Question 1

Which of the following statements is true for the Australian banking industry?

Accepted Answer

A)  The Australian banking industry is highly concentrated. 
B)  There are four major banks in Australia. 
C)  The four major banks and the five regional banks offer a full range of commercial and investment banking services. 
D)  All of the listed options are correct. 
A)  The Australian banking industry is highly concentrated. 
B)  There are four major banks in Australia. 
C)  The four major banks and the five regional banks offer a full range of commercial and investment banking services. 
D)  All of the listed options are correct. D

Question 2

Discuss the factors that contributed to Australia's financial resilience and relatively strong performance during the global financial crisis.

Accepted Answer

The maintenance of high lending standards and risk conservatism during the 2000s was one of the reasons why the Australian economy generally was less impacted by the GFC than many other countries. Despite the changes in structure of the banking industry, the Australian banks' performance during the GFC was relatively good compared to global markets. Some features that prevented excessive risk-taking by Australian financial institutions include the following:
a. Internal governance characteristics are one possible factor. Inherent conservatism induced by memory of the banking crisis at the start of the 1990s may have been another, inducing lower risk lending and limiting exposure.
b. External influences may also have been important influences upon risk-taking. For example, deposit and debt markets could have exerted discipline against excessive risk-taking, if depositors believed that their funds were at risk and subordination of debt holder claims due to depositor preference increased monitoring.
c. Another external influence is regulation and strong prudential supervision. The 'twin-peaks' model adopted just prior to the start of the decade created a specialist prudential regulator (APRA) and a specialist corporate, markets and financial services regulator (ASIC). Such specialisation may have facilitated more effective prudential regulation and prevention of excessive risk-taking. Also, with the collapse of the major insurance company HIH at the start of the decade, a tougher approach to prudential regulation was induced.
d. Another factor may have been the overall structure of financing in the economy. With (major) Australian banks borrowing extensively offshore (helping to finance Australia's current account deficit) and able to profitably use those funds for housing and other domestic lending, there were limited incentives to invest in ultimately 'toxic' assets and have very limited involvement in securities trading on their own account and consequently did not have material holdings of assets (such as collateralised debt obligations) that caused large asset write downs by many large international banks.

Question 3

Responding to the financial crisis, the Australian government introduced a number of measures to ease liquidity issues and included the following:

Accepted Answer

A)  a permanent financial claims scheme (FCS) in October 2008, which explicitly guaranteed bank deposits with a $1 million cap. 
B)  a semi-permanent financial claims scheme (FCS), which implicitly guaranteed bank deposits. 
C)  a permanent guarantee scheme for large deposits and wholesale funding, which for a fee, guaranteed bank deposits greater than $1 million. 
D)  a permanent financial claims scheme (FCS) in October 2008, which explicitly guaranteed bank deposits with a $1 million cap; the guarantee was reduced to $250 000 per depositor from 2012. 
A)  a permanent financial claims scheme (FCS) in October 2008, which explicitly guaranteed bank deposits with a $1 million cap. 
B)  a semi-permanent financial claims scheme (FCS), which implicitly guaranteed bank deposits. 
C)  a permanent guarantee scheme for large deposits and wholesale funding, which for a fee, guaranteed bank deposits greater than $1 million. 
D)  a permanent financial claims scheme (FCS) in October 2008, which explicitly guaranteed bank deposits with a $1 million cap; the guarantee was reduced to $250 000 per depositor from 2012. D

Question 4

PAIRS provides APRA with a score-card approach to assessing the risk of FI failure and the impact of any failure by detailing the 12 risk elements separately and disclosing the result to the FI being investigated.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a role of a bank?

Accepted Answer

A)  Attract funds from the capital markets to facilitate borrowing by the household sector. 
B)  Accept deposits and make loans and in doing so facilitate the flow of funds from borrowers to lenders. 
C)  Accept deposits and make loans and in doing so facilitate the flow of funds from savers to borrowers. 
D)  Manage the level of interest rates. 
A)  Attract funds from the capital markets to facilitate borrowing by the household sector. 
B)  Accept deposits and make loans and in doing so facilitate the flow of funds from borrowers to lenders. 
C)  Accept deposits and make loans and in doing so facilitate the flow of funds from savers to borrowers. 
D)  Manage the level of interest rates.

Question 6

The collapse of Lehman Brothers in 2008 and the impact of the global financial crisis made it difficult for Australian banks to obtain off-shore funding. As a consequence banks pursued more stable sources of: funds. These strategies include:

Accepted Answer

A)  increased use of wholesale long-term funding. 
B)  decreased use of wholesale long-term funding. 
C)  decreased holdings of liquid assets. 
D)  decreased use of wholesale long-term funding and increased holdings of liquid assets. 
A)  increased use of wholesale long-term funding. 
B)  decreased use of wholesale long-term funding. 
C)  decreased holdings of liquid assets. 
D)  decreased use of wholesale long-term funding and increased holdings of liquid assets.

Question 7

Which of the following is a reason for the increase in the number of banks since the mid-1980s?

Accepted Answer

A)  Relaxation of entry requirements into the Australian banking industry. 
B)  Changes in the regulatory requirements of non-bank depository institutions. 
C)  The need for a more sophisticated banking system in Australia. 
D)  Relaxation of entry requirements into the Australian banking industry and changes in the regulatory requirements of non-bank depository institutions. 
A)  Relaxation of entry requirements into the Australian banking industry. 
B)  Changes in the regulatory requirements of non-bank depository institutions. 
C)  The need for a more sophisticated banking system in Australia. 
D)  Relaxation of entry requirements into the Australian banking industry and changes in the regulatory requirements of non-bank depository institutions.

Question 8

ASIC stands for Australian Society of Inter-bank Cooperation and ASIC is responsible for market integrity and consumer protection across the financial system.

Accepted Answer

A) True 
 B)False

Question 9

The major reasons for the shift in the composition of bank lending commitments from the retail market to the commercial market are the:

Accepted Answer

A)  introduction of capital adequacy regulations in 1989. 
B)  number of non-bank depository institutions that gained banking licences in the early 1990s. 
C)  fact that commercial loans paid higher returns than housing loans. 
D)  None of the listed options are correct as the shift was from commercial loans to housing loans. 
A)  introduction of capital adequacy regulations in 1989. 
B)  number of non-bank depository institutions that gained banking licences in the early 1990s. 
C)  fact that commercial loans paid higher returns than housing loans. 
D)  None of the listed options are correct as the shift was from commercial loans to housing loans.

Question 10

In which way did building societies respond to the competitive pressures resulting from the deregulation of the banking system in the 1980s?

Accepted Answer

A)  They engaged in mergers for efficiency and scale reasons. 
B)  They adopted improved technology. 
C)  They diversified their products and activities. 
D)  All of the listed options are correct. 
A)  They engaged in mergers for efficiency and scale reasons. 
B)  They adopted improved technology. 
C)  They diversified their products and activities. 
D)  All of the listed options are correct.

Question 11

The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is true of off-balance-sheet activities?

Accepted Answer

A)  They involve generation of fees without exposure to any risk. 
B)  They include contingent activities recorded in the current balance sheet. 
C)  They invite regulatory costs and additional 'taxes'. 
D)  They have both risk-reducing as well as risk-increasing attributes. 
A)  They involve generation of fees without exposure to any risk. 
B)  They include contingent activities recorded in the current balance sheet. 
C)  They invite regulatory costs and additional 'taxes'. 
D)  They have both risk-reducing as well as risk-increasing attributes.

Question 13

Explain the Post Wallis Inquiry regulatory framework in Australia.

Accepted Answer

Australia's current financial regulatory

Question 14

Which of the following statements is true?

Accepted Answer

A)  Building societies are depository institutions. 
B)  Building societies usually operate on a cooperative basis. 
C)  In case of building societies the depositors are also members of the society. 
D)  All of the listed options are correct. 
A)  Building societies are depository institutions. 
B)  Building societies usually operate on a cooperative basis. 
C)  In case of building societies the depositors are also members of the society. 
D)  All of the listed options are correct.

Question 15

Which of the following statements is true?

Accepted Answer

A)  An off-balance-sheet item is recorded on the balance sheet of a financial institution when the annual report is being prepared. 
B)  An off-balance-sheet liability is an item that moves onto the liability side of the balance sheet when a contingent event occurs. 
C)  An off-balance-sheet asset is an item that moves onto the asset side of the balance sheet when a contingent event occurs or at the end of a financial period. 
D)  All of the listed options are correct. 
A)  An off-balance-sheet item is recorded on the balance sheet of a financial institution when the annual report is being prepared. 
B)  An off-balance-sheet liability is an item that moves onto the liability side of the balance sheet when a contingent event occurs. 
C)  An off-balance-sheet asset is an item that moves onto the asset side of the balance sheet when a contingent event occurs or at the end of a financial period. 
D)  All of the listed options are correct.

Question 16

Which of the following statements is true?

Accepted Answer

A)  Authorised depository institutions are those that have been granted an authority by the RBA to operate in Australia. 
B)  Authorised depository institutions are those that have been granted an authority by APRA to operate in Australia. 
C)  Authorised depository institutions are those that have been granted an authority by the Australian Government to operate in Australia. 
D)  Authorised depository institutions are those that have been granted an authority by ASIC to operate in Australia. 
A)  Authorised depository institutions are those that have been granted an authority by the RBA to operate in Australia. 
B)  Authorised depository institutions are those that have been granted an authority by APRA to operate in Australia. 
C)  Authorised depository institutions are those that have been granted an authority by the Australian Government to operate in Australia. 
D)  Authorised depository institutions are those that have been granted an authority by ASIC to operate in Australia.

Question 17

During the 1960s and 1970s, the growth of credit unions ensured an increasing supply of funds for housing loans at reasonable rates, while the building society expansion ensured the availability of relatively low cost unsecured and secured personal loans.

Accepted Answer

A) True 
 B)False

Question 18

Compare and contrast credit unions with the major banks.

Accepted Answer

In Australia, banks and credit unions ar

Question 19

Following the global financial crisis, banks strengthened their funding and liquidity profiles by:

Accepted Answer

A)  reducing their holdings of liquid assets. 
B)  increasing their holdings of liquid assets. 
C)  reducing their use of wholesale funds and increasing their holdings of liquid assets. 
D)  increasing their use of wholesale funds and decreasing their holdings of liquid assets. 
A)  reducing their holdings of liquid assets. 
B)  increasing their holdings of liquid assets. 
C)  reducing their use of wholesale funds and increasing their holdings of liquid assets. 
D)  increasing their use of wholesale funds and decreasing their holdings of liquid assets.

Question 20

Covered bonds:

Accepted Answer

A)  were introduced following the GFC to ease liquidity pressures on the bank's balance sheet. 
B)  are issued by a bank, backed by a pool of assets, which remain on the balance sheet of the issuing bank. 
C)  are issued by a bank, backed by a pool of assets, which are off-balance-sheet items of the issuing bank. 
D)  are issued by the Reserve Bank of Australia to FIs with liquidity problems. 
A)  were introduced following the GFC to ease liquidity pressures on the bank's balance sheet. 
B)  are issued by a bank, backed by a pool of assets, which remain on the balance sheet of the issuing bank. 
C)  are issued by a bank, backed by a pool of assets, which are off-balance-sheet items of the issuing bank. 
D)  are issued by the Reserve Bank of Australia to FIs with liquidity problems.

Which of the following statements is true for the Australian banking industry?

Discuss the factors that contributed to Australia's financial resilience and relatively strong performance during the global financial crisis.

Responding to the financial crisis, the Australian government introduced a number of measures to ease liquidity issues and included the following:

PAIRS provides APRA with a score-card approach to assessing the risk of FI failure and the impact of any failure by detailing the 12 risk elements separately and disclosing the result to the FI being investigated.

Which of the following is a role of a bank?

The collapse of Lehman Brothers in 2008 and the impact of the global financial crisis made it difficult for Australian banks to obtain off-shore funding. As a consequence banks pursued more stable sources of: funds. These strategies include:

Which of the following is a reason for the increase in the number of banks since the mid-1980s?

ASIC stands for Australian Society of Inter-bank Cooperation and ASIC is responsible for market integrity and consumer protection across the financial system.

The major reasons for the shift in the composition of bank lending commitments from the retail market to the commercial market are the:

In which way did building societies respond to the competitive pressures resulting from the deregulation of the banking system in the 1980s?

The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.

Which of the following is true of off-balance-sheet activities?

Explain the Post Wallis Inquiry regulatory framework in Australia.

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

During the 1960s and 1970s, the growth of credit unions ensured an increasing supply of funds for housing loans at reasonable rates, while the building society expansion ensured the availability of relatively low cost unsecured and secured personal loans.

Compare and contrast credit unions with the major banks.

Following the global financial crisis, banks strengthened their funding and liquidity profiles by:

Covered bonds:

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

Which of the following statements is true for the Australian banking industry?

Discuss the factors that contributed to Australia's financial resilience and relatively strong performance during the global financial crisis.

Responding to the financial crisis, the Australian government introduced a number of measures to ease liquidity issues and included the following:

PAIRS provides APRA with a score-card approach to assessing the risk of FI failure and the impact of any failure by detailing the 12 risk elements separately and disclosing the result to the FI being investigated.

Which of the following is a role of a bank?

The collapse of Lehman Brothers in 2008 and the impact of the global financial crisis made it difficult for Australian banks to obtain off-shore funding. As a consequence banks pursued more stable sources of: funds. These strategies include:

Which of the following is a reason for the increase in the number of banks since the mid-1980s?

ASIC stands for Australian Society of Inter-bank Cooperation and ASIC is responsible for market integrity and consumer protection across the financial system.

The major reasons for the shift in the composition of bank lending commitments from the retail market to the commercial market are the:

In which way did building societies respond to the competitive pressures resulting from the deregulation of the banking system in the 1980s?

The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.

Which of the following is true of off-balance-sheet activities?

Explain the Post Wallis Inquiry regulatory framework in Australia.

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

During the 1960s and 1970s, the growth of credit unions ensured an increasing supply of funds for housing loans at reasonable rates, while the building society expansion ensured the availability of relatively low cost unsecured and secured personal loans.

Compare and contrast credit unions with the major banks.

Following the global financial crisis, banks strengthened their funding and liquidity profiles by:

Covered bonds:

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