Exam 7: Risks of Financial Institutions

The risk that interest income will increase at a slower rate than interest expense is

FinTech firms do not support models of peer-to-peer mass collaboration, but rather only to existing organizational firm-to-firm collaboration.

Holding corporate bonds with fixed interest rates involves

An FI that finances a euro (€) loan with U.S.dollar ($) deposits is exposed to

FinTech firms have large teams of highly-skilled and experienced employees with years of experience in dealing with risk issues.

Similar to loans, non-government bonds expose a lender to principal payment default risk.

Exactly matching the maturities of assets and liabilities will provide a perfect hedge against interest rate risk for an FI.

Because the economies of the U.S.and other overseas countries have become more integrated, the risks of financial intermediation have decreased.

In which of the following situations would an FI be considered net long in foreign assets if it has ¥100 million in loans?

FinTech Risk refers to the risk that FinTech firms could disrupt business of financial service firms in the form of lost customers and lost revenue.

The risk that many borrowers in a particular country fail to repay their loans as a result of a recession in that country relates to

Sovereign risk involves the inability of a foreign corporation to repay the principal or interest on a loan because of stipulations by the foreign government that is out of the control of the foreign corporation.

One method of guarding against credit risk is to assess a risk premium based on the estimate of default risk exposure that a borrower carries.

To ease the demand for immediate cash by customers, and FI can either borrow additional funds or sell assets.

During a liquidity crisis, an FI may have to borrow additional funds at higher rates as the supply of funds becomes restricted.

Examples of FinTech services can include cryptocurrencies and blockchain.

Many of the various risks faced by an FI often are interrelated with each other.

In the case where a borrower defaults on a loan, the FI may lose only a portion of the principal that was loaned.

One objective of technological expansion is to achieve economies of scale at the expense of diseconomies of scope.

Loss of reputation is a type of operational risk to a financial institution.