Exam 17: Technology and Other Operational Risks

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

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

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

Investment in technology has allowed FIs to lower the amount of non-interest income as a percent of total operating income.

Providing for the transmission of invoices, purchase orders, and shipping notices automatically using FIs as clearinghouses.

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