THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 319

CHAPTER 11
*6. Explain how sovereign loans in the 1970s and early
1980s caused problems for the Big Six.

Banking Industry: Structure and Competition

287

11. What are the essential differences between chartered banks, trust and mortgage loan companies,
and credit unions and caisses populaires?

7. Explain how the early development of chartered
banks in Canada differed from the development of
commercial banks in the United States.

*12. Why have banks been losing cost advantages in
acquiring funds in recent years?

*8. What incentives do Canadian regulatory agencies
have to encourage the establishment of foreign
banks in Canada?

13. If inflation had not risen in the 1960s and 1970s, the
banking industry might be healthier today. Is this statement true, false, or uncertain? Explain your answer.

9. Explain how securitization can be used to change
illiquid assets into liquid assets.

*14. Why have banks been losing income advantages on
their assets in recent years?

*10. If the bank at which you keep your chequing
account is owned by Saudi Arabians, should you
worry that your deposits are less safe than if
Canadians owned the bank?

15. The invention of the computer is the major factor
behind the decline of the banking industry. Is this statement true, false, or uncertain? Explain your answer.

WEB EXERCISES
1. Go to the Canadian Bankers Association website at
www.cba.ca and search for an article called
Automated Banking Machine Market in Canada.
Write a short essay on ABM transactions in Canada
and bank access points. According to the trends,
does the public appear to have more or less access
to banking facilities?

2. Despite the regulations that protect banks from
failure, some do fail. Go to www2.fdic.gov/hsob/.
Select the tab labelled Failures and Assistance
Transactions. How many bank failures occurred in
the U.S. during the most recent complete calendar
year? What were the total assets held by the banks
that failed? How many U.S. banks failed in 1937?

Be sure to visit the MyEconLab website at www.myeconlab.com.This online
homework and tutorial system puts you in control of your own learning with
study and practice tools directly correlated to this chapter content.
On the MyEconLab website you will find the following mini-case for this chapter:
Mini-Case 11.1:The Changing Landscape for Domestic and Global Financial Markets