banking Regulation Act, 1949 and Banking Laws (Co−operative Societies) Act, 1965.

How did competitive forces lead to the repeal of the Glass-Steagall Act’s separation of the banking and the securities industries

Banking regulation suffers from the principal-agent problem. Describe how this problem relates to regulators and politicians.

(a) Outline three reasons why banks are regulated. (b) Name two bank regulators and briefly explain their regulatory purpose.