Financial Market Reforms

Description: This quiz tests your knowledge on the topic of Financial Market Reforms.
Number of Questions: 15
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Tags: financial markets reforms regulations
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What was the primary objective of the Glass-Steagall Act of 1933?

  1. To separate commercial banking from investment banking.

  2. To establish the Federal Deposit Insurance Corporation (FDIC).

  3. To regulate the stock market.

  4. To create the Securities and Exchange Commission (SEC).


Correct Option: A
Explanation:

The Glass-Steagall Act was enacted in response to the stock market crash of 1929 and the subsequent Great Depression. The act aimed to prevent banks from engaging in risky investment activities that could lead to financial instability.

Which financial crisis prompted the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act?

  1. The Great Depression

  2. The Savings and Loan Crisis

  3. The Asian Financial Crisis

  4. The 2008 Financial Crisis


Correct Option: D
Explanation:

The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in 2010 in response to the 2008 financial crisis. The act aimed to address the systemic risks in the financial system and to protect consumers from predatory lending practices.

What is the primary role of the Securities and Exchange Commission (SEC)?

  1. To regulate the stock market.

  2. To insure deposits in banks.

  3. To set interest rates.

  4. To manage the federal budget.


Correct Option: A
Explanation:

The SEC is an independent agency of the United States government that is responsible for regulating the securities industry. The SEC's mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

What is the purpose of stress testing in financial regulation?

  1. To assess the resilience of financial institutions to adverse economic conditions.

  2. To evaluate the creditworthiness of borrowers.

  3. To determine the appropriate level of capital requirements for banks.

  4. To measure the systemic risk in the financial system.


Correct Option: A
Explanation:

Stress testing is a technique used by financial regulators to assess the resilience of financial institutions to adverse economic conditions. Stress tests are conducted by simulating various economic scenarios and assessing the impact of these scenarios on the financial institution's financial condition.

What is the Basel III Accord?

  1. A set of international banking regulations.

  2. A trade agreement between the United States and China.

  3. A climate change treaty.

  4. A nuclear disarmament agreement.


Correct Option: A
Explanation:

The Basel III Accord is a set of international banking regulations that were developed by the Basel Committee on Banking Supervision (BCBS) in response to the 2008 financial crisis. The accord aims to strengthen the resilience of banks and to reduce the risk of financial crises.

What is the purpose of the Consumer Financial Protection Bureau (CFPB)?

  1. To protect consumers from predatory lending practices.

  2. To regulate the banking industry.

  3. To set interest rates.

  4. To manage the federal budget.


Correct Option: A
Explanation:

The CFPB is an independent agency of the United States government that is responsible for protecting consumers from predatory lending practices. The CFPB's mission is to ensure that consumers have access to fair, transparent, and competitive financial products and services.

What is the role of the Federal Reserve in financial market reforms?

  1. To set interest rates.

  2. To regulate banks.

  3. To conduct stress tests.

  4. All of the above.


Correct Option: D
Explanation:

The Federal Reserve plays a key role in financial market reforms. The Fed is responsible for setting interest rates, regulating banks, and conducting stress tests. The Fed also works with other financial regulators to promote financial stability and to protect consumers.

What is the purpose of the Volcker Rule?

  1. To prohibit banks from engaging in proprietary trading.

  2. To limit the amount of risk that banks can take.

  3. To require banks to hold more capital.

  4. All of the above.


Correct Option: A
Explanation:

The Volcker Rule is a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act that prohibits banks from engaging in proprietary trading. Proprietary trading is the practice of banks trading for their own account, rather than on behalf of their clients.

What is the role of the Financial Stability Oversight Council (FSOC) in financial market reforms?

  1. To identify and address systemic risks in the financial system.

  2. To regulate the banking industry.

  3. To set interest rates.

  4. To manage the federal budget.


Correct Option: A
Explanation:

The FSOC is a council of regulators that is responsible for identifying and addressing systemic risks in the financial system. The FSOC is chaired by the Secretary of the Treasury and includes the heads of other financial regulatory agencies.

What is the purpose of the Dodd-Frank Act's Orderly Liquidation Authority (OLA)?

  1. To allow the government to wind down a failing financial institution in an orderly manner.

  2. To provide financial assistance to troubled financial institutions.

  3. To set interest rates.

  4. To manage the federal budget.


Correct Option: A
Explanation:

The OLA is a provision of the Dodd-Frank Act that allows the government to wind down a failing financial institution in an orderly manner. The OLA is designed to prevent the systemic collapse of the financial system.

What is the purpose of the Financial CHOICE Act?

  1. To repeal the Dodd-Frank Act.

  2. To reform the financial regulatory system.

  3. To set interest rates.

  4. To manage the federal budget.


Correct Option: A
Explanation:

The Financial CHOICE Act is a bill that was passed by the House of Representatives in 2018. The bill would repeal the Dodd-Frank Act and make significant changes to the financial regulatory system.

What is the purpose of the Bank Secrecy Act (BSA)?

  1. To prevent money laundering and terrorist financing.

  2. To regulate the banking industry.

  3. To set interest rates.

  4. To manage the federal budget.


Correct Option: A
Explanation:

The BSA is a law that requires banks and other financial institutions to report suspicious transactions to the government. The BSA is designed to prevent money laundering and terrorist financing.

What is the purpose of the USA PATRIOT Act?

  1. To expand the government's surveillance powers.

  2. To regulate the banking industry.

  3. To set interest rates.

  4. To manage the federal budget.


Correct Option: A
Explanation:

The USA PATRIOT Act is a law that was passed in the aftermath of the 9/11 terrorist attacks. The act expanded the government's surveillance powers and gave law enforcement agencies new tools to investigate terrorist activity.

What is the purpose of the Foreign Account Tax Compliance Act (FATCA)?

  1. To prevent tax evasion by U.S. citizens living abroad.

  2. To regulate the banking industry.

  3. To set interest rates.

  4. To manage the federal budget.


Correct Option: A
Explanation:

FATCA is a law that requires foreign banks and other financial institutions to report information about U.S. citizens who have accounts with them. FATCA is designed to prevent tax evasion by U.S. citizens living abroad.

What is the purpose of the Common Reporting Standard (CRS)?

  1. To promote tax transparency and prevent tax evasion.

  2. To regulate the banking industry.

  3. To set interest rates.

  4. To manage the federal budget.


Correct Option: A
Explanation:

The CRS is an international agreement that requires countries to automatically exchange information about the financial accounts of their residents. The CRS is designed to promote tax transparency and prevent tax evasion.

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