Chapt 11

Question 1

Managerial and marketing knowledge developed at home can be used abroad with ____

Answer 1

Marginal Low Cost

Question 2

The foreign bank subsidiary can draw on the parent bank’s knowledge of personal contacts and credit investigations for use in that foreign market.

Answer 2

Knowledge Advantage

Question 3

Major distinguishing features between domestic banks and international banks are

Answer 3

D. ALL of the above

Question 4

Since international banks have the facilities to trade foreign exchange

Answer 4

C. they generally also trade foreign exchange products for their own account.

Question 5

Banks that both perform traditional commercial banking functions and engage in investment banking activities are often called

Answer 5

D. merchant banks.

Question 6

Merchant banks are different from traditional commercial banks in what way(s)?

Answer 6

A. Merchant banks can engage in investment banking activities.

Question 7

By far the most important international finance centers are

Answer 7

B. New York, London, and Tokyo.

Question 8

A domestic bank that becomes a multinational bank to prevent erosion by foreign banks of the traveler’s checks, touring, and foreign business market

Answer 8

Retail defensive strategy

Question 9

A bank that establishes for this reason is when very large multinational banks have high perceived prestige, liquidity, and deposit safety that can be used to attract clients abroad.

Answer 9

Prestige

Question 10

When a bank stablishes for this reason has greater stability of earnings is possible with international diversification. Offsetting
business and monetary policy cycles across nations reduces the country-specific risk of any one nation.

Answer 10

Risk reduction

Question 11

Which are reasons why a bank may establish a multinational operation?

Answer 11

A. Low marginal and transaction costs
B. Home nation information services, and prestige
C. Growth and risk reduction
D. All of the above

Question 12

Correspondent bank services include

Answer 12

prepaid postage and packing materials

foreign exchange conversions

Question 13

is a small service facility staffed by parent bank personnel that is designed to assist MNC
clients of the parent bank in dealings with the bank’s correspondents.

Answer 13

Representative office

Question 14

operates like a local bank, but legally is a part of the parent bank

Answer 14

Foreign bank branch

Question 15

The most popular way for a U.S. bank to expand overseas is

Answer 15

Branch bank

Question 16

Multinational banks are often not subject to the same regulations as domestic banks. There may be reduced need to publish adequate financial information, lack of required deposit insurance and reserve requirements on foreign currency deposits, and the absence of territorial restrictions

Answer 16

Regulatory Advantage

Question 17

The biggest bank in the world

Answer 17

CitiGroup

Question 18

banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational’s foreign subsidiaries.

Answer 18

Wholesale defensive

Question 19

by maintaining foreign branches and foreign currency balances, banks may reduce
transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented.

Answer 19

Transaction Costs

Question 20

growth prospects in a home nation may be limited by a market largely saturated with the services offered by domestic banks.

Answer 20

Growth

Question 21

Local firms in a foreign market may be able to obtain more complete information on trade and financial markets in the multinational bank’s home nation than is obtainable from foreign domestic banks.

Answer 21

Home Country Information Services

Question 22

two banks maintain deposits with one another.

Answer 22

correspondent bank relationship

Question 23

A locally incorporated bank that is wholly owned by a foreign parent.and majority owned by a foreign parent

Answer 23

Subsidiary Bank

Question 24

a locally incorporated bank that is partially owned (but not controlled) by a foreign parent.

Answer 24

Affiliate bank

Question 25

Foreign banks that establish subsidiary and affiliate banks in the U.S.
A. tend to locate in states that are major centers of financial activity.
B. tend to locate in the highly populous states of New York, California, Illinois, Florida,
Georgia, and Texas.
C. can underwrite securities, but not accept dollar-denominated deposits.
D. both a) and b)

Answer 25

D

Question 26

Can accept foreign deposits, extend trade credit, finance foreign projects abroad, trade
foreign currencies, and engage in investment banking activities with U.S. citizens involving foreign securities.
Are federally chartered subsidiaries of U.S. banks that are physically located in the United States and are allowed to engage in a full range of international banking activities.

Answer 26

Edge Act

Question 27

a country whose banking system is organized to permit external accounts beyond the normal economic activity of the county.

Answer 27

Offshore banking

Question 28

operate as branches or subsidiaries of the parent bank.

Answer 28

Offshore bank

Question 29

Which banks cannot accept foreign deposits?

Answer 29

Domestic bank in US

Question 30

bank capital adequacy refers to the amount of equity capital a bank holds as reserves
against impaired loans

Answer 30

Capital Requirements

Question 31

a time deposit of money in an international bank located in a county different from the
country that issued the currency.

Answer 31

Eurocurrency

Question 32

is a market rate, analogous to the U.S. Federal Funds rate.

Answer 32

LIBOR

Question 33

are short- to medium-term loans of Eurocurrency extended by Eurobanks to corporations,sovereign governments, nonprime banks, or international organizations.

Answer 33

Eurocredits

Question 34

Correspondent bank services include

Answer 34

A. prepaid postage and packing materials

C. Foreign exchange conversions

Question 35

Eurodollars refers to dollar deposits when the depository bank is located in

Answer 35

outside US

Question 36

A DECREASE in the implied three-month LIBOR yield causes Eurodollar futures price

Answer 36

Increase

Question 37

The crisis that followed a period of economic expansion in the region financed by record private capital inflows.

Answer 37

Asian Crisis