商业银行管理彼得S.罗斯英文原书第8版-英语试题库Chap016

Chapter16LendingPoliciesandProcedures:ManagingCreditRiskFillintheBlankQuestions1.The______________isauniformratingsystemdevelopedbyregulatorswherebanksaregivenaratingfromonetofiveineachofsixcategoriesandanoverallratingfromonetofive.Answer:CAMELS2.Oneofthe6C’soflending,______________suggeststhatthelendermustlookatthepositionofthebusinessfirmintheindustryandtheoutlookoftheindustrytoevaluatealoan.Answer:condition3.Oneofthe6C’soflending,______________suggeststhatthelendermustlooktoseeiftheborrowerislegallyentitledtosignabindingloanagreement.Foranindividualthisentailsmakingsuretheborrowerisoflegalagetosignacontract.Answer:capacity4.Whenabankpurchasesawholeloanorapieceofaloanfromanotherbanktheyarepurchasingwhatisknownasa____________________________.Answer:participation5.Loansthathaveminorweaknessesbecausethebankhasnotfolloweditswrittenloanpolicyorwhichhavemissingdocumentationarecalled______________byregulators.Answer:criticized6.____________________________areloansextendedtofarmersandrancherstoassistinplantingcrops,harvestingcropsandtosupportthefeedingandcareoflivestock.Answer:Agricultureloans7.____________________________devotethebulkoftheircreditportfoliotolarge-denominationloanstocorporationsandotherbusinessesandtendtobelargebanks.Answer:Wholesalelenders8.____________________________areloanswhicharesecuredbylandbuildingsandotherstructures.Theseloanscanbeshorttermconstructionloansorlongertermloanstofinancethepurchaseofhomesandapartmentsamongothers.Answer:Realestateloans9.A______________issignedbytheborrowerandindicatestheprincipalamountoftheloan,theinterestrateontheloanandthetermsunderwhichrepaymentmusttakeplace.Answer:Promissorynote10.____________________________arethosethingsaborrowermustdo.Theyareactionstheborrowermusttake.Examplesincludefilingperiodicfinancialstatementswiththebankandpurchasinginsuranceonanycollateralpledged.Answer:Affirmativecovenants11.___________________________arewhenlendersextendcredittobanks,insurancecompanies,andfinancecompaniesamongothers.Answer:Financialinstitutionloans12.______________areloansthatcarryastrongprobabilityoflosstothebank.Answer:Doubtfulloans13.A(n)______________istheprocessofresolvingatroubledloansothebankcanrecoveritsfunds.Answer:loanworkout14.______________isoneofthekeyfeaturesofanyloan.ThisCoflendingexamineswhethertheborrowerwillhaveenoughsalesorincometorepaytheloan.Answer:cash15.Abank’s__________________________________________givesloanofficersspecificguidelinesinmakingindividualloandecisionsandinshapingtheoverallloanportfolio.Answer:writtenloanpolicy16.Anapproachinwhichthelendingofficerfocusesonchangesinborrowercashflowsovertimeisknownasthe_____________cashflowmethod.Answer:direct17.areloansgrantedtobusinessestocoverpurchasesofinventory,payingtaxesandmeetingpayrolls.Answer:Commercialandindustrialloans(C&ILoans)18.includecredittofinancethepurchaseofautomobiles,mobilehomes,appliancesandotherretailgoodsandmanyotherpurchasesbyconsumers.Answer:Loanstoindividuals(consumerloans)19.iswherethelenderbuysequipmentorvehiclesandrentsthemtoitscustomers.Answer:Leasefinancingreceivables20.Smallerbankstendtoemphasizeintheformofsmallerdenominationpersonalcashloansandhomemortgageloanstoextendedtoindividualsandfamiliesaswellassmallerbusinessloans.Answer:retailcredit21.Theloanmixofanylendinginstitutiondependsheavilyonthethateachloanofferscomparedtoallotherassetsthelendinginstitutioncanacquire.Answer:expectedyield22.Underthenoindividualcanbedeniedcreditbecauseofrace,sex,religiousaffiliation,ageorreceiptofpublicassistance.Answer:EqualCreditOpportunityAct(1974)23.OneaspectoftheCAMELSratingsystemiswhichlooksatthequalityofthebank’sloans.Examinerslookatallloansoveracertainsizeandarandomselectionofallotherloanswhenlookingatthisaspectofabank.Answer:assetquality24.Onepartofthe6C’soflendingiswhichlooksatwhethertheborrowerhasawell-definedpurposefortheloanandaseriousintenttorepaytheloan.Answer:character25.OneofthemostwidelyconsultedsourcesofdataonbusinessfirmsiswhichwasfoundedinPhiladelphiain1914toexchangecreditinformationamongbusinesslendinginstitutionsandtoorganizeconferencesandpublisheducationalmaterialstotrainloanofficersandcreditanalysts.Answer:RiskManagementAssociates(RMA)26.Oneproblemwiththenewerlendingmodelcalled_________________wasfoundtoatleastpartiallycontributetotherecentcrisisinthemortgagemarket.Answer:“Streamlining”27.Inthemortgageenvironmentoftheearly2000s,lenderswereencouragedtosellindividualloansandpackagesofloanstobuymoreliquidsecuritiesinstead,thusshiftingmuchoftheriskoflendingtocapitalmarkets.Thisprocessisreferredtoas__________________.Answer:Securitization28.Factorssuchaschangesintheeconomy,naturaldisasters,andregulationarereferredtoas__________factors,whilemanagementerrors,illegalmanipulation,andineffectivelendingpoliciesareconsidered___________factors.Answer:External;internal29.Intheloanworkoutprocess,thepreferredoptionisnearlyalwaystoseeka_______________,whichgivesboththelendinginstitutionanditscustomerthechancetorestorenormaloperations.Answer:RevisedloanagreementTrue/FalseQuestionsTF30.Theprincipalreasonbanksarecharteredbyfederalandstategovernmentsistomakeloanstotheircustomers.Answer:TrueTF31.Riskinbankingtendstobeconcentratedinabank’sloanportfolio.Answer:TrueTF32.Thelargestbankshave,onaverage,reducedtheirdependenceonrealestateloansrelativetosmallerbanks.Answer:TrueTF33.Realestatelendingispopularwithbank,inpart,duetothegrowthofthesecondarymortgagemarket.Answer:TrueTF34.BanksintheUnitedStatesare,onaverage,examinedatleastonceeverythreeyears.Answer:TrueTF35.Smallerbankstendtoemphasizewholesalebankingservices.Answer:FalseTF36.Retailcreditinbankingreferstosuchloansasresidentialmortgagesandinstallmentloanstoindividuals.Answer:TrueTF37.Loansmadebyaparticularbanksecuredbythebank’sownstockarenotusuallypermittedexceptunderspecialcircumstances.Answer:TrueTF38.Federally-supervisedbanksintheU.S.mustmakean“affirmativeeffort”toprovideloansandotherservicestoallcredit-worthyborrowersintheirchosenservicearea.Answer:TrueTF39.Loanstominorsarenotlegallyenforceablecontractsinmoststates.Answer:TrueTF40.Theletter“C”intheCAMELSratingsystemforbanksintheU.S.referstothe“condition”ofabank.Answer:FalseTF41.Theletter“M”intheCAMELSratingsystemforbanksintheU.S.referstothe“managementquality”ofabank.Answer:TrueTF42.Theprocessofloanreviewmeansthataloancommitteemustgenerallyapprovealoanbeforetheborroweristoldtheloanisapproved.Answer:FalseTF43.Troubledloansnormallyaresubjecttomorefrequentreviewthanaresoundloans.Answer:TrueTF44.Creditcardloansaregenerallymoreprofitableforsmallandmedium-sizebanksthanforthelargestbanks.Answer:FalseTF45.Banksshouldconcentratetheirlendingonthoseloansinwhichtheyhavethegreatestcostadvantage.Answer:TrueTF46.Thetypeofbankloanexperiencingthelargestlossesperdollarofloaniscreditcardloans.Answer:TrueTF47.Constructionloansbyabankfitundertheloancategoryknownascommercialandindustrialloans.Answer:FalseTF48.Iftheeconomyslowsdownabankshouldreviewitsoutstandingloansmorefrequently.Answer:TrueTF49.Foreclosureonpropertypledgedbehindabankloandoesnotsubjectabanktoliabilitytocleanupanyenvironmentaldamagetheborrowermayhavecausedtohappen.Answer:FalseTF50.Loansgrantedtobusinessesappeartoconveypositiveinformationtothemarketplaceaboutaborrower’screditquality,enablingaborrowertoobtainmoreandcheaperfundsfromothersources.Answer:TrueTF51.Loanstoabank’sofficerscanneverexceed2.5percentofabank’scapitalandunimpairedsurplusor$25,000whicheverislargerandcannotbemorethan$100,000.Answer:TrueTF52.Financialinstitutionsthatdisagreewithexaminerclassificationsoftheirloanscanappealtheseexaminerratings.Answer:TrueTF53.Aratingof“5”isthehighestandbestratingthataU.S.bankcanreceiveundertheCAMELratingsystem.Answer:FalseTF54.Accountsreceivablefinancingmeansthatabankactuallytakesoverownershipofreceivables,whereasfactoringmeansthatabankmerelylendsmoneyonaborrowingcustomer’sreceivablesandthecustomerstillhasownershipofthereceivables.Answer:FalseTF55.Arestrictionagainstaborrowertakingonnewdebtisanaffirmativecovenantinaloancontract.Answer:FalseTF56.Loanreviewisconsideredtobealuxury,notanecessityformostbanks,especiallythosewithsoundlendingpolicies.Answer:FalseTF57.Cashisoneofthe6C’soflendingandreferstothefactthatthelenderwantstomakesuretheborrowerhastheabilitytogenerateenoughcashtorepaytheloan.Answer:TrueTF58.Therearethreeprincipalsourcesofcashtorepayaloan.Thesearecashflowsgeneratedfromsalesorincome,fundsgeneratedfromtheliquidationofassetsandfundsraisedbysellingdebtorequitysecurities.Answer:TrueTF59.Negativecovenantsrequiretheborrowertotakecertainactions.Answer:FalseTF60.Affirmativecovenantsrestrictaborrowerfromdoingcertainthings.Answer:FalseTF61.Foreaseandconveniencemostbankshavetheloanreviewconductedbythesamepersonwhomakestheloan.Thisisparticularlytrueoflargebanks.Answer:FalseTF62.Aloanworkoutiswhenthebankandthecustomerinitiallynegotiatethetermsoftheloan.Answer:FalseTF63.Awrittenloanpolicygivesloanofficersandthebank’smanagementspecificguidelinesinmakingindividualloandecisionsandinformingthebank’sloanportfolio.Answer:TrueTF64.Commercialandindustrialloansareloanstobusinessestocoversuchthingsaspurchasinginventory,payingtaxesandmeetingpayrollexpenses.Answer:TrueTF65.Agricultureloansareloansthataremadetoindividualstofinancevacations,purchasedurablegoodsandotherretailgoods.Answer:FalseTF66.TheAintheCAMELSratingsystemstandsforassetquality.Answer:TrueTF67.Netcashflowfromoperationsistheborrower’snetincomeexpressedincashratherthanonanaccrualbasis.Answer:TrueTF68.The“directcashflow”methodand“cashflowbyorigin”aretwoverydifferentwaysofassessingthecashflowsofapotentialborrower.Answer:FalseTF69.Commercialbanksarethelargestoriginatorofhouseholdloans.Answer:TrueTF70.Followingtherecentglobalcreditcrisis,regulatorshavebeguntoemphasizetheneedforloanoriginatorstoknowtheirborrowersbetterandretainsomeoftheriskonloansthattheysell.Answer:TrueMultipleChoiceQuestions71.Theprincipaleconomicfunctionofbanksisto:A)TakedepositsB)MakeloansC)SellfinancialservicesD)EncouragespendingE)NoneoftheaboveAnswer:B72.Loansextendedtofinancethepurchaseofautomobiles,mobilehomes,homeappliances,andvacationsareclassifiedas:A)RealestateloansB)FinancialinstitutionsC)AgriculturalloansD)CommercialandindustrialloansE)NoneoftheaboveAnswer:E73.Accordingtothetextbookthelargestcategory(bydollarvolume)ofloansextendedbyU.S.banksis:A)RealestateloansB)FinancialinstitutionsC)AgriculturalloansD)CommercialandindustrialloansE)NoneoftheaboveAnswer:A74.Banksthatemphasizelendingtocommercialcustomersarelabeled:A)WholesalebanksB)RetailbanksC)PersonalbanksD)NonbankbanksE)RegionalbanksAnswer:A75.ThevastmajorityofFDIC-insuredinstitutionsareclassifiedas:A)CreditcardbanksB)AgriculturalbanksC)ConsumerlendersD)CommerciallendersE)MortgagelendersAnswer:D76.IntheUnitedStatesnationalbankscannotextendanunsecuredloantoasingleborrowerthatexceedsofanationalbank’scapitalandsurplus.Thecorrectfigurethatfillsintheblankintheprecedingsentenceis:A)25percentB)10percentC)15percentD)20percentE)NoneoftheaboveAnswer:C77.RealestateloansmadebynationalbanksintheU.S.cannotexceed:A)15percentofanationalbank’stotalassetsor25percentofitstotalcapital.B)Anationalbank’stotalcapitalandsurplusor70percentoftimeandsavingsdeposits,whicheverisgreater.C)20percentofanationalbank’scapitalandsurplusor80percentofitssavingsdeposits,whicheverissmallerinamount.D)25percentofcapitalor10percentofthecoredepositsofanationalbank,whichevergivesthelargestamount.E)Noneoftheabove.Answer:B78.Loanstofinanceone-to-fourfamilyhomesfallunderwhichloancategory?A)CommercialandindustrialloansB)RealestateloansC)LoanstoindividualsD)Single-paymentloansE)Noneoftheabove.Answer:B79.Theloancategoryexperiencingthelargestlosses(loandefaults)isusually:A)CreditcardloansB)RealestateloansC)AgriculturalloansD)CommercialandindustrialloansE)NoneoftheaboveAnswer:A80.Themostcostlytypeofloantomake(measuredbythecostperdollarofloan)forabankisusually:A)RealestateloansB)AgriculturalloansC)CommercialandindustrialloansD)LoanstofinancialinstitutionsE)Noneoftheabove.Answer:E81.Loansprovidingcredittofinancethepurchaseofautomobiles,mobilehomes,appliances,andotherretailgoodstorepairandmodernizehomesareclassifiedunderthecategory:A)FinancialinstitutionloansB)CommercialindustrialC)LoanstoindividualsD)MiscellaneousloansE)NoneoftheaboveAnswer:C82.Loansextendedtofarmandranchoperationstoassistinplantingandharvestingcropsandtosupportthefeedingandcareoflivestockareknownas:A)RealestateloansB)CommercialandindustrialloansC)LandloansD)AgriculturalloansE)Noneoftheabove.Answer:D83.Loansgrantedtobusinessestocoversuchexpensesaspurchasinginventories,payingtaxes,andmeetingpayrollsareknownas:A)CommercialandindustrialloansB)AgriculturalloansC)RealestateloansD)LoanstoindividualsE)Noneoftheabove.Answer:A84.Alenderthatmakesaloantoaminorwouldbeviolatingwhichofthe6C’soflending?A)CharacterB)CapacityC)CashD)ControlE)CollateralAnswer:B85.Alenderthatmakesaloanthatviolatesitswrittenloanpolicywouldbeviolatingwhichofthe6C’soflending?A)CharacterB)CapacityC)CashD)ControlE)CollateralAnswer:D86.Whichofthefollowingisafactorindeterminingthemixofloansthatabankhas?A)ThelocationofthebankB)ThesizeofthebankC)ThewrittenloanpolicyofthebankD)TheexperienceandexpertiseofthemanagementE)AlloftheabovearefactorsindeterminingthemixofloansAnswer:E87.Aloantoalocalbusinesstopurchaseanewmachinewouldbecategorizedas:A)AconsumerloanB)AnagricultureloanC)AcommercialandindustrialloanD)ArealestateloanE)NoneoftheaboveAnswer:C88.Thelender'ssecondarysourceofrepaymentincaseofdefaultis:A)Capacity.B)Collateral.C)Character.D)Capital.E)Credit.Answer:B89.Alenderthatmakesaloantoanindividualwhoseonlyincomeiscommissionbasedandwhohasn’tmadeasaleinsixweeksmaybeviolatingwhichofthe6C’soflending?A)CharacterB)CapacityC)CashD)ControlE)CollateralAnswer:C90.SeanCarterhasanexcellentcreditrating.Whichofthe6C’soflendingwouldthispieceofinformationbelongto?A)CharacterB)CapacityC)CashD)CollateralE)ConditionsAnswer:A91.FirstNationalBankofEdmondasksaprospectivecustomerforherdriver’slicense.Whichofthe6C’soflendingwouldthispieceofinformationbelongto?A)CharacterB)CapacityC)CashD)CollateralE)ConditionsAnswer:B92.TheloanofficerofSecondNationalBankofLaramiedecidestoreviewtheinsurancecoverageofoneofitsbusinesscustomers.Whichofthe6C’soflendingwouldthispieceofinformationbelongto?A)CharacterB)CapacityC)CashD)CollateralE)ConditionsAnswer:D93.TheTRCCompanyisrequiredbyitsbanktopaynodividendover$3pershare.Whatisthis?A)AnaffirmativecovenantB)AnegativecovenantC)ASpecialcovenantD)AhorizontalcovenantE)NoneoftheaboveAnswer:B94.Abankthatprimarilymakesitsloanstoindividuals,familiesandsmallbusinessesis:A)AretailbankB)AwholesalelenderC)AmoneycenterbankD)AmoneymarketbankE)NoneoftheaboveAnswer:A95.Theprocessofresolvingatroubledloansothelendercanrecoveritsfundsiscalledthe:A)LoanReviewB)WrittenLoanPolicyC)LoanWorkoutD)LoanCommitmentAgreementE)NoneoftheaboveAnswer:C96.Whichofthefollowingisasignofapotentialloanproblem?A)TimelyreceiptoffinancialstatementsfromthecompanywithaloanB)IncreasesinthestockpriceofthecompanythathasaloanC)IncreasesinearningsforeachofthelastthreeyearsofacompanyD)Changesinthemethodsusedtoaccountforinventory,depreciationandotheritemsE)AlloftheabovearesignsofproblemswiththeloanAnswer:D97.Whichofthefollowingshouldbepartofthewrittenloanpolicy?A)LendingauthorityofeachloanofficerandloancommitteeB)LinesofresponsibilityforfindingandreportinginformationwithintheloandepartmentC)AstatementofqualitystandardsforallloansD)AstatementforthepreferredupperlimitfortotalloansoutstandingE)AlloftheaboveshouldbepartofthewrittenloanpolicyAnswer:E98.Alenderreviewsthepartnershipagreementofoneofitssmallbusinesscustomers.Whichofthe6C’soflendingwouldthispieceofinformationbelongto?A)CharacterB)CapacityC)CashD)CollateralE)ConditionsAnswer:B99.Whichactrequiresthatbankloanstoinsidersbepricedatmarket?A)CommunityReinvestmentActof1977B)EqualCreditOpportunityActof1974C)Sarbanes-OxleyActof2002D)BankLendingActof2003E)U.S.PatriotActAnswer:C100.Amethodwherebytheloanofficerfocusesonhowtheborrowercashflowsmaychangeovertimeisknownas:A)IndirectcashflowB)DirectcashflowC)PervasivecashflowD)VariablecashflowE)TotalcashflowAnswer:B101.TheSouthCarolinaNationalBankmakesaloantotheHeritageCreditUnion.Whattypeofloandidthisbankmake?A)FinancialinstitutionloanB)CommercialandindustrialloanC)LoanstoindividualsD)MiscellaneousloansE)LeasefinancingreceivablesAnswer:A102.AloanforColinBeverlytopurchaseanewMazdaMiatawouldfitintowhichofthefollowingcategoriesofbankloans?A)FinancialinstitutionloanB)CommercialandindustrialloanC)LoantoanIndividualD)MiscellaneousloanE)LeasefinancingreceivablesAnswer:C103.ThePriceBankofEdmondmakesaloantoHomeDepot.Whattypeofloanhasthisbankmade?A)FinancialinstitutionloanB)CommercialandindustrialloanC)LoantoanindividualD)MiscellaneousloanE)LeasefinancingreceivablesAnswer:B104.TheFirstStateBankofDuncanbuysrailroadcarsandrentsthemtotheSantaFeRailroadCompany.Whattypeofloanhasthisbankmade?A)FinancialinstitutionloanB)CommercialandindustrialloanC)LoantoanindividualD)MiscellaneousloanE)LeasefinancingreceivablesAnswer:E105.TheThirdNationalBankofWichitamakesaloansothatTimBridgescanbuy1000sharesofCocaColastock.Whichcategoryofloanswouldthisloanfitinbest?A)FinancialinstitutionloanB)CommercialandindustrialloanC)LoantoanindividualD)MiscellaneousloanE)LeasefinancingreceivablesAnswer:D106.TheFirstStateBankislocatedinGuyman,OklahomawhichisinthemiddleofthewheatcountryofOklahomaandasaresultmanyofitsloansareagricultureloans.Whatfactordeterminingthegrowthandmixtureofloansdoesthisfactreflect?A)CharacteristicsofthemarketareaB)LendersizeC)TheexperienceandexpertiseofmanagementD)ThewrittenloanpolicyofthebankE)BankregulationsAnswer:A107.TheSecondStateBankhaslessthan$100millioninassetsandasaresultprimarilymakesrealestateloans,otherconsumerloansandloanstoverysmallbusinesses.Whatfactordeterminingthegrowthandmixtureofloansdoesthisfactreflect?A)CharacteristicsofthemarketareaB)LendersizeC)TheexperienceandexpertiseofmanagementD)ThewrittenloanpolicyofthebankE)BankregulationsAnswer:B108.GeoffWillisandMaryWilliamsthepresidentandCEOoftheFirstNationalBankofEdmondbothcomefromabackgroundofretailbanking.Asaresulttheyhavedecidedtofocustheirlendingactivitiesonconsumerloansandloanstosmallbusiness.Whatfactordeterminingthegrowthandmixtureofloansdoesthisfactreflect?A)CharacteristicsofthemarketareaB)LendersizeC)TheexperienceandexpertiseofmanagementD)ThewrittenloanpolicyofthebankE)BankregulationsAnswer:C109.FirstStateBank’sloanpolicymanualstates‘thatthegoalofthebankistomakehighqualityloansforhomemortgages,thepurchaseofautomobilesandsmallbusinessaccountsreceivables’.Whatfactordeterminingthegrowthandmixtureofloansdoesthisfactreflect?A)CharacteristicsofthemarketareaB)LenderSizeC)TheexperienceandexpertiseofmanagementD)ThewrittenloanpolicyofthebankE)BankregulationsAnswer:D110.TheSecondNationalBankhascapitalandsurplusof$100million.ThebankhasdecidedthatthemostthatitcanloantotheKrumlovaManufacturingCompanyis$15million.Whatfactordeterminingthegrowthandmixtureofloansdoesthismostlikelyreflectforthisbank?A)CharacteristicsofthemarketareaB)LendersizeC)TheexperienceandexpertiseofmanagementD)ThewrittenloanpolicyofthebankE)BankregulationsAnswer:E111.Aloanthatappearstoexaminerstocontainsignificantweaknessesorthatrepresentadangerousconcentrationofcreditinoneborrowerorindustryarecalled:A)CriticizedloansB)ScheduledloansC)SubstandardloansD)DoubtfulloansE)LossloansAnswer:B112.Aloanthatexaminersregardasuncollectibleandunsuitabletobecalledabankassetiscalleda:A)CriticizedloanB)ScheduledloanC)SubstandardloanD)DoubtfulloanE)LossloanAnswer:E113.Thelawthatrequiresbankstomake‘anaffirmativeeffort’tomeetthecreditneedsofindividualsandbusinessesintheirtradeterritoriesiscalled:A)TheSarbanes-OxleyActB)TheCommunityReinvestmentActC)TheEqualCreditOpportunityActD)TheTruthinLendingActE)NoneoftheaboveAnswer:B114.Thelawthatpreventsindivid