Question 1

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.E) B) and C)
F) A) and B)

Question 2

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.E) A) and C)
F) A) and B)

Question 3

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 centE) A) and B)
F) C) and D)

Question 4

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.E) B) and C)
F) C) and D)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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.E) None of the above
F) A) and C)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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 9

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.E) A) and B)
F) None of the above

Question 10

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 11

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.E) C) and D)
F) A) and B)

Question 12

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.E) A) and D)
F) None of the above

Question 13

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.E) B) and C)
F) B) and D)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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.E) A) and B)
F) B) and D)

Question 16

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) .E) A) and B)
F) A) and C)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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.E) B) and D)
F) All of the above

Question 19

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

Accepted Answer

A)  ASIC.
B)  RBA.
C)  APRA.
D)  ACCC.E) C) and D)
F) All of the above

Question 20

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.E) None of the above
F) C) and D)

Exam 15: Liability and Liquidity Management

Which of the following statements is true?

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

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Over the past 30 years in the DI industry:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA) CHEQUE ACCOUNT AND OTHER DEMAND DEPOS...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following are characteristics of a liquid asset?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Liquid asset ratio describes:

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Basel III liquidity reforms:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

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The contagious effect:

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

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A) CHEQUE ACCOUNT AND OTHER DEMAND DEPOS...
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