i |
When the value of collateral is adjusted for its maturity,
enforceability and price volatility, the process is called ____________.
A) Securitization B)
Collateralization C)
Haircut
D) Prudence E)
None of the above
|
|
ii |
After a certain point, any further increase in interest rate
__________ the expected return to lenders.
A) enhances B)
reduces C)
affects
D) does not affect E)
None of the above
|
|
iii |
When Statutory Liquidity Requirement (SLR) of a bank increases
its capacity to extend credit ____________.
A) increases B)
decreases C)
stabilizes
D) has no impact E)
None of the above |
|
iv |
For credits against pledge of shares of blue chip companies
a credit risk manager has to ensure that a minimum margin of _______
is always maintained.
A) 0% B)
20% C)
30% D)
100%
E) None of the above |
|
v |
In Pakistan all banks are required to create a general reserve
equal to at least ______% of their secured consumer credit portfolio.
A) 1.0 B)
1.5 C)
10.0 D)
15.0
E) None of the above |
|
vi |
The Credit-to-GDP (Gross Domestic Product) ratio in the economy
of Pakistan is around:
A) 5% B)
25% C)
55% D)
100%
E) None of the above
|
|
vii |
__________ sector is the largest recipient of credit in Pakistan.
A) Agriculture
B) Consumer C)
Corporate
D) SME E)
None of the above |
|
viii |
During the financial year ending June-06 the credit off-take
in the economy of Pakistan was around Rs. __________ Billion against
the target of Rs 330 Billion in the Annual Credit Plan.
A) 250 B)
350 C)
500 D)
2500
E) None of the above
|
|
ix |
______________ is a clause in the floating
charge whereby a company promises not to charge its assets elsewhere
without the prior approval of the bank.
A) ordinary pledge B)
negative pledge
C) floating pledge
D) collateralization E)
None of the above |
|
x |
The method of funding acquisition of a physical
asset where the repayment of the exposure is dependent upon the
cash flows generated by that specific asset is called __________
Finance.
A) Project B)
Object C)
Commodity D)
Running
E) None of the above
|
|
xi |
The diversification of a credit portfolio means
that the portfolio should ideally be divided into different economic
sectors having __________ correlation.
A) perfect B) high
C) equal D) low
E) None of the above
|
|
xii |
Credit risk is most closely described by:
A) actual accounting loss B) potential accounting
loss
C) economic loss D) Loss of reputation
E) None of the above
|
|
xiii |
Stocks of the company is __________
A) Hypothecated B) Mortgaged C) Pledged
D) A&C E) None of the above
|
|
xiv |
Floor rate is:
A) Cap rate B) Base Rate C) Floating Rate
C) Minimum agreed rate E) None of the above
|
|
xv |
Land and Building of the company is __________
A) Hypothecated B) Mortgaged C) Pledged
D) B&C E) None of the above
|
|
xvi |
Against the borrower’s equity of Rs.10
M the Borrower is entitle for Non-funded exposure of :
A) Rs.100M B) Rs.60M C) Rs.80M
D) Rs.40M.00 E) None of the above |
|
xvii |
Against the Running finance Limit of Rs.10.00
Million against 40% margin , what should be the minimum value
of stock to draw down Rs.10.00 Million:
A) Rs 180M B) Rs 150M C) Rs 167M
D) Rs 140M E) None of the above |
|
xviii |
Where Trade Bills(Import/Export or Inland Bills)
are not paid/ adjusted within 180 days of the due date. This will
be classified under which of the following categories:
A) OAEM B) Substandard C) Doubtful
D) Loss E) None of the above |
|
xix |
If the accommodation is secured against liquid
securities, the minimum acceptable current ratio for all corporate
and commercial loans is:
A) 0.75 : 1.0 B) 1.00 : 1.0 C) 1.50 : 1.0
D) Regulation not applicable. E) None of the above |
|
xx |
Where mark-up/interest or principal is overdue
by 90days or more from the due date. This will be classified under:
A) OAEM B) Substandard C) Doubtful
D) Loss E) None of the above |
|
xxi |
Charge will not be registered in case of the
following security:
A) Pledge B) Hypothecation
C) Equitable Mortgage D) Defence Saving Certificate
E) None of the above
|
|
xxii |
It is mandatory to get the Personal Guarantees
of the borrowers/ Directors in the Following except:
A) A & B company with Assets size of 10M
& sales of 200M
B) M & C company with Assets size of 40M and Sales of 150M
C) A & N company with Assets size of 50M and Sales of 310M.
D) X & Y company with Assets size of 51m and above
E) None of the above |
|
xxiii |
Fund Based Clean financing Limit to a SME concern
is allowed upto:
A) One Hundred Thousand B) Five hundred thousand
C) One Million D) Two Million
E) None of the above |
|
xxiv |
Clean Fund Based facilities can be utilized
for the following except:
A) Purchase of 2nd hand Vehicle
B) Repayment of Credit Card bills
C) Advance school fees
D) Subscription of shares
E) None of the above
|
|
xxv |
Bank Spread is a :
A) Difference between Cost of funds & Income
derived from these funds
B) Difference between Deposit and Advances
C) Provisioning charged on Non-Performing Loans
D) Difference between mark-up rate and deposit rate.
E) None of the above |
|
i |
The risk that failure of a large
bank would lead to collapse of the entire banking system is called
Systemic Risk. |
|
ii |
Net advances are equal to gross advances
plus provisioning held. |
|
iii |
The price of a bond (or a secondary market
loan) is directly related to its yield. |
|
iv |
A fixed charge covers all the assets of a
company. |
|
v |
A mortgage is a type of loan that is collateralized
with a specific piece of real estate, either residential or commercial.
|
|
vi |
The cash flow from investments is the key
to determine the ability to repay a loan because it is directly
related to the economic decisions. |
|
vii |
One can fairly assume that rating of an instrument
is directly related to its default rate. |
|
viii |
Running Finance is a type of credit facility
that is extended by a bank to its customers for a period of 01
year. |
|
ix |
A revocable letter of credit can neither
be cancelled nor amended without prior consent of the beneficiary.
|
|
x |
It is easier to calculate credit risk in
loans and advances as compared to fixed income securities. |
|
xi |
With increasing sophistication and dependence
upon technology operational risk becomes more important than credit
risk. |
|
xii |
Liquidity risk reflects an enterprise’s
inability in raising funds to meet its commitment. |
|
xiii |
Mark-up interest earned minus mark-up interest
expensed is equal to net profit. |
|
xiv |
The equitable mortgage and mortgage by deposit
of title deeds is the same security. |
|
xv |
Interest rate risk arises where the value
of financial instruments fluctuate due to changes in market price.
|
|
xvi |
Advances are bank’s liabilities and
deposits are bank’s assets. |
|
xvii |
Set-off means adjusting a debit balance in
one account against a credit balance of the group companies. |
|
xviii |
Credit risk represents the accounting loss
that would be recognized at the reporting date if counter parties
failed to perform as contracted. |
|
xix |
Accommodation granted against a guarantee
unsupported by collateral security is an unsecured advance. |
|
xx |
Subordinated Loan means a secured loan extended
to the borrower by its sponsors. |
|
xxi |
Frequency of mark up recovery impacts the
effective rate of mark up |
|
xxii |
Frequency of mark up recovery impacts the
effective rate of mark up |
|
xxiii |
In hypothecation, both title and possession
rests with the borrower. |
|
xxiv |
Equitable mortgage can be created by depositing
certified true copy of the title documents. |
|
xxv |
It is imperative for the scheduled commercial
banks to have minimum capital adequacy of 8 % even if there is
a significant difference in their risk profile. |
|
Q.4 (A) |
CD Textile is banking with four
Banks. These banks have granted different financing facilities
against 1st parri-passu Charge. Now the company applies to 5th
Banks for some facilities. 5th Bank is asking for PariPassu charge.
What are its implications for other Banks? (03) |
Q.4 (B) |
What are the implications of raise in CRR & SLR on Credit
Pricing? (04) |
Q.4 (C) |
Mention the repercussions of financing fixed Assets of a manufacturing
concern with the short term borrowings and also suggest the corrective
measures? (05) |
Q.5 |
What do you understand by loan review? When should this exercise
be undertaken and mention at least 5 basic factors that you will
consider while loan review? (05) |
Q.6 |
What is a problem loan? What measures would you suggest to manage
the existing portfolio of problem loans and to stem their flow in
future? (10) |
Q.7 |
You have been deputed to Gwadar branch of ABC bank as Credit Manager.
A local entrepreneur comes to you for financing. What information
would you obtain directly from him/her or from other sources? Why
would you require such information? (10) |
Q.8 |
Case study (08)
QUOTE
DEALING WITH DIRECTORS, MAJOR SHARE-HOLDERS
AND EMPLOYEES OF THE BANKS / DFIs
Banks / DFIs shall not take any exposure on any of their directors
or to individuals, firms or companies in which they or any of
their directors, either directly in the borrowing entity or in
any of its group companies, hold key management positions, or
are interested as partner, director or guarantor, as the case
may be, their Chief Executives and shareholders holding 5% or
more of the share capital of the bank / DFI, including their spouses,
parents, and children or to firms and companies in which they
are interested as partners, directors or shareholders holding
5% or more of the share capital of that concern, without the approval
of the majority of the directors of that bank / DFI excluding
the director concerned. The facilities to the persons mentioned
above shall be extended at market terms and conditions and be
dealt with at arm length basis.
UNQUOTE
A company XYZ is an old and valued client of the bank availing
financial facilities both funded and unfunded from the bank for
the past many years recently on of the directors of xyz company
is appointed on the board of directors of the bank. XYZ Company
is planning expansion of its facilities and requires additional
funding .The company also requested the bank to allow relaxation
in repayment of existing loans by one year and reduce the rate
of mark on the existing facilities by .25%.
(A) Advise the bank if it can extend following facilities keeping
the provision of above quoted regulations. Substantiate your answer
with reasoning.
1. Additional financing facilities?
2. Provide relaxation in repayment of loan?
3. Provide relaxation in Mark up rate?
(B) What would be your advice to the bank if the director was
also holding 5% shares of the bank? |