Question 1

External insurance is one way of operational risk loss prevention.

Accepted Answer

A) True 
 B)False

Question 2

According to KPMG there has been a decline in the number of credit cards on issue, while there was no slowdown in transaction activity.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following scenarios is most desirable for the FI?

Accepted Answer

A) The initial set-up and development costs are lower than the sum of the discounted present values of cash flows from selling the product. 
B) The initial set-up and development costs exceed the sum of the discounted present values of cash flows from selling the product. 
C) The initial set-up and development costs equal the sum of the discounted present values of cash flows from selling the product. 
D) The most desirable scenario depends on the FI's individual situation. 
A) The initial set-up and development costs are lower than the sum of the discounted present values of cash flows from selling the product. 
B) The initial set-up and development costs exceed the sum of the discounted present values of cash flows from selling the product. 
C) The initial set-up and development costs equal the sum of the discounted present values of cash flows from selling the product. 
D) The most desirable scenario depends on the FI's individual situation.

Question 4

Which of the following expressions describes economies of scope?

Accepted Answer

A) ACA+B│X1,X2│ A│X1,0│ + ACB│X2,0│ 
B) ACA+B│X1,X2│ > ACA│X1,0│ + ACB│X2,0│ 
C) ACA+B│X1,X1│ A│X1,0│ + ACB│X1,0│ 
D) ACA+B│X1,X2│ = ACA│X1,0│ + ACB│X2,0│ 
A) ACA+B│X1,X2│ A│X1,0│ + ACB│X2,0│ 
B) ACA+B│X1,X2│ > ACA│X1,0│ + ACB│X2,0│ 
C) ACA+B│X1,X1│ A│X1,0│ + ACB│X1,0│ 
D) ACA+B│X1,X2│ = ACA│X1,0│ + ACB│X2,0│

Question 5

An FI's operating cost and the efficient use of technology:

Accepted Answer

A) have no impact on the FI's profits before taxes 
B) can have a significant impact on the FI's profits before taxes 
C) will merely improve the FI's reputation 
D) are not important as FIs have the back-up of the government in times of financial distress 
A) have no impact on the FI's profits before taxes 
B) can have a significant impact on the FI's profits before taxes 
C) will merely improve the FI's reputation 
D) are not important as FIs have the back-up of the government in times of financial distress

Question 6

Outline the main sources of operational risk and why operational risk gained prominence during the GFC.

Accepted Answer

There are at least five sources of opera

Question 7

According to economic theory involving economies of scale, larger and more cost-efficient FIs should prevail over smaller, less cost-efficient FIs.

Accepted Answer

A) True 
 B)False

Question 8

The total operating cost of producing services is $125 000 for a loan volume of $12 500 000.What is the average cost of loan production for the bank?

Accepted Answer

A) 0.1% 
B) 1% 
C) 10% 
D) 100% 
A) 0.1% 
B) 1% 
C) 10% 
D) 100%

Question 9

Which of the following is not a source of operational risk for an FI?

Accepted Answer

A) capital assets 
B) customer relationships 
C) technology 
D) positive duration gap 
A) capital assets 
B) customer relationships 
C) technology 
D) positive duration gap

Question 10

Which of the following statements is true?

Accepted Answer

A) FI's should invest in as much technology as possible as it will provide the FI with a competitive advantage. 
B) FI's need to strike a balance as both, too much and too little investment in technology can be bad for the FI. 
C) FI's should invest in as little technology as possible as these investments are too risky. 
D) Technology investments do not have an impact on the survival and profitability of the FI. 
A) FI's should invest in as much technology as possible as it will provide the FI with a competitive advantage. 
B) FI's need to strike a balance as both, too much and too little investment in technology can be bad for the FI. 
C) FI's should invest in as little technology as possible as these investments are too risky. 
D) Technology investments do not have an impact on the survival and profitability of the FI.

Question 11

Which of the following statements is true?

Accepted Answer

A) RTGS stands for Real Transaction Gross Settlement. 
B) RTGS allows large transactions to be settled at the end of the banking day. 
C) The use of RTGS eliminates settlement risk. 
D) RTGS allows detecting any failure to complete settlement during the day that the transactions occur. 
A) RTGS stands for Real Transaction Gross Settlement. 
B) RTGS allows large transactions to be settled at the end of the banking day. 
C) The use of RTGS eliminates settlement risk. 
D) RTGS allows detecting any failure to complete settlement during the day that the transactions occur.

Question 12

Some benefits of technological advancement for FIs include:

Accepted Answer

A) convenience and service quality 
B) lower operating cost, cross-marketing and cross-selling potential 
C) less direct contact with customers 
D) All of the listed options are correct. 
A) convenience and service quality 
B) lower operating cost, cross-marketing and cross-selling potential 
C) less direct contact with customers 
D) All of the listed options are correct.

Question 13

The effect of improving technology over time is to shift the AC curve upwards over time.

Accepted Answer

A) True 
 B)False

Question 14

The term diseconomies of scope refers to the situation in which the costs of joint production of FI services are higher than they would be if they were produced independently.

Accepted Answer

A) True 
 B)False

Question 15

Specific problems that can create capital asset risk include:

Accepted Answer

A) fire/flood 
B) contractual disagreement 
C) war 
D) error 
A) fire/flood 
B) contractual disagreement 
C) war 
D) error

Question 16

Operational risk sources can lead to the following costs for the FI:

Accepted Answer

A) direct costs, indirect costs and opportunity costs 
B) direct costs and indirect costs only 
C) direct costs and opportunity costs only 
D) indirect costs and opportunity costs only 
A) direct costs, indirect costs and opportunity costs 
B) direct costs and indirect costs only 
C) direct costs and opportunity costs only 
D) indirect costs and opportunity costs only

Question 17

External and internal fraud are both sources of operational risk.

Accepted Answer

A) True 
 B)False

Question 18

The success in technologically related innovation often is dependent on changes in regulations and regulatory procedures.

Accepted Answer

A) True 
 B)False

Question 19

How can the interest expense of an FI be reduced by improved technological efficiency?

Accepted Answer

A) By improving the efficiency of management of information flows. 
B) By obtaining access to low cost sources of funds. 
C) By linking services to the quality of the FI's technology. 
D) By innovating new interest-earning products. 
A) By improving the efficiency of management of information flows. 
B) By obtaining access to low cost sources of funds. 
C) By linking services to the quality of the FI's technology. 
D) By innovating new interest-earning products.

Question 20

Daylight overdrafts occur when:

Accepted Answer

A) FIs in different time zones clear transactions 
B) FI debits exceed credits during the day 
C) FI credits exceed debits during the day 
D) the sum of all debits transmitted over the system exceeds the sum of all credits during the day 
A) FIs in different time zones clear transactions 
B) FI debits exceed credits during the day 
C) FI credits exceed debits during the day 
D) the sum of all debits transmitted over the system exceeds the sum of all credits during the day

External insurance is one way of operational risk loss prevention.

According to KPMG there has been a decline in the number of credit cards on issue, while there was no slowdown in transaction activity.

Which of the following scenarios is most desirable for the FI?

Which of the following expressions describes economies of scope?

An FI's operating cost and the efficient use of technology:

Outline the main sources of operational risk and why operational risk gained prominence during the GFC.

According to economic theory involving economies of scale, larger and more cost-efficient FIs should prevail over smaller, less cost-efficient FIs.

The total operating cost of producing services is $125 000 for a loan volume of $12 500 000.What is the average cost of loan production for the bank?

Which of the following is not a source of operational risk for an FI?

Which of the following statements is true?

Which of the following statements is true?

Some benefits of technological advancement for FIs include:

The effect of improving technology over time is to shift the AC curve upwards over time.

The term diseconomies of scope refers to the situation in which the costs of joint production of FI services are higher than they would be if they were produced independently.

Specific problems that can create capital asset risk include:

Operational risk sources can lead to the following costs for the FI:

External and internal fraud are both sources of operational risk.

The success in technologically related innovation often is dependent on changes in regulations and regulatory procedures.

How can the interest expense of an FI be reduced by improved technological efficiency?

Daylight overdrafts occur when:

Why Are Financial Institutions Special

The Financial Service Industry: Depository Institutions

The Financial Service Industry: Other Financial Institutions

Risks 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

Managing Interest Rate Risk Using Securitisation

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

Capital Management and Adequacy

Filters

Exam 17: Technology and Other Operational Risks

External insurance is one way of operational risk loss prevention.

According to KPMG there has been a decline in the number of credit cards on issue, while there was no slowdown in transaction activity.

Which of the following scenarios is most desirable for the FI?

Which of the following expressions describes economies of scope?

An FI's operating cost and the efficient use of technology:

Outline the main sources of operational risk and why operational risk gained prominence during the GFC.

According to economic theory involving economies of scale, larger and more cost-efficient FIs should prevail over smaller, less cost-efficient FIs.

The total operating cost of producing services is $125 000 for a loan volume of $12 500 000.What is the average cost of loan production for the bank?

Which of the following is not a source of operational risk for an FI?

Which of the following statements is true?

Which of the following statements is true?

Some benefits of technological advancement for FIs include:

The effect of improving technology over time is to shift the AC curve upwards over time.

The term diseconomies of scope refers to the situation in which the costs of joint production of FI services are higher than they would be if they were produced independently.

Specific problems that can create capital asset risk include:

Operational risk sources can lead to the following costs for the FI:

External and internal fraud are both sources of operational risk.

The success in technologically related innovation often is dependent on changes in regulations and regulatory procedures.

How can the interest expense of an FI be reduced by improved technological efficiency?

Daylight overdrafts occur when:

Why Are Financial Institutions Special

The Financial Service Industry: Depository Institutions

The Financial Service Industry: Other Financial Institutions

Risks 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

Managing Interest Rate Risk Using Securitisation

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

Capital Management and Adequacy

Filters