1. When interest rates are high the adverse selection problem worsens as more high-risk borrowers are willing to borrow.
2. With deregulation allowing for interstate banking in the US, large banks now have the ability to diversify their asset holdings.
3. If a bank manager expects interest rates to increase then she will try to decrease the bank’s rate-sensitive assets and increase the bank’s rate-sensitive assets.
4. If the cost associated with deposit outflows are higher, then banks will hold less excess reserves.
5. The interest rate at which banks borrow from the FED is called the federal funds rate.
6. Foreign exchange transactions undertaken by banks are considered off-balance sheet activities.
7. Banks in the US are allowed to purchase and hold common stock issued by corporations.
8. Sweep accounts impose an additional implicit tax burden as banks must maintain reserve requirements for these accounts.
9. A bank holding companies and ATMs are financial innovations that were devised to circumvent branching restrictions.
10. All nationally chartered banks must be insured by the FDIC.
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