Question 1

What is the benefit of a regulatory guarantee or deposit insurance program for liability holders of FIs?

Accepted Answer

A)  It decreases the likelihood contagious runs. 
B)  It increases concerns about the asset quality of FI. 
C)  It increases concerns about solvency of an FI. 
D)  It provides preference to those who are first in line to withdraw funds over those last in line. 
A)  It decreases the likelihood contagious runs. 
B)  It increases concerns about the asset quality of FI. 
C)  It increases concerns about solvency of an FI. 
D)  It provides preference to those who are first in line to withdraw funds over those last in line.

Question 2

Which of the following liability products does not have withdrawal risk?

Accepted Answer

A)  wholesale CDs 
B)  money market deposit accounts 
C)  cheque and retail saving accounts 
D)  All of the given options have withdrawal risk. 
A)  wholesale CDs 
B)  money market deposit accounts 
C)  cheque and retail saving accounts 
D)  All of the given options have withdrawal risk.

Question 3

Covered bonds are issued by:

Accepted Answer

A)  NBFIs and must have a pool of assets covering the bonds that meet 105 per cent of the face value of the outstanding covered bonds. 
B)  depository institutions and must have a pool of assets covering the bonds that meet 105 per cent of the face value of the outstanding covered bonds. 
C)  by depository institutions and must have a pool of assets covering the bonds that meet 100 per cent of the face value of the outstanding covered bonds. 
D)  depository institutions and must have a pool of assets covering the bonds that meet 103 per cent of the face value of the outstanding covered bonds. 
A)  NBFIs and must have a pool of assets covering the bonds that meet 105 per cent of the face value of the outstanding covered bonds. 
B)  depository institutions and must have a pool of assets covering the bonds that meet 105 per cent of the face value of the outstanding covered bonds. 
C)  by depository institutions and must have a pool of assets covering the bonds that meet 100 per cent of the face value of the outstanding covered bonds. 
D)  depository institutions and must have a pool of assets covering the bonds that meet 103 per cent of the face value of the outstanding covered bonds.

Question 4

The Reserve Bank of Australia has responsibility for providing depositor protection. This is seen as:

Accepted Answer

A)  a blanket guarantee for all deposits and a protection against all FIs' failure. 
B)  the RBA using its available powers in the interest of protecting depositors' funds. 
C)  deposit insurance for all FIs. 
D)  All of the listed options are correct. 
A)  a blanket guarantee for all deposits and a protection against all FIs' failure. 
B)  the RBA using its available powers in the interest of protecting depositors' funds. 
C)  deposit insurance for all FIs. 
D)  All of the listed options are correct.

Question 5

NCDs are short-term, fixed-term deposits and are known as wholesale CDs, which have a face value of below $100 000.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is true?

Accepted Answer

A)  Australian FIs are required to hold a minimum of three days' estimated cash requirements to enable them to manage a short run on deposits. 
B)  Australian FIs are required to hold a minimum of five days' estimated cash requirements to enable them to manage a short run on deposits. 
C)  Australian FIs are required to hold a minimum of seven days' estimated cash requirements to enable them to manage a short run on deposits. 
D)  None of the listed options are correct. 
A)  Australian FIs are required to hold a minimum of three days' estimated cash requirements to enable them to manage a short run on deposits. 
B)  Australian FIs are required to hold a minimum of five days' estimated cash requirements to enable them to manage a short run on deposits. 
C)  Australian FIs are required to hold a minimum of seven days' estimated cash requirements to enable them to manage a short run on deposits. 
D)  None of the listed options are correct.

Question 7

Which of the following procedures does APRA require to be adopted by FIs as part of their liquidity management strategies?

Accepted Answer

A)  Liquidity management policy approved by the board. 
B)  Procedures for assessing and measuring liquidity. 
C)  A formal contingency plan for dealing with a liquidity crisis. 
D)  All of the listed options are correct. 
A)  Liquidity management policy approved by the board. 
B)  Procedures for assessing and measuring liquidity. 
C)  A formal contingency plan for dealing with a liquidity crisis. 
D)  All of the listed options are correct.

Question 8

Which of the following items are sources of stored liquidity?

Accepted Answer

A)  interbank market loans 
B)  large certificates of deposits 
C)  interbank market for exchange settlement funds 
D)  semi-government securities 
A)  interbank market loans 
B)  large certificates of deposits 
C)  interbank market for exchange settlement funds 
D)  semi-government securities

Question 9

Which of the following statements is true?

Accepted Answer

A)  The issuers of Treasury notes are local governments. 
B)  The issuers of Treasury notes are state governments. 
C)  The issuer of Treasury notes is the Australian federal government. 
D)  The issuers of Treasury notes are corporations. 
A)  The issuers of Treasury notes are local governments. 
B)  The issuers of Treasury notes are state governments. 
C)  The issuer of Treasury notes is the Australian federal government. 
D)  The issuers of Treasury notes are corporations.

Question 10

APS210 specifies that 'high-quality liquid assets' must be free from encumbrances and include:

Accepted Answer

A)  cash. 
B)  long-term loans. 
C)  cash and eligible securities approved by APRA. 
D)  cash and long-term loans. 
A)  cash. 
B)  long-term loans. 
C)  cash and eligible securities approved by APRA. 
D)  cash and long-term loans.

Question 11

The average implicit interest rate can be calculated as follows: the difference between an FI's average:

Accepted Answer

A)  management costs per account per year and the average fees earned per account per year, multiplied by the average annual size of the account. 
B)  management costs per account per year and the average fees earned per account per year, divided by the average annual size of the account. 
C)  fees earned per account per year and average management costs per account per year, multiplied by the average annual size of the account. 
D)  fees earned per account per year and average management costs per account per year, divided by the average annual size of the account. 
A)  management costs per account per year and the average fees earned per account per year, multiplied by the average annual size of the account. 
B)  management costs per account per year and the average fees earned per account per year, divided by the average annual size of the account. 
C)  fees earned per account per year and average management costs per account per year, multiplied by the average annual size of the account. 
D)  fees earned per account per year and average management costs per account per year, divided by the average annual size of the account.

Question 12

Which of the following are characteristics of a liquid asset?

Accepted Answer

A)  The asset can be turned into cash quickly. 
B)  Turning the asset into cash will result in low transaction costs. 
C)  Turning the asset into cash will result in little or no loss in principal value. 
D)  All of the listed options are correct. 
A)  The asset can be turned into cash quickly. 
B)  Turning the asset into cash will result in low transaction costs. 
C)  Turning the asset into cash will result in little or no loss in principal value. 
D)  All of the listed options are correct.

Question 13

Liquid asset ratio describes:

Accepted Answer

A)  The minimum ratio of liquid assets to total equity set by the central bank. 
B)  The minimum ratio of liquid assets to total liabilities set by the central bank 
C)  The minimum ratio of liquid assets to total assets set by the central bank. 
D)  None of the listed options are correct. 
A)  The minimum ratio of liquid assets to total equity set by the central bank. 
B)  The minimum ratio of liquid assets to total liabilities set by the central bank 
C)  The minimum ratio of liquid assets to total assets set by the central bank. 
D)  None of the listed options are correct.

Question 14

Use the following information to answer the question. A current deposit account requires a minimum balance of $500 if annual interest of 5 per cent is to be earned monthly on its deposits. An account holder has maintained an average balance of $300 for the first nine months of the year and $800 for the last three months of the year. She has written an average of 20 cheques a month and is not charged for these services. However, it costs the bank $0.02 to process each cheque.
What is the average return earned (both explicit and implicit) by the account holder over the full year?

Accepted Answer

A)  2.98 per cent 
B)  3.48 per cent 
C)  4.28 per cent 
D)  4.79 per cent 
A)  2.98 per cent 
B)  3.48 per cent 
C)  4.28 per cent 
D)  4.79 per cent

Question 15

Which of the following elements should be included in an FI's liquidity management strategy?

Accepted Answer

A)  Clearly defined managerial responsibilities and controls. 
B)  A formal plan to minimise excess liquidity. 
C)  An agreement to predominantly focus on stored liquidity management. 
D)  Clearly defined managerial responsibilities and controls and a formal plan to minimise excess liquidity only. 
A)  Clearly defined managerial responsibilities and controls. 
B)  A formal plan to minimise excess liquidity. 
C)  An agreement to predominantly focus on stored liquidity management. 
D)  Clearly defined managerial responsibilities and controls and a formal plan to minimise excess liquidity only.

Question 16

Historically, asset liquidity was the primary method by which banks met cash demands.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements relating to required stable funding is true?

Accepted Answer

A)  The required stable funding (RSF) is found by subtracting the value of assets held and funded by the FI, multiplied by a specific RSF factor assigned to specific asset types. 
B)  The RSF is found by adding the value of assets held and funded by the FI, multiplied by a specific RSF factor assigned to specific asset types. 
C)  Assets that are more liquid receive a higher RSF factor. 
D)  The RSF amount is determined by the liquidity characteristics of the FI's various on-balance sheet contingent exposures. 
A)  The required stable funding (RSF) is found by subtracting the value of assets held and funded by the FI, multiplied by a specific RSF factor assigned to specific asset types. 
B)  The RSF is found by adding the value of assets held and funded by the FI, multiplied by a specific RSF factor assigned to specific asset types. 
C)  Assets that are more liquid receive a higher RSF factor. 
D)  The RSF amount is determined by the liquidity characteristics of the FI's various on-balance sheet contingent exposures.

Question 18

Potential sources of liquidity include investment in:

Accepted Answer

A)  housing loans. 
B)  new equipment. 
C)  short-term securities such as treasury notes and bank accepted bills. 
D)  housing loans and investment in bank accepted bills. 
A)  housing loans. 
B)  new equipment. 
C)  short-term securities such as treasury notes and bank accepted bills. 
D)  housing loans and investment in bank accepted bills.

Question 19

Which of the following statements is true?

Accepted Answer

A)  Going-concern scenario refers to abnormal behaviour of cash flows in the course of business. 
B)  Going-concern scenario focuses on the bank's liquidity policy in a worst case scenario. 
C)  Going-concern scenario focuses on the bank's day-to-day liquidity management. 
D)  None of the listed options are correct. 
A)  Going-concern scenario refers to abnormal behaviour of cash flows in the course of business. 
B)  Going-concern scenario focuses on the bank's liquidity policy in a worst case scenario. 
C)  Going-concern scenario focuses on the bank's day-to-day liquidity management. 
D)  None of the listed options are correct.

Question 20

Funding costs generally are positively related to the period of time the liability remains on the balance sheet.

Accepted Answer

A) True 
 B)False

What is the benefit of a regulatory guarantee or deposit insurance program for liability holders of FIs?

Which of the following liability products does not have withdrawal risk?

Covered bonds are issued by:

The Reserve Bank of Australia has responsibility for providing depositor protection. This is seen as:

NCDs are short-term, fixed-term deposits and are known as wholesale CDs, which have a face value of below $100 000.

Which of the following statements is true?

Which of the following procedures does APRA require to be adopted by FIs as part of their liquidity management strategies?

Which of the following items are sources of stored liquidity?

Which of the following statements is true?

APS210 specifies that 'high-quality liquid assets' must be free from encumbrances and include:

The average implicit interest rate can be calculated as follows: the difference between an FI's average:

Which of the following are characteristics of a liquid asset?

Liquid asset ratio describes:

Which of the following elements should be included in an FI's liquidity management strategy?

Historically, asset liquidity was the primary method by which banks met cash demands.

Which of the following statements relating to required stable funding is true?

Potential sources of liquidity include investment in:

Which of the following statements is true?

Funding costs generally are positively related to the period of time the liability remains on the balance sheet.

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters

Exam 15: Liability and Liquidity Management

What is the benefit of a regulatory guarantee or deposit insurance program for liability holders of FIs?

Which of the following liability products does not have withdrawal risk?

Covered bonds are issued by:

The Reserve Bank of Australia has responsibility for providing depositor protection. This is seen as:

NCDs are short-term, fixed-term deposits and are known as wholesale CDs, which have a face value of below $100 000.

Which of the following statements is true?

Which of the following procedures does APRA require to be adopted by FIs as part of their liquidity management strategies?

Which of the following items are sources of stored liquidity?

Which of the following statements is true?

APS210 specifies that 'high-quality liquid assets' must be free from encumbrances and include:

The average implicit interest rate can be calculated as follows: the difference between an FI's average:

Which of the following are characteristics of a liquid asset?

Liquid asset ratio describes:

Which of the following elements should be included in an FI's liquidity management strategy?

Historically, asset liquidity was the primary method by which banks met cash demands.

Which of the following statements relating to required stable funding is true?

Potential sources of liquidity include investment in:

Which of the following statements is true?

Funding costs generally are positively related to the period of time the liability remains on the balance sheet.

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters