Question

1.Assume that you are a supplier in Malaysia. There is one buyer from Vietnam wanted to buy your product using an L/C. Because this is the first time you deal with a buyer from Vietnam, you need to makesure that the buyer's bank is reliable so that the transaction can be completed smoothly. What is the type of L/C you may use in this situation?(1 Point)

Standby L/C

Revocable L/C

Revolving L/C

Confirmed L/C

2.The followings are the reasons of a bank going international EXCEPT(1 Point)

Provides services to its multinational customers

Minimizes geographical risk

Escapes home country's regulatory burden

Follows local government policy forcing banks to go abroad

3.What is a common ex-ante problem that banks face in giving loans?(1 Point)

Moral hazard

Adverse selection

Loan defaults

Loan demands

4.Weak market discipline is mainly caused by(1 Point)

Deposit insurance

Poor regulation

Low managerial discipline

Central bank policy on interest rates

5.Financial crises can lead to(1 Point)

Reduction in banking risk

Reduction in bank market discipline

Reduction in regulatory involvement in regulating banks

Reduction in country's income

6.Supposed you are officer at a bank in Kuala Lumpur. One day, Mr Abdul comes to your bank asking for your advise. He has sold raw materials to a supplier from Thailand using a Letter of Credit (L/C) and now waiting for the payment. However, he needs quick cash to to pay salary of his employees. What is the best advise you can suggest to him?(1 Point)

Ask the supplier's bank to make advance payment to him before the documents are received

Apply for back-to-back L/C to get quick financing from his bank

Use forfaiting service from any forfaiter company

Apply for a new term loan from bank to get instant cash

7.Which type of organizational structure gives the least exposure on legal action to the parent bank?(1 Point)

Branch

Corresponding banking

Subsidiary

Representative office

8.Basel Committee of Banking Supervision formulates supervisory standards and guidelines and recommends sound practices to banking systems around the world. It is compulsory for all countries to adopt the guidelines provided by the committee.(1 Point)

True

False

9.You go to Bank ABC to and give your cheque amounted THB 10,000 in exchange for Malaysian Ringgit. Which rate bank will use?(1 Point)

Buying TT

Buying OD

Selling TT/OD

Buying Notes

10.Which institution ranked as the highest regulatory body in the US banking system?(1 Point)

Federal Deposit Insurance Corporation (FDIC)

The Federal Reserve System

Bank for International Settlement

International Monetary Fund

11.The best payment method to sell products to an affiliated buyer is(1 Point)

Letter of credit

Documentary collection

Trust receipt

Open account

12.Which of the following options is not a product/service provided by a bank?(1 Point)

Commercial paper

Trust receipt

Overdraft

Documentary collection

13.Money is converted into assets or other forms that looks legitimate in economic and financial system. This statement refers to?(1 Point)

Integration

Layering

Placement

Conversion

14.What you need to if your bank is facing a negative gap?(1 Point)

Increase interest-sensitive liablities

Increase interest-sensitive assets

Decrease interest-sensitive assets

Decrease equity capital

15.Bank ABC is not allowed to enter the banking system of Country A using full service foreign bank. Hence, Bank ABC uses correspondent bank instead. Which type of criteria best describes this situation?(1 Point)

Bank's resource constraint

Host's country attitude on foreign bank entry

Tax consideration of a bank

Attitude of home's country

16.What is international banking?(1 Point)

Banking business within home country's border

Banking business beyond home country's border

Banking business involving only home currency

Banking business offered to home citizens only

17.Hard information refers to(1 Point)

Information on borrower's creditworthiness based on close relationshion between lenders and borrowers

Information on borrower's financial data stored in bank database

Information on bank's assets and liability that are hard to liquidize

Information on bank's lending portfolios

18.Which institution acts as the bank for central banks?(1 Point)

International Monetary Funds

World Bank

Bank for International Settlement

Asian Development Bank

19.How does lack of competition cause a banking crisis?(1 Point)

Banks operate at high capitalisation

High market power causes banks to be less efficient

Increased probability of bank runs

Massive policy intervention by the government

20.After the completion of a project, its revenue is not as expected due to the existence of a new substitute product that causes the demand for the services is low. This causes the project unable to generate sufficient income to repay the loan. This refers to(1 Point)

Resource risk

Operational risk

Market risk

Completion risk

21.What is financial repression?(1 Point)

Financial depress of banks during financial crises

Financial injection by the government to help banks from becoming insolvent

High level of government control on financial activities

Financial products offered by an international bank to its customers in purchasing raw materials

22.Which type of bank has the biggest geographical presence in Japanese banking system?(1 Point)

City banks

Regional banks

Trust banks

Cooperative banks

23.Ensuring banks adhere to the regulation. This refers to(1 Point)

Regulation

Supervision

Laws

Guidelines

24.This institution's main objective is to reduce the income gap among people in a country. What is the name of this institution?(1 Point)

United Nation

World Bank

International Monetary Fund

Bank Negara Malaysia

25.Supposed you are assigned to start a banking business of your bank in Laos. Which is the best organizational structure that you can use to enter Laos banking market based on Laos riskiness?(1 Point)

Subsidiary

Branch

Agency

Representative office

26.This document is used to make sure the exported product can be legally shipped to the importer's country.(1 Point)

Bill of lading

Packing list

Consular invoice

Insurance document

27.Why there is no separate rate for Selling TT and Selling OD in a bank's quote? Instead, they are quoted as Selling TT/OD.(1 Point)

Both give bank higher profits if they are quoted together compared to quoted separately

Both requires bank to incur loss to exchange the received currency

Both give bank Malaysian Ringgit that can be used immediately

Both are done in the same time and place

28.What is the main reason for BIS to introduce a standard practice in banking supervision among all countries in the world?(1 Point)

To increase banking system stability

To ease central banks' job in formulating rules and guidelines

To ensure no foreign banks can avoid regulation

To ensure banks can survive during a crisis time

29.An OFC is a jurisdiction that charges high tax to the users of financial services in that jurisdiction(1 Point)

True

False

30.Eurocurrency is(1 Point)

The currency used by the countries in European Union (EU) such as Germany and France

Currency held in the outside of its origin country

Currency used to trade with any company that is from European continental

Currency used in an European offshore financial centre like Switzerland and Luxembourg

Answer 1

1. In this situation where we need to make sure that buyer's bank is reliable, we may use standby L/C.

Standby letter of credit is type of an agreement which is made which ensures that seller will receive the amount even if buyer's bank or buyer fails to pay the payment or makes default.

2. Banks go international of all the points except on which is government forces to go international.

This is because other reasons are correct. But government in this case does not forces them to go international.

3. Common ex-ante problem banks face is moral hazard.

Moral hazard is a problem faced when there is a market in which we cannot differentiate between people. In giving loans, banks do not know which person will not make default and which person will pay the full amount with interest.

To overcome this, they make investigation in order to check any past defaults of the person or whether he is in a condition to pay or not.

4. Weak market discipline is mainly caused by deposit insurance.

This is because deposit insurance which is backed by the government weaks the market discipline and thus risk in financial market rises.

Please ask 4 at a time for detailed explanation! Thank you!