Question 1

How can interest income of an FI be increased 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 2

Which of the following implies that small FIs are more cost efficient than large FIs, and that in a freely competitive environment for financial services, small FIs may outperform their larger counterparts?

Accepted Answer

A) economies of scale 
B) diseconomies of scale 
C) economies of scope 
D) diseconomies of scope 
A) economies of scale 
B) diseconomies of scale 
C) economies of scope 
D) diseconomies of scope

Question 3

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.

Question 4

Cost inefficiencies related to managerial performance and other hard-to-quantify factors are also called X-inefficiencies.

Accepted Answer

A) True 
 B)False

Question 5

Economies of scale refers to the:

Accepted Answer

A) fall in an FI's average costs of production as its output decreases. 
B) fall in an FI's average costs of production as its output increases. 
C) fall in an FI's average costs of production as its output remains stable. 
D) increase in an FI's average costs of production as its output increases. 
A) fall in an FI's average costs of production as its output decreases. 
B) fall in an FI's average costs of production as its output increases. 
C) fall in an FI's average costs of production as its output remains stable. 
D) increase in an FI's average costs of production as its output increases.

Question 6

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.Further assume that if the two banks merged they would be able to achieve $50 000 in cost efficiencies.What is the average cost of producing products A and B if the two institutions merged (round to two decimals)?

Accepted Answer

A) 3.14 per cent 
B) 5.08 per cent 
C) 5.67 per cent 
D) 2.57 per cent 
A) 3.14 per cent 
B) 5.08 per cent 
C) 5.67 per cent 
D) 2.57 per cent

Question 7

Economies of scope refers to the:

Accepted Answer

A) fall in an FI's average costs of production as its output increases. 
B) increase in an FI's average costs of production as its output increases. 
C) situation in which the costs of joint production of FI services are higher than they would be if they were produced independently. 
D) ability of an FI to generate synergistic cost savings through joint use of inputs in producing multiple outputs. 
A) fall in an FI's average costs of production as its output increases. 
B) increase in an FI's average costs of production as its output increases. 
C) situation in which the costs of joint production of FI services are higher than they would be if they were produced independently. 
D) ability of an FI to generate synergistic cost savings through joint use of inputs in producing multiple outputs.

Question 8

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 9

A major advantage of EFTPOS is that:

Accepted Answer

A) the transaction value will be debited from the customer's account at a later point in time. 
B) customers can use cheques to pay for their purchases. 
C) customers do not have to carry cash to make purchases. 
D) All of the listed options are correct. 
A) the transaction value will be debited from the customer's account at a later point in time. 
B) customers can use cheques to pay for their purchases. 
C) customers do not have to carry cash to make purchases. 
D) All of the listed options are correct.

Question 10

Distinguish between diseconomies of scale and diseconomies of scope.How could they occur?

Accepted Answer

Diseconomies of scale occur when the ave

Question 11

Which of the following statements is true?

Accepted Answer

A) FIs should invest in as much technology as possible as it will provide the FI with a competitive advantage. 
B) FIs need to strike a balance as both, too much and too little investment in technology can be bad for the FI. 
C) FIs 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) FIs should invest in as much technology as possible as it will provide the FI with a competitive advantage. 
B) FIs need to strike a balance as both, too much and too little investment in technology can be bad for the FI. 
C) FIs 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 12

How can operating expenses 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 13

External insurance is one way of operational risk loss prevention.

Accepted Answer

A) True 
 B)False

Question 14

Potential reasons that technologically based product innovations result in a negative net present value are:

Accepted Answer

A) competitors' ability to mimic these products after long periods of time. 
B) uncertainties over revenues and costs of these projects. 
C) uncertainties over revenues and costs of these projects and competitors' ability to mimic these products after long periods of time. 
D) certainty of cash flows and competitors' ability to mimic these products quickly. 
A) competitors' ability to mimic these products after long periods of time. 
B) uncertainties over revenues and costs of these projects. 
C) uncertainties over revenues and costs of these projects and competitors' ability to mimic these products after long periods of time. 
D) certainty of cash flows and competitors' ability to mimic these products quickly.

Question 15

Which of the following are potential benefits of technology for an FI?

Accepted Answer

A) Service quality, especially for customers of large banks. 
B) The rate of innovation of new products has increased. 
C) FIs can more easily cross-market new and existing products to customers. 
D) All of the listed options are correct. 
A) Service quality, especially for customers of large banks. 
B) The rate of innovation of new products has increased. 
C) FIs can more easily cross-market new and existing products to customers. 
D) All of the listed options are correct.

Question 16

To offset costs arising from operational risks, FI managers spend considerable efforts on the following:

Accepted Answer

A) Loss prevention, loss control, loss financing and loss insulation. 
B) Loss prevention, loss control, loss investment and loss insulation. 
C) Loss provisioning, loss control, loss financing and loss insulation. 
D) Loss prevention, loss control, loss financing and loss creation. 
A) Loss prevention, loss control, loss financing and loss insulation. 
B) Loss prevention, loss control, loss investment and loss insulation. 
C) Loss provisioning, loss control, loss financing and loss insulation. 
D) Loss prevention, loss control, loss financing and loss creation.

Question 17

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 18

Which of the following statements is false?

Accepted Answer

A) Large-scale investments may result in excess capacity problems. 
B) Large-scale investments may result in integration problems. 
C) Large-scale investments may result in problems of capacity constraints. 
D) Large-scale investments may result in cost overruns. 
A) Large-scale investments may result in excess capacity problems. 
B) Large-scale investments may result in integration problems. 
C) Large-scale investments may result in problems of capacity constraints. 
D) Large-scale investments may result in cost overruns.

Question 19

Retail customers mostly prefer to obtain their cash by withdrawing it from an ATM.Since 2005:

Accepted Answer

A) there has been a general upward trend in the growth of ATM use. 
B) growth in ATM use has been static. 
C) there has been a general downward trend in the growth of ATM use. 
D) None of the listed options are correct. 
A) there has been a general upward trend in the growth of ATM use. 
B) growth in ATM use has been static. 
C) there has been a general downward trend in the growth of ATM use. 
D) None of the listed options are correct.

Question 20

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

Accepted Answer

A) True 
 B)False

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

Which of the following implies that small FIs are more cost efficient than large FIs, and that in a freely competitive environment for financial services, small FIs may outperform their larger counterparts?

Daylight overdrafts occur when:

Cost inefficiencies related to managerial performance and other hard-to-quantify factors are also called X-inefficiencies.

Economies of scale refers to the:

Economies of scope refers to the:

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

A major advantage of EFTPOS is that:

Distinguish between diseconomies of scale and diseconomies of scope.How could they occur?

Which of the following statements is true?

How can operating expenses of an FI be reduced by improved technological efficiency?

External insurance is one way of operational risk loss prevention.

Potential reasons that technologically based product innovations result in a negative net present value are:

Which of the following are potential benefits of technology for an FI?

To offset costs arising from operational risks, FI managers spend considerable efforts on the following:

Which of the following expressions describes economies of scope?

Which of the following statements is false?

Retail customers mostly prefer to obtain their cash by withdrawing it from an ATM.Since 2005:

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

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

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

Capital Management and Adequacy

Filters

Exam 17: Technology and Other Operational Risk

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

Which of the following implies that small FIs are more cost efficient than large FIs, and that in a freely competitive environment for financial services, small FIs may outperform their larger counterparts?

Daylight overdrafts occur when:

Cost inefficiencies related to managerial performance and other hard-to-quantify factors are also called X-inefficiencies.

Economies of scale refers to the:

Economies of scope refers to the:

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

A major advantage of EFTPOS is that:

Distinguish between diseconomies of scale and diseconomies of scope.How could they occur?

Which of the following statements is true?

How can operating expenses of an FI be reduced by improved technological efficiency?

External insurance is one way of operational risk loss prevention.

Potential reasons that technologically based product innovations result in a negative net present value are:

Which of the following are potential benefits of technology for an FI?

To offset costs arising from operational risks, FI managers spend considerable efforts on the following:

Which of the following expressions describes economies of scope?

Which of the following statements is false?

Retail customers mostly prefer to obtain their cash by withdrawing it from an ATM.Since 2005:

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

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

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

Capital Management and Adequacy

Filters