Exam 17: Technology and Other Operational Risks

Spruce Bank is planning to automate some of its back office functions and reduce operating costs. The installation of new computers and software will require an initial investment of $1,000,000. The savings generated because of reduced personnel cost is $200,000 per year. The bank uses an 8 percent rate of discount to evaluate cost saving projects which are expected to last 10 years. -What must be the minimum annual cost savings in order to accept this project? Assume a five-year horizon and 8 percent discount rate.

As banks and other FIs increase the use of technology, an unintended consequence may be that

Which of the following implies reduced unit costs as size or volume of assets increases?

Which of the following partially explains why cash management services have not attracted customers in Europe to the degree that they have in the US?

Retail banking services and products in recent years have moved strongly toward electronic payment technology.

The increased use of wire transfers as a replacement for check and cash payments has decreased the risk of fraud.

Investing in appropriate technology allows an FI to access lower-cost funding markets.

As of January 2012, which of the following accounts for the highest volume of noncash transactions in the United States?

Daylight overdrafts occur when

Which of the following implies that small FIs are more cost efficient than large FIs, and that in a freely competitive environment for financial services, small FIs may outperform their larger counterparts?

Which is the most important banking area in which technology has had an impact?

As of 2012, the combined value of payments sent over Fedwire and CHIPS often exceeded $5.0 trillion a day.

Large-scale investment projects that lead to excess capacity and integration problems that create cost overruns and control problems are examples of

Which of the following implies reduced unit costs as the range of products offered increases inputs in producing multiple products?

Controlled disbursement accounts are designed to reduce the delay in check clearing.

On Fedwire, daylight overdraft

Which of the following is NOT a wholesale banking service?

Compared to the United States, the use of electronic methods of payment is lower in other major developed countries.

As of January 2012, which of the following accounts for the highest volume of noncash transactions worldwide?

Which of the following best describes economies of scope?