Question 1

Euro credits feature rollover pricing.

Accepted Answer

A)  Rollover pricing was created on Euro credits so that Euro banks do not end up paying more on Euro currency time deposits than they earn from the loans.
B)  Because of the rollover pricing feature,a Euro credit may be viewed as a series of shorter-term loans,where at the end of each time period (generally three or six months) ,the loan is rolled over and the base lending rate is repriced to current LIBOR over the next time interval of the loan.
C)  The lending rate on these Euro credits is stated as LIBOR + X percent,where X is the lending margin charged depending upon the credit worthiness of the borrower.LIBOR is reset according to a set schedule.
D)  all of the optionsE) C) and D)
F) None of the above

Question 2

Edge Act banks

Accepted Answer

A)  are not prohibited from owning equity in business corporations.
B)  are prohibited from owning equity in business corporations.
C)  could be prohibited (or not) from owning equity in business corporations.
D)  none of the optionsE) All of the above
F) B) and D)

Question 3

A representative office

Accepted Answer

A)  is what lawyers' offices are called in Mexico.
B)  is a small service facility staffed by parent bank personnel that is designed to assist MNC clients of the parent bank in dealings with the bank's correspondents.
C)  is a small service facility staffed by correspondent bank personnel that is designed to assist MNC clients of the parent bank in dealings with the bank's correspondents.
D)  none of the optionsE) None of the above
F) B) and C)

Question 4

The major legislation controlling the operation of foreign banks in the U.S.

Accepted Answer

A)  specifies that foreign branch banks operating in the U.S.must comply with U.S.banking regulations just like U.S.banks.
B)  specifies that foreign branch banks operating in the U.S.must comply with their country-of-origin banking regulations just like U.S.banks operating abroad.
C)  specifies that the "shell" branches are illegal for U.S.and foreign banks.
D)  specifies that foreign branch banks operating in the U.S.must comply with U.S.banking regulations just like U.S.banks,and also specifies that the "shell" branches are illegal for U.S.and foreign banks.E) C) and D)
F) A) and B)

Question 5

A foreign branch bank

Accepted Answer

A)  is a small service facility staffed by parent bank personnel that is designed to assist MNC clients of the parent bank in dealings with the bank's correspondents.
B)  operates like a local bank,but legally is a part of the parent bank.
C)  is subject to domestic regulation only.
D)  all of the optionsE) A) and C)
F) B) and C)

Question 6

In reference to capital requirements,value-at-risk analysis

Accepted Answer

A)  refers to traditional bank loans and deposits.
B)  refers to a "risk-focused" approach to determining adequate bank capital.
C)  provides a level of confidence measure of the probability of the maximum loss that can occur during a period of time.
D)  refers to a "risk-focused" approach to determining adequate bank capital and provides a level of confidence measure of the probability of the maximum loss that can occur during a period of time.E) B) and D)
F) B) and C)

Question 7

Correspondent bank relationships can be beneficial

Accepted Answer

A)  because a bank can service its MNC clients at a very low cost.
B)  because a bank can service its MNC clients without the need to have personnel in many different countries.
C)  because a bank can service its MNC clients without developing its own foreign facilities to service its clients.
D)  all of the optionsE) B) and C)
F) None of the above

Question 8

A "three against nine" forward rate agreement

Accepted Answer

A)  could call for a buyer to sell a six-month Eurobond in three months at prices agreed upon today.
B)  could call for a buyer to pay the seller the increased interest cost on a notational amount if six-month interest rates fall below an agreed rate beginning three months from now and ending nine months from now.
C)  is a forward contract on a three-month Eurobond with a nine-month maturity.
D)  is a forward contract on a nine-month Eurobond with a three-month maturity.E) A) and B)
F) A) and C)

Question 9

Offshore banks

Accepted Answer

A)  are frequently located on old oil drilling platforms located in international waters.
B)  are often located in "pariah" countries like North Korea and Iran.
C)  operate as branches or subsidiaries of the parent bank.
D)  none of the optionsE) A) and B)
F) A) and C)

Question 10

A bank may establish a multinational operation for the reason of retail defensive strategy.The underlying rationale being that

Accepted Answer

A)  banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational's foreign subsidiaries.
B)  multinational banking operations help a bank prevent the erosion of its traveler's check,tourist,and foreign business markets from foreign bank competition.
C)  by maintaining foreign branches and foreign currency balances,banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented.
D)  multinational banks are often not subject to the same regulations as domestic banks.There may be reduced need to publish adequate financial information,lack of required deposit insurance and reserve requirements on foreign currency deposits,and the absence of territorial restrictions.E) B) and C)
F) A) and D)

Question 11

Major distinguishing features between domestic banks and international banks are

Accepted Answer

A)  the types of deposits they accept.
B)  the types of loans and investments they make.
C)  membership in loan syndicates.
D)  all of the optionsE) A) and C)
F) B) and C)

Question 12

One enduring truth of banking is that

Accepted Answer

A)  for some reason,bankers always seem willing to lend huge amounts to borrowers with a limited potential to repay.
B)  credit ratings work,but only in the aggregate.
C)  when liquidity dries up,bankers are typically able to ride out the storm by buying up other investors debt at pennies on the dollar,holding it until the crisis is over,and then selling at a huge profit.
D)  none of the optionsE) B) and C)
F) A) and D)

Question 13

The models that the credit rating firms (e.g.,Moody's,S&P,and Fitch) used to evaluate the risk of the various tranches of MBS debt and thereby assign a credit rating (e.g.AAA,AA-BB,or unrated) were

Accepted Answer

A)  right on target,but only in the aggregate.
B)  poorly specified.
C)  superfluous,since the CDOs turned out to be backed by the full faith and credit of the U.S.Treasury.
D)  super models,and while as a group they were not so good at evaluating credit risk,they made up for it with their good looks and impeccable fashion sense.E) B) and C)
F) C) and D)

Question 14

The LIBOR rate for euro

Accepted Answer

A)  is EURIBOR.
B)  is a government set rate.
C)  is the rate at which Interbank deposits of euro are offered by one prime bank to another in the euro zone.
D)  is EURIBOR,and is the rate at which Interbank deposits of euro are offered by one prime bank to another in the euro zone.E) A) and B)
F) B) and C)

Question 15

Which of the following are principles of sound banking behavior?

Accepted Answer

A)  Avoid an undue concentration of loans to single activities.
B)  Control mismatches between assets and liabilities.
C)  Expand cautiously into unfamiliar activities.
D)  all of the optionsE) None of the above
F) C) and D)

Question 16

A bank may establish a multinational operation for the reason of prestige.The underlying rationale being that

Accepted Answer

A)  local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiary's home country than they can obtain from their own domestic banks.
B)  the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market.
C)  very large multinational banks have high perceived prestige,liquidity,and deposit safety that can be used to attract clients abroad.
D)  multinational banks are often not subject to the same regulations as domestic banks.There may be reduced need to publish adequate financial information,lack of required deposit insurance and reserve requirements on foreign currency deposits,and the absence of territorial restrictions.E) All of the above
F) A) and B)

Question 17

Approximately ________ of wholesale Euro bank external liabilities come from fixed time deposits,the remainder from Negotiable Certificates of Deposit.

Accepted Answer

A)  50 percent
B)  75 percent
C)  90 percent
D)  none of the optionsE) All of the above
F) A) and C)

Question 18

An affiliate bank is

Accepted Answer

A)  a locally incorporated bank that is wholly owned by a foreign parent.
B)  a locally incorporated bank that is majority owned by a foreign parent.
C)  a locally incorporated bank that is partially owned (but not controlled) by a foreign parent.
D)  a locally incorporated bank that is wholly (or majority) owned by a foreign parent.E) None of the above
F) All of the above

Question 19

Banks that both perform traditional commercial banking functions and engage in investment banking activities are often called

Accepted Answer

A)  international service banks.
B)  investment banks.
C)  commercial banks.
D)  merchant banks.E) A) and D)
F) All of the above

Question 20

International banks are different from domestic banks in what way(s) ?

Accepted Answer

A)  International banks can arrange trade financing.
B)  International banks can arrange for foreign exchange transactions.
C)  International banks can assist their clients in hedging exchange rate risk.
D)  all of the optionsE) B) and C)
F) A) and D)

Exam 11: International Banking and Money Market

Which of the following are principles of sound banking behavior?

Correct AnswerverifiedShow Answer

Banks that both perform traditional commercial banking functions and engage in investment banking activities are often called

Correct AnswerverifiedShow Answer

A "three against nine" forward rate agreement

Correct AnswerverifiedShow Answer

In reference to capital requirements,value-at-risk analysis

Correct AnswerverifiedShow Answer

An affiliate bank is

Correct AnswerverifiedShow Answer

A bank may establish a multinational operation for the reason of prestige.The underlying rationale being that

Correct AnswerverifiedShow Answer

The LIBOR rate for euro

Correct AnswerverifiedShow Answer

A bank may establish a multinational operation for the reason of retail defensive strategy.The underlying rationale being that

Correct AnswerverifiedShow Answer

Edge Act banks

Correct AnswerverifiedShow Answer

Euro credits feature rollover pricing.

Correct AnswerverifiedShow Answer

Correspondent bank relationships can be beneficial

Correct AnswerverifiedShow Answer

The models that the credit rating firms (e.g.,Moody's,S&P,and Fitch) used to evaluate the risk of the various tranches of MBS debt and thereby assign a credit rating (e.g.AAA,AA-BB,or unrated) were

Correct AnswerverifiedShow Answer

A foreign branch bank

Correct AnswerverifiedShow Answer

Approximately ________ of wholesale Euro bank external liabilities come from fixed time deposits,the remainder from Negotiable Certificates of Deposit.

Correct AnswerverifiedShow Answer

International banks are different from domestic banks in what way(s) ?

Correct AnswerverifiedShow Answer

A representative office

Correct AnswerverifiedShow Answer

The major legislation controlling the operation of foreign banks in the U.S.

Correct AnswerverifiedShow Answer

Major distinguishing features between domestic banks and international banks are

Correct AnswerverifiedShow Answer

Offshore banks

Correct AnswerverifiedShow Answer

One enduring truth of banking is that

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified