Exam 17: Technology and Other Operational Risk

Which of the following statements is true?

The most important banking area in which technology has impacted wholesale or corporate customer services is a financial institution's ability to provide:

Which of the following statements is true?

How can operating income of an FI be increased by improved technological efficiency?

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

The following information is available on the average costs of the three major banks in a given local market.Bank A has assets of $10 million and average costs are 15 per cent, Bank B has assets of $20 million and average costs of 13 per cent while Bank C has assets of $30 million with average costs of 12 per cent.Average costs are measured as a proportion of total assets. The above figures indicate that:

Operational risk came into prominence during the global financial crisis (GFC) due to: A)Lehman Brothers using 'recycled collateral' to expand their funding beyond on-balance-sheet assets. B)The classification of 'sophisticated investors' led to investment banks not providing material information about the riskiness of derivative transactions. C)the credit default swap market was likely to cause systemic market risk due to difficulties in settling out trades with distressed or failed counterparties. D)All of the listed options are correct.

Specific problems that can create capital asset risk include:

The term daylight overdraft refers to a situation in which an FI's:

There is little strong evidence that larger multi-product financial service firms enjoy cost advantages over smaller, more specialised firms.

Inputs such as capital and labour cannot be jointly used by FIs.

Which of the following statements is true?

Which of the following wholesale services offered by FIs to businesses allows the FI to combine the email capabilities of the internet with the FIs ability to process payments electronically through the interbank payment networks?

Technological efficiency focuses exclusively on the cost side of financial intermediation.

Assume that ABC Bank produces product A for a corporate client, while XYZ Bank produces product B for the client.The total operating cost for producing product A is $200 000 and $300 000 for product B.The resulting business volumes for the FI are $7 500 000 for product A and $10 000 000 for product B.What is the total average cost of producing products A and B separately (round to two decimals)?

Which of the following observations concerning the production approach is true?

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 observations concerning the intermediation approach is true?

Specific problems that can create employee risk include:

Some benefits of technological advancement for FIs include: