Question 1

Over the past 30 years in the DI industry:

Accepted Answer

A) the loan portfolio has become more liquid because of increased securitisation. 
B) lower amounts of very liquid assets need to be held to manage withdrawal risk. 
C) DIs have intentionally managed liabilities to reduce withdrawal risk. 
D) All of the listed options are correct. 
A) the loan portfolio has become more liquid because of increased securitisation. 
B) lower amounts of very liquid assets need to be held to manage withdrawal risk. 
C) DIs have intentionally managed liabilities to reduce withdrawal risk. 
D) All of the listed options are correct.

Question 2

Use the following information to answer the question.A current deposit account requires a minimum balance of $500 if annual interest of 5% 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.The bank would like to limit the average return (both explicit and implicit) earned by the account holder to 5% per year.How much should it charge for processing each check to this account holder assuming that it will pay annual interest of 5% and minimum balances of $200 are maintained?

Accepted Answer

A) 1 cent per cheque 
B) 2 cents per cheque 
C) 3 cents per cheque 
D) 4 cents per cheque 
A) 1 cent per cheque 
B) 2 cents per cheque 
C) 3 cents per cheque 
D) 4 cents per cheque

Question 3

Secondary or buffer reserves are non-reserve assets that can be quickly turned into cash or used to provide collateral for repurchase agreements and other bank borrowing

Accepted Answer

A) True 
 B)False

Question 4

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 5

A viable liability management strategy is the diversification of funding sources.

Accepted Answer

A) True 
 B)False

Question 6

Commercial bills (or non-bank bills) are bills of exchange issued by a non-bank drawer to raise funds for its business purposes and accepted by a non-bank corporation

Accepted Answer

A) True 
 B)False

Question 7

Debt instruments that are backed by a segregated pool of high-quality assets which remain on the DI's balance sheet are

Accepted Answer

A) covered bonds 
B) core deposits 
C) asset-backed equity 
D) repos 
A) covered bonds 
B) core deposits 
C) asset-backed equity 
D) repos

Question 8

The supervision of an FI's liquidity management is undertaken by the:

Accepted Answer

A) ASIC 
B) RBA 
C) APRA 
D) ACCC 
A) ASIC 
B) RBA 
C) APRA 
D) ACCC

Question 9

Which of the following statements is true?

Accepted Answer

A) Australian DI payments are processed through either RTGS or RITS. 
B) Australian DI payments are processed through either RTGS or CHESS. 
C) Australian DI payments are processed through either RTGS or ESA. 
D) Australian DI payments are processed through either RTGS or DNSS 
A) Australian DI payments are processed through either RTGS or RITS. 
B) Australian DI payments are processed through either RTGS or CHESS. 
C) Australian DI payments are processed through either RTGS or ESA. 
D) Australian DI payments are processed through either RTGS or DNSS

Question 10

Subordinated debt is:

Accepted Answer

A) debt that is either unsecured or has a lower priority than that of another debt claim on the same asset or property 
B) senior debt 
C) hybrid debt 
D) None of the listed options are correct. 
A) debt that is either unsecured or has a lower priority than that of another debt claim on the same asset or property 
B) senior debt 
C) hybrid debt 
D) None of the listed options are correct.

Question 11

Which of the following statements is true?

Accepted Answer

A) FIs are required to hold some liquid assets to lessen the threat of insolvency. 
B) FIs are required to hold some liquid assets for the purpose of monetary policy. 
C) FIs are required to hold some liquid assets for the purpose of taxation implications. 
D) FIs are required to hold some liquid assets to lessen the threat of insolvency, for the purpose of monetary policy and for the purpose of taxation implications. 
A) FIs are required to hold some liquid assets to lessen the threat of insolvency. 
B) FIs are required to hold some liquid assets for the purpose of monetary policy. 
C) FIs are required to hold some liquid assets for the purpose of taxation implications. 
D) FIs are required to hold some liquid assets to lessen the threat of insolvency, for the purpose of monetary policy and for the purpose of taxation implications.

Question 12

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 13

Which of the following statements is true?

Accepted Answer

A) Bank accepted bills classify as purchased liquidity. 
B) Loans to short-term money market dealers classify as purchased liquidity. 
C) Securities sold under agreements to repurchase classify as stored liquidity. 
D) Certificates of deposits classify as stored liquidity. 
A) Bank accepted bills classify as purchased liquidity. 
B) Loans to short-term money market dealers classify as purchased liquidity. 
C) Securities sold under agreements to repurchase classify as stored liquidity. 
D) Certificates of deposits classify as stored liquidity.

Question 14

Why do FIs face a return or interest earnings penalty by holding large amounts of assets such as cash, T-bills, and T-bonds to reduce liquidity risk?

Accepted Answer

A) These assets carry a reserve requirement tax. 
B) These assets offer low returns. 
C) These assets offer higher returns that reflect their risk. 
D) Inflation increases the purchasing power value of these assets. 
A) These assets carry a reserve requirement tax. 
B) These assets offer low returns. 
C) These assets offer higher returns that reflect their risk. 
D) Inflation increases the purchasing power value of these assets.

Question 15

A committed liquidity facility is a:

Accepted Answer

A) facility that allows the FI to access funds from the RBA to obtain liquidity to meets its settlement needs 
B) liquidity facility that allows the FI to access funds from the RBA to obtain liquidity to meets its short-term needs 
C) liquidity facility that allows the FI to access funds from the RBA to obtain liquidity to meets its long-term needs 
D) facility providing a secured line of credit from the RBA to allow access to liquid assets to meet Basel III liquidity reforms 
A) facility that allows the FI to access funds from the RBA to obtain liquidity to meets its settlement needs 
B) liquidity facility that allows the FI to access funds from the RBA to obtain liquidity to meets its short-term needs 
C) liquidity facility that allows the FI to access funds from the RBA to obtain liquidity to meets its long-term needs 
D) facility providing a secured line of credit from the RBA to allow access to liquid assets to meet Basel III liquidity reforms

Question 16

The adverse effects of a contagious run include the restrictions on the ability of individuals to transfer wealth through time and a negative impact on the level or rate of savings.

Accepted Answer

A) True 
 B)False

Question 17

A deep market is defined as a market in which large volumes of a particular security are traded.

Accepted Answer

A) True 
 B)False

Over the past 30 years in the DI industry:

Secondary or buffer reserves are non-reserve assets that can be quickly turned into cash or used to provide collateral for repurchase agreements and other bank borrowing

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

A viable liability management strategy is the diversification of funding sources.

Commercial bills (or non-bank bills) are bills of exchange issued by a non-bank drawer to raise funds for its business purposes and accepted by a non-bank corporation

Debt instruments that are backed by a segregated pool of high-quality assets which remain on the DI's balance sheet are

The supervision of an FI's liquidity management is undertaken by the:

Which of the following statements is true?

Subordinated debt is:

Which of the following statements is true?

Which of the following items are sources of stored liquidity?

Which of the following statements is true?

Why do FIs face a return or interest earnings penalty by holding large amounts of assets such as cash, T-bills, and T-bonds to reduce liquidity risk?

A committed liquidity facility is a:

The adverse effects of a contagious run include the restrictions on the ability of individuals to transfer wealth through time and a negative impact on the level or rate of savings.

A deep market is defined as a market in which large volumes of a particular security are traded.

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

Off-Balance-Sheet Activities

Technology and Other Operational Risks

Capital Management and Adequacy

Filters

Exam 15: Liability and Liquidity Management

Over the past 30 years in the DI industry:

Secondary or buffer reserves are non-reserve assets that can be quickly turned into cash or used to provide collateral for repurchase agreements and other bank borrowing

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

A viable liability management strategy is the diversification of funding sources.

Commercial bills (or non-bank bills) are bills of exchange issued by a non-bank drawer to raise funds for its business purposes and accepted by a non-bank corporation

Debt instruments that are backed by a segregated pool of high-quality assets which remain on the DI's balance sheet are

The supervision of an FI's liquidity management is undertaken by the:

Which of the following statements is true?

Subordinated debt is:

Which of the following statements is true?

Which of the following items are sources of stored liquidity?

Which of the following statements is true?

Why do FIs face a return or interest earnings penalty by holding large amounts of assets such as cash, T-bills, and T-bonds to reduce liquidity risk?

A committed liquidity facility is a:

The adverse effects of a contagious run include the restrictions on the ability of individuals to transfer wealth through time and a negative impact on the level or rate of savings.

A deep market is defined as a market in which large volumes of a particular security are traded.

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

Off-Balance-Sheet Activities

Technology and Other Operational Risks

Capital Management and Adequacy

Filters