Question 1

Measuring stored liquidity is easy because many assets cannot be clearly classified as liquid or non-liquid.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is true?

Accepted Answer

A) In the current situation, only small FIs have to hold 9 per cent of their liabilities in specified high-quality liquefiable assets. 
B) Currently, FIs are required to have in place a regulator-approved liquidity management strategy. 
C) Currently, FIs are not subject to the user-pays approach. 
D) Currently, FIs are required to have in place a regulator-approved liquidity management strategy and only small FIs have to hold 9 per cent of their liabilities in specified high-quality liquefiable assets. 
A) In the current situation, only small FIs have to hold 9 per cent of their liabilities in specified high-quality liquefiable assets. 
B) Currently, FIs are required to have in place a regulator-approved liquidity management strategy. 
C) Currently, FIs are not subject to the user-pays approach. 
D) Currently, FIs are required to have in place a regulator-approved liquidity management strategy and only small FIs have to hold 9 per cent of their liabilities in specified high-quality liquefiable assets.

Question 3

Historically, asset liquidity was the primary method by which banks met cash demands.

Accepted Answer

A) True 
 B)False

Question 4

Funding costs generally are positively related to the period of time the liability remains on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following liability products does not have withdrawal risk?

Accepted Answer

A) wholesale CDs 
B) money market deposit accounts 
C) cheque and retail saving accounts 
D) All of the given options have withdrawal risk. 
A) wholesale CDs 
B) money market deposit accounts 
C) cheque and retail saving accounts 
D) All of the given options have withdrawal risk.

Question 6

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 7

Which of the following are characteristics of a liquid asset?

Accepted Answer

A) The asset can be turned into cash quickly. 
B) Turning the asset into cash will result in low transaction costs. 
C) Turning the asset into cash will result in little or no loss in principal value. 
D) All of the listed options are correct. 
A) The asset can be turned into cash quickly. 
B) Turning the asset into cash will result in low transaction costs. 
C) Turning the asset into cash will result in little or no loss in principal value. 
D) All of the listed options are correct.

Question 8

The Reserve Bank of Australia has responsibility for providing depositor protection.This is seen as:

Accepted Answer

A) a blanket guarantee for all deposits and a protection against all FIs' failure. 
B) the RBA using its available powers in the interest of protecting depositors' funds. 
C) deposit insurance for all FIs. 
D) All of the listed options are correct. 
A) a blanket guarantee for all deposits and a protection against all FIs' failure. 
B) the RBA using its available powers in the interest of protecting depositors' funds. 
C) deposit insurance for all FIs. 
D) All of the listed options are correct.

Question 9

Liquid asset ratio describes:

Accepted Answer

A) The minimum ratio of liquid assets to total equity set by the central bank. 
B) The minimum ratio of liquid assets to total liabilities set by the central bank 
C) The minimum ratio of liquid assets to total assets set by the central bank. 
D) None of the listed options are correct. 
A) The minimum ratio of liquid assets to total equity set by the central bank. 
B) The minimum ratio of liquid assets to total liabilities set by the central bank 
C) The minimum ratio of liquid assets to total assets set by the central bank. 
D) None of the listed options are correct.

Question 10

Basel III liquidity reforms:

Accepted Answer

A) will strengthen global illiquidity rules with the key aim of promoting a resilient global sector. 
B) introduce the need for adequate high-quality liquid assets that meet the available stable funding (ASF) requirement 
C) introduce the need for adequate high-quality liquid assets that meet the net stable funding ratio (NSFR). 
D) introduce the need for adequate high-quality liquid assets that meet the liquidity coverage ratio (LCR). 
A) will strengthen global illiquidity rules with the key aim of promoting a resilient global sector. 
B) introduce the need for adequate high-quality liquid assets that meet the available stable funding (ASF) requirement 
C) introduce the need for adequate high-quality liquid assets that meet the net stable funding ratio (NSFR). 
D) introduce the need for adequate high-quality liquid assets that meet the liquidity coverage ratio (LCR).

Question 11

Which one of the following statements relating to scenario analysis is incorrect?

Accepted Answer

A) Going-concern scenario relates to 'normal' behaviour of cash flows in the ordinary course of business. 
B) Going-concern scenario relates to 'abnormal' behaviour of cash flows in the ordinary course of business. 
C) Name crisis scenario relates to the FI operating in adverse operating conditions and can fund operations for 5 days. 
D) All of the listed options are correct. 
A) Going-concern scenario relates to 'normal' behaviour of cash flows in the ordinary course of business. 
B) Going-concern scenario relates to 'abnormal' behaviour of cash flows in the ordinary course of business. 
C) Name crisis scenario relates to the FI operating in adverse operating conditions and can fund operations for 5 days. 
D) All of the listed options are correct.

Question 12

What are the withdrawal risks and costs associated with the following types of liabilities? a) cheque account and other demand deposits.
B) fixed-term deposits
C) interbank funds

Accepted Answer

A) CHEQUE ACCOUNT AND OTHER DEMAND DEPOS

Question 13

Which of the following statements is true?

Accepted Answer

A) The stock of liquid assets held in an FI's balance sheet will depend on the FI's willingness to trade off liquidity against returns and on its ability to use purchased liquidity. 
B) The stock of liquid assets held in an FI's balance sheet will depend on the FI's willingness to trade off liquidity against returns but not on its ability to use purchased liquidity. 
C) The stock of liquid assets held in an FI's balance sheet will not depend on the FI's willingness to trade off liquidity against returns, it will depend, however, on its ability to use purchased liquidity. 
D) The stock of liquid assets held in an FI's balance sheet will neither depend on the FI's willingness to trade off liquidity against returns, nor on its ability to use purchased liquidity. 
A) The stock of liquid assets held in an FI's balance sheet will depend on the FI's willingness to trade off liquidity against returns and on its ability to use purchased liquidity. 
B) The stock of liquid assets held in an FI's balance sheet will depend on the FI's willingness to trade off liquidity against returns but not on its ability to use purchased liquidity. 
C) The stock of liquid assets held in an FI's balance sheet will not depend on the FI's willingness to trade off liquidity against returns, it will depend, however, on its ability to use purchased liquidity. 
D) The stock of liquid assets held in an FI's balance sheet will neither depend on the FI's willingness to trade off liquidity against returns, nor on its ability to use purchased liquidity.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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 16

The contagious effect:

Accepted Answer

A) stems from the positive correlation in FI returns. 
B) results when interest rate risk increases credit risk and liquidity risk exposures. 
C) occurs when liquidity risk problems at bad banks damages well-run banks. 
D) is completely eliminated by government provided deposit insurance against bank runs. 
A) stems from the positive correlation in FI returns. 
B) results when interest rate risk increases credit risk and liquidity risk exposures. 
C) occurs when liquidity risk problems at bad banks damages well-run banks. 
D) is completely eliminated by government provided deposit insurance against bank runs.

Question 17

Which of the following statements is true?

Accepted Answer

A) All banks are required to comply with the liquidity coverage ratio by 2015 and will need to hold high-quality liquefiable assets that can be converted to cash to meet liquidity needs for 5 days. 
B) All banks are required to comply with the liquidity coverage ratio by 2015 and will need to hold high-quality liquefiable assets that can be converted to cash to meet liquidity needs for 30 days. 
C) Large banks are required to comply with the liquidity coverage ratio by 2015 and will need to hold high-quality liquefiable assets that can be converted to cash to meet liquidity needs for 30 days, whereas small banks will only need to meet liquidity needs for 5 days. 
D) These days only small banks are subject to the liquidity requirement. 
A) All banks are required to comply with the liquidity coverage ratio by 2015 and will need to hold high-quality liquefiable assets that can be converted to cash to meet liquidity needs for 5 days. 
B) All banks are required to comply with the liquidity coverage ratio by 2015 and will need to hold high-quality liquefiable assets that can be converted to cash to meet liquidity needs for 30 days. 
C) Large banks are required to comply with the liquidity coverage ratio by 2015 and will need to hold high-quality liquefiable assets that can be converted to cash to meet liquidity needs for 30 days, whereas small banks will only need to meet liquidity needs for 5 days. 
D) These days only small banks are subject to the liquidity requirement.

Question 18

The supervision of 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 19

To reduce liquidity risk, an FI can efficiently manage the liability structure of its portfolio.

Accepted Answer

A) True 
 B)False

Question 20

What is the average implicit interest rate on a $100 000 account if the bank's average management costs are $2500 and annual fees average $1750?

Accepted Answer

A) 2.50 per cent 
B) 1.75 per cent 
C) 0.75 per cent 
D) -0.75 per cent 
A) 2.50 per cent 
B) 1.75 per cent 
C) 0.75 per cent 
D) -0.75 per cent

Measuring stored liquidity is easy because many assets cannot be clearly classified as liquid or non-liquid.

Which of the following statements is true?

Historically, asset liquidity was the primary method by which banks met cash demands.

Funding costs generally are positively related to the period of time the liability remains on the balance sheet.

Which of the following liability products does not have withdrawal risk?

Over the past 30 years in the DI industry:

Which of the following are characteristics of a liquid asset?

The Reserve Bank of Australia has responsibility for providing depositor protection.This is seen as:

Liquid asset ratio describes:

Basel III liquidity reforms:

Which one of the following statements relating to scenario analysis is incorrect?

What are the withdrawal risks and costs associated with the following types of liabilities? a) cheque account and other demand deposits. B) fixed-term deposits C) interbank funds

Which of the following statements is true?

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

Which of the following statements is true?

The contagious effect:

Which of the following statements is true?

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

To reduce liquidity risk, an FI can efficiently manage the liability structure of its portfolio.

What is the average implicit interest rate on a $100 000 account if the bank's average management costs are $2500 and annual fees average $1750?

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

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters

Exam 15: Liability and Liquidity Management

Measuring stored liquidity is easy because many assets cannot be clearly classified as liquid or non-liquid.

Which of the following statements is true?

Historically, asset liquidity was the primary method by which banks met cash demands.

Funding costs generally are positively related to the period of time the liability remains on the balance sheet.

Which of the following liability products does not have withdrawal risk?

Over the past 30 years in the DI industry:

Which of the following are characteristics of a liquid asset?

The Reserve Bank of Australia has responsibility for providing depositor protection.This is seen as:

Liquid asset ratio describes:

Basel III liquidity reforms:

Which one of the following statements relating to scenario analysis is incorrect?

What are the withdrawal risks and costs associated with the following types of liabilities? a) cheque account and other demand deposits. B) fixed-term deposits C) interbank funds

Which of the following statements is true?

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

Which of the following statements is true?

The contagious effect:

Which of the following statements is true?

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

To reduce liquidity risk, an FI can efficiently manage the liability structure of its portfolio.

What is the average implicit interest rate on a $100 000 account if the bank's average management costs are $2500 and annual fees average $1750?

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

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters