Question

QUESTION 3

Who benefits the most from the minimum capital requirements imposed by Basel regulation?

	A.	The regulator in charge of implementing the regulation in a given country.
	B.	Shareholders of the bank.
	C.	The borrowers who got loans from the banks.
	D.	Banks' creditors who do not benefit from a government protection.
	E.	Depositors who are protected by a government deposit insurance.

QUESTION 4

Country A raises its countercyclical buffer from 0% to 1% while Country B lowers its countercyclical buffer from 1% to 0%.

Which of the following statements is NOT correct?

	A.	Banks in Country B have now a larger capacity to write off assets, without breaching the minimum capital requirements.
	B.	Regulator in Country B  thinks that the negative event is about to unfold or is already unfolding.
	C.	The regulator in Country A is expecting a negative event in the future.
	D.	Banks in Country A are likely to increase the risk of their assets and/or the size of their assets if they cannot issue shares or increased retain profits.
	E.	Banks in Country B do not need to contract their assets and/or decrease the risk of their assets if they lose some equity.

QUESTION 5

The bank's provisions for bad and doubtful debt (lending provisions) amount to $16 million. The bank writes off $24 million non-performing loans.

As a result of the write off, the gross loans _____________________, the lending provisions _____________________ and bank's equity _______________.

	A.	decreases by $16 million; increases by $24 million;  decreases by $8 million
	B.	decreases by $16 million; does not change; does not change.
	C.	decreases by $24; decreases by $24 million; decreases by $8 million.
	D.	decreases by $16 million; decreases by $16 million; does not change.
	E.	decreases by $24 million; decreases by $16 million; decreases by $8 million.

QUESTION 6

1. A prior purchase agreement is a(n) ______________ and ________________ in ASIC relief list.

   	A.	naked short sale; is
   	B.	covered short sale; is
   	C.	naked short sale; is NOT
   	D.	ordinary sale; is
   	E.	covered short sale; is NOT

QUESTION 7

Which of the following statements is correct?

A traditional closed-ended managed fund _______________________________.

	A.	raises funds through the issue of shares and debt.
	B.	has a fixed number of shares on issue.
	C.	is subject to withdrawals by investors
	D.	issues non-tradable equity instruments.
	E.	takes short positions.

QUESTION 8

Which of the following statements is NOT correct?

Retail investors in ETF shares  ____________________________.

	A.	can benefit from intraday trade for their shares.
	B.	can sell their shares in the stock market.
	C.	can either resell the ETF shares to another investor or redeem the ETF shares by bringing them back to the ETF.
	D.	can be exposed to a diversified portfolio of assets, if the ETF mimics the  composition of ASX 200 index.
	E.	can buy ETF shares on the secondary market.

QUESTION 9

At the beginning of first quarter 2020, the bank buys a trading security for $150. At the end of the first quarter the price is $170. The bank sells the security at $200 at the end of the second quarter 2020.

In net, over the second quarter (i.e. comparing situation at two moments in time: at the beginning and the end of the second quarter), the bank shareholders' equity ______________, the retained profit ___________________ and the capital reserve _____________________.

	A.	decreased by $50; decreased by $50; did not change
	B.	increased by $30; increased by $30; did not change
	C.	increased by $50; increased by $50; decreased by $20
	D.	did not change; increased by $30; decreased by $50
	E.	increased by $30; increased by $30; decreased by $20

QUESTION 10

A bank had bought shares with the objective of benefiting from a capital gain. However, prices in the stock market have been going down due to the  Covid-19 crisis.  If the crisis became more serious, the bank could be exceptionally authorized by the regulator to reclassify the shares from _________ to _________ in order to stop any further loss of the bank's equity.

	A.	trading securities ; available-for-sale securities
	B.	investment securities ; available-for-sale securities
	C.	trading securities ; investment securities
	D.	investment securities ; trading securities
	E.	available-for-sale securities ; investment securities

QUESTION 12

Which of the following items is NOT part of CET1 capital?

	A.	Ordinary shares issued
	B.	Non cumulative preference shares
	C.	Current profit
	D.	Capital reserve
	E.	Accumulated past retained profits

QUESTION 13

A security borrowing agreement takes place at T followed by a sell order/match of the security at T+3.

Which of the following statements is CORRECT?

The borrower becomes the official owner of the security at    _____________    and at the time of the sale order, the sale is a __________________.

	A.	T+5; ordinary sale
	B.	T+1; naked short sale
	C.	T+ 2; ordinary sale
	D.	T+2 ; covered short sale
	E.	T; covered short sale

QUESTION 14

Consider a bank statement of financial position.

Which of the following statement is NOT correct?

	A.	Unrealized capital gain on investment securities affects bank's assets but do not affect bank's equity.
	B.	A change in the market value of available-for-sale securities affects bank's assets and bank's capital reserve.
	C.	A write off of a loan decreases gross loans.
	D.	A new charge for bad and doubtful debt decreases net loans.
	E.	A loan from another bank increases the bank's liabilities and the bank's holding of ESF.

QUESTION 17

The conversion of capital notes to ordinary shares ________________________________.

	A.	increases CET1, Additional Tier 1, Tier 1, and Total capital
	B.	increases CET1 capital and leaves Tier 1 capital unchanged.
	C.	increases CET1 and Total capital
	D.	decreases Additional Tier 1 and Tier 1 capital and leaves Total capital unchanged.
	E.	decreases additional Tier 1 and Total capital

Answer 1

3) Option D is the correct answer

Basel Capital requirements were introduced to ensure the security of the banking system and avoid the accumulation of non perfoming assets in the banks' balance sheet. It keeps a check on the reckless lending by the banks.

Statement D : Those creditors who are not under the government's protection are most vulnerable to the bank failure so the minimum requirement set by BASEL will ensure that no such abrupt failure of bank can take place and money deposited in those bank will remain safe even during stress conditions.

Statement A : A country's regulator is not much affected from the basel requirements. They have to keep a check on the banks to meet the limits

Statement B : A shareholder of bank is indeed benefited as it reduces the failures of the bank but they were earlier under some kind of protection

Statement C : Borrowers who got loans from bank will find it difficult to get loan further as the bank will tighten its lending mechanism

Statement E : Those lendors who are under government protection will not face much effect.