Practice Question Set: Banks

Topic Progress:

Chapter 1. Banks Practice Question Set contains 8 pages covering the following learning objectives:

* Identify the major risks faced by a bank, and explain ways in which these risks can arise.
* Distinguish between economic capital and regulatory capital.
* Summarize Basel Committee regulations for regulatory capital and their motivations.
* Explain how deposit insurance gives rise to a moral hazard problem.
* Describe investment banking financing arrangements including private placement, public offering, best efforts, firm commitment, and Dutch auction approaches.
* Describe the potential conflicts of interest among commercial banking, securities services, and investment banking divisions of a bank and recommend solutions to the conflict of interest problems.
* Describe the distinctions between the “banking book” and the “trading book” of a bank.
* Explain the originate-to-distribute model of a bank and discuss its benefits and drawbacks.

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