Question 1

The current financial system in Australia consists of three major agencies, these being:

Accepted Answer

A)  APRA, ASIC and the Australian Government. 
B)  APRA, the RBA and the Australian Government. 
C)  APRA, ASIC and the RBA. 
D)  The RBA, ASIC and the Australian Government. 
A)  APRA, ASIC and the Australian Government. 
B)  APRA, the RBA and the Australian Government. 
C)  APRA, ASIC and the RBA. 
D)  The RBA, ASIC and the Australian Government.

Question 2

Which of the following statements is true?

Accepted Answer

A)  Non-bank depository institutions include building societies and credit unions. 
B)  A non-bank depository institution meets the legal definition of a bank. 
C)  A non-bank depository institution does not meet the legal definition of a bank. 
D)  A non-bank depository institution may be a building society or a credit union and a non-bank depository institution undertakes many of the same activities of a bank without meeting the legal definition of a bank. 
A)  Non-bank depository institutions include building societies and credit unions. 
B)  A non-bank depository institution meets the legal definition of a bank. 
C)  A non-bank depository institution does not meet the legal definition of a bank. 
D)  A non-bank depository institution may be a building society or a credit union and a non-bank depository institution undertakes many of the same activities of a bank without meeting the legal definition of a bank.

Question 3

Which of the following observations concerning credit unions is not true?

Accepted Answer

A)  They invest heavily in corporate securities. 
B)  Member loans constitute a majority of their total assets. 
C)  They engage in off-balance-sheet activities. 
D)  They focus more on providing services and less on profitability. 
A)  They invest heavily in corporate securities. 
B)  Member loans constitute a majority of their total assets. 
C)  They engage in off-balance-sheet activities. 
D)  They focus more on providing services and less on profitability.

Question 4

Which of the following statements is true?

Accepted Answer

A)  Capital adequacy regulations of banks were introduced in 1989. 
B)  Capital adequacy regulations require banks to hold, on average, less capital for low-risk assets such as housing loans compared to higher-risk assets such as commercial loans. 
C)  Capital adequacy regulations were abolished in 2000. 
D)  Capital adequacy regulations of banks were introduced in 1989 and Capital adequacy regulations require banks to maintain levels of capital adequate for the type of activity undertaken, on average, less capital for low-risk assets such as housing loans compared to higher-risk assets such as commercial loans. 
A)  Capital adequacy regulations of banks were introduced in 1989. 
B)  Capital adequacy regulations require banks to hold, on average, less capital for low-risk assets such as housing loans compared to higher-risk assets such as commercial loans. 
C)  Capital adequacy regulations were abolished in 2000. 
D)  Capital adequacy regulations of banks were introduced in 1989 and Capital adequacy regulations require banks to maintain levels of capital adequate for the type of activity undertaken, on average, less capital for low-risk assets such as housing loans compared to higher-risk assets such as commercial loans.

Question 5

Australia's current financial regulatory framework was reformed in 1999 and moved from industry-based regulation to functional regulation of financial institutions.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is part of the supervisory activities of APRA?

Accepted Answer

A)  Prudential review is the most important as it provides a detailed assessment of a FIs inherent risks and the adequacy of its risk management controls. 
B)  Licensing is the last stage of APRA's supervision which ensures that only FIs that have the capacity to successfully operate can operate the market. 
C)  Enforcement supervision is not part of APRA supervisory activity as it would involve enforcement teams to specifically intervene in the running of the FI. 
D)  Entity financial analysis is the FIs own assessment of its financial position. 
A)  Prudential review is the most important as it provides a detailed assessment of a FIs inherent risks and the adequacy of its risk management controls. 
B)  Licensing is the last stage of APRA's supervision which ensures that only FIs that have the capacity to successfully operate can operate the market. 
C)  Enforcement supervision is not part of APRA supervisory activity as it would involve enforcement teams to specifically intervene in the running of the FI. 
D)  Entity financial analysis is the FIs own assessment of its financial position.

Question 7

Credit unions were generally less affected than other depository institutions by the recent financial crisis because:

Accepted Answer

A)  they hold more government securities, on average. 
B)  they hold less government securities, on average. 
C)  they had a focus on high quality domestic assets. 
D)  they had a focus on domestic deposits and more assets in residential mortgages. 
A)  they hold more government securities, on average. 
B)  they hold less government securities, on average. 
C)  they had a focus on high quality domestic assets. 
D)  they had a focus on domestic deposits and more assets in residential mortgages.

Question 8

In case of building societies, the members are usually linked to the society by some common bond such as locality or trade union.

Accepted Answer

A) True 
 B)False

Question 9

The number of banks has grown steadily since the middle of the 1980s for the following reasons:

Accepted Answer

A)  liberalisation of conditions for foreign bank entry by APRA. 
B)  deregulation of the banking industry, including the relaxation of bank entry requirements. 
C)  changes to the regulatory regime for non-bank depository institutions favoured conversion from building society to banks. 
D)  All of the listed options are correct. 
A)  liberalisation of conditions for foreign bank entry by APRA. 
B)  deregulation of the banking industry, including the relaxation of bank entry requirements. 
C)  changes to the regulatory regime for non-bank depository institutions favoured conversion from building society to banks. 
D)  All of the listed options are correct.

Question 10

APRA conducts a prudential supervisory framework that assesses FI risk and likelihood of FI failure and determines an appropriate supervisory response. Outline the two systems implemented by APRA-PAIRS and SOARS-and the purpose of the assessment system.

Accepted Answer

The main objectives of the FI risk asses

Question 11

Off-balance-sheet activities are:

Accepted Answer

A)  not shown on the current balance sheet. 
B)  not shown on the balance sheet but after the completion of the financial year are recorded on the balance sheet. 
C)  not shown on the current balance sheet but are an off-balance-sheet asset/liability, if when a contingent event occurs, the activity moves onto the asset/liability side of the balance sheet. 
D)  contingent events which move the asset or liability from the balance sheet to off-balance-sheet. 
A)  not shown on the current balance sheet. 
B)  not shown on the balance sheet but after the completion of the financial year are recorded on the balance sheet. 
C)  not shown on the current balance sheet but are an off-balance-sheet asset/liability, if when a contingent event occurs, the activity moves onto the asset/liability side of the balance sheet. 
D)  contingent events which move the asset or liability from the balance sheet to off-balance-sheet.

Question 12

Which of the following statements is true?

Accepted Answer

A)  The net interest margin is a profitability indicator and is measured as net income divided by earning assets. 
B)  The net interest margin is a profitability indicator and is measured by interest income minus interest expense, divided by earning assets. 
C)  The net interest margin is a profitability indicator and is measured by interest income plus interest expense, divided by earning assets. 
D)  The net interest margin is a profitability indicator and is measured as interest income minus non-interest income divided by total assets. 
A)  The net interest margin is a profitability indicator and is measured as net income divided by earning assets. 
B)  The net interest margin is a profitability indicator and is measured by interest income minus interest expense, divided by earning assets. 
C)  The net interest margin is a profitability indicator and is measured by interest income plus interest expense, divided by earning assets. 
D)  The net interest margin is a profitability indicator and is measured as interest income minus non-interest income divided by total assets.

Question 13

Depository institutions are financial institutions that only take deposits from savers, but do not lend money to borrowers.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is true?

Accepted Answer

A)  During the 1960s and 1970s, the growth of building societies ensured an increasing supply of funds for housing loans at reasonable rates. 
B)  During the 1960s and 1970s, the credit union expansion ensured the availability of relatively low cost unsecured and secured personal loans. 
C)  During the 1960s and 1970s, regulatory constraints meant that banks could not in general satisfy the demand for consumer credit. 
D)  All of the listed options are correct. 
A)  During the 1960s and 1970s, the growth of building societies ensured an increasing supply of funds for housing loans at reasonable rates. 
B)  During the 1960s and 1970s, the credit union expansion ensured the availability of relatively low cost unsecured and secured personal loans. 
C)  During the 1960s and 1970s, regulatory constraints meant that banks could not in general satisfy the demand for consumer credit. 
D)  All of the listed options are correct.

Question 15

Most foreign banks have succeeded in establishing a well-developed and profitable retail banking network in Australia.

Accepted Answer

A) True 
 B)False

Question 16

Some prudential standards issued by APRA include regulations regarding:

Accepted Answer

A)  capital adequacy for market risk and liquidity. 
B)  credit quality and capital adequacy for credit risk. 
C)  large exposures, business continuity management and securitisation. 
D)  All of the listed options are correct. 
A)  capital adequacy for market risk and liquidity. 
B)  credit quality and capital adequacy for credit risk. 
C)  large exposures, business continuity management and securitisation. 
D)  All of the listed options are correct.

Question 17

The market structure of the banking sector has changed since deregulation of the financial system during the 1980s. Which statement more closely reflects the current structure of the banking sector in Australia?

Accepted Answer

A)  Foreign banks dominate in number and share of total assets. 
B)  The major banks no longer hold the largest share of total assets. 
C)  Total assets are fairly evenly distributed between the major, regional and foreign banks. 
D)  The number of banks has grown steadily since the 1980s and the major banks maintain the highest percentage share of total assets. 
A)  Foreign banks dominate in number and share of total assets. 
B)  The major banks no longer hold the largest share of total assets. 
C)  Total assets are fairly evenly distributed between the major, regional and foreign banks. 
D)  The number of banks has grown steadily since the 1980s and the major banks maintain the highest percentage share of total assets.

Question 18

Which of the following is true?

Accepted Answer

A)  PAIRS provides APRA with a score-card approach to assessing the risk of FI failure and the impact of any failure. 
B)  PAIRS provides APRA with a single rating which incorporates both the probability that the FI will fail and the impact of any failure. 
C)  PAIRS provides APRA with a rating that assesses the risk of FI failure. 
D)  PAIRS provides APRA with an impact factor that determines what regulatory response needs to be implemented to prevent FI failure. 
A)  PAIRS provides APRA with a score-card approach to assessing the risk of FI failure and the impact of any failure. 
B)  PAIRS provides APRA with a single rating which incorporates both the probability that the FI will fail and the impact of any failure. 
C)  PAIRS provides APRA with a rating that assesses the risk of FI failure. 
D)  PAIRS provides APRA with an impact factor that determines what regulatory response needs to be implemented to prevent FI failure.

Question 19

Business continuity relates to:

Accepted Answer

A)  an FI that has a business plan that meets the liquidity and capital requirements of APRA. 
B)  a whole-of-business approach to FI operations and profitability. 
C)  a business continuity plan which reduces the impact of any disruption on FI operations, reputation, profitability, depositors and other stakeholders of a FI. 
D)  a business continuity plan which increases profitability of a FI. 
A)  an FI that has a business plan that meets the liquidity and capital requirements of APRA. 
B)  a whole-of-business approach to FI operations and profitability. 
C)  a business continuity plan which reduces the impact of any disruption on FI operations, reputation, profitability, depositors and other stakeholders of a FI. 
D)  a business continuity plan which increases profitability of a FI.

Question 20

Which of the following statements is true?

Accepted Answer

A)  Off-balance-sheet transactions for Australian banks include direct credit substitutes, interest rate derivative contracts and foreign exchange derivative contracts. 
B)  On-balance-sheet transactions for Australian banks include direct futures and forward contracts. 
C)  Off-balance-sheet transactions for Australian banks include the commercial loans and term-deposits. 
D)  All of the listed options are correct. 
A)  Off-balance-sheet transactions for Australian banks include direct credit substitutes, interest rate derivative contracts and foreign exchange derivative contracts. 
B)  On-balance-sheet transactions for Australian banks include direct futures and forward contracts. 
C)  Off-balance-sheet transactions for Australian banks include the commercial loans and term-deposits. 
D)  All of the listed options are correct.

The current financial system in Australia consists of three major agencies, these being:

Which of the following statements is true?

Which of the following observations concerning credit unions is not true?

Which of the following statements is true?

Australia's current financial regulatory framework was reformed in 1999 and moved from industry-based regulation to functional regulation of financial institutions.

Which of the following is part of the supervisory activities of APRA?

Credit unions were generally less affected than other depository institutions by the recent financial crisis because:

In case of building societies, the members are usually linked to the society by some common bond such as locality or trade union.

The number of banks has grown steadily since the middle of the 1980s for the following reasons:

APRA conducts a prudential supervisory framework that assesses FI risk and likelihood of FI failure and determines an appropriate supervisory response. Outline the two systems implemented by APRA-PAIRS and SOARS-and the purpose of the assessment system.

Off-balance-sheet activities are:

Which of the following statements is true?

Depository institutions are financial institutions that only take deposits from savers, but do not lend money to borrowers.

Which of the following statements is true?

Most foreign banks have succeeded in establishing a well-developed and profitable retail banking network in Australia.

Some prudential standards issued by APRA include regulations regarding:

The market structure of the banking sector has changed since deregulation of the financial system during the 1980s. Which statement more closely reflects the current structure of the banking sector in Australia?

Which of the following is true?

Business continuity relates to:

Which of the following statements is true?

Why Are Financial Institutions Special

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

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters

Exam 2: The Financial Services Industry: Depository Institutions

The current financial system in Australia consists of three major agencies, these being:

Which of the following statements is true?

Which of the following observations concerning credit unions is not true?

Which of the following statements is true?

Australia's current financial regulatory framework was reformed in 1999 and moved from industry-based regulation to functional regulation of financial institutions.

Which of the following is part of the supervisory activities of APRA?

Credit unions were generally less affected than other depository institutions by the recent financial crisis because:

In case of building societies, the members are usually linked to the society by some common bond such as locality or trade union.

The number of banks has grown steadily since the middle of the 1980s for the following reasons:

APRA conducts a prudential supervisory framework that assesses FI risk and likelihood of FI failure and determines an appropriate supervisory response. Outline the two systems implemented by APRA-PAIRS and SOARS-and the purpose of the assessment system.

Off-balance-sheet activities are:

Which of the following statements is true?

Depository institutions are financial institutions that only take deposits from savers, but do not lend money to borrowers.

Which of the following statements is true?

Most foreign banks have succeeded in establishing a well-developed and profitable retail banking network in Australia.

Some prudential standards issued by APRA include regulations regarding:

The market structure of the banking sector has changed since deregulation of the financial system during the 1980s. Which statement more closely reflects the current structure of the banking sector in Australia?

Which of the following is true?

Business continuity relates to:

Which of the following statements is true?

Why Are Financial Institutions Special

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

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters