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BNK601-MCQ Solved with Ref-Mehreen Humayun-12

BNK601

Banking Laws & Practices

Lesson 1-45

Solved by Mehreen Humayun

www.vuzs.net 

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A foreign correspondent of issuing bank that advises the beneficiary of letter of credit is known as:

Confirming bank

Issuing bank

Investment bank

Advising bank 

Advising Bank

An advising bank, usually a foreign correspondent bank of the issuing bank will advise the beneficiary.

The headquarter of Sate Bank of Pakistan was initially established in:

Lahore

Karachi

Islamabad

Peshawar

The headquarters are located in the financial capital of Pakistan, Karachi with its second headquarters in the capital, Islamabad.

The word letter of credit has been derived from which language?

British

American

German

French

Letter of Credit is an English name, which is derived from a French word.

Which of the following party must evaluate the credibility of the customers?

State Bank

Loan officer

Any agent of bank

Government official

The discounting rate of the first class bills by the State Bank is called:

Bank rate

Prime lending rate

Loan rate

Discounting rate

Which of the following is the reason of increasing investment in foreign markets?

Getting friends

Removal of trade barriers

Opening a foreign bank account

Less diversification

State Bank uses CAMEL as a supervisory framework to judge the financial health of financial institutions. This analysis involves _____ indicators.

Six

Five

Four

Three

CAMELS Rating System
The six factors examined are as follows:

C - Capital adequacy
A - Asset quality
M - Management quality
E - Earnings
L - Liquidity
S - Sensitivity to Market Risk. 

Through which of the following we can lower the average cost of production?

Economies of scale

Economies of supply

Foreign exchange risk

Sovereign risk

If there are economies of scale, the increase can lower the average cost of production of a good.

All of the following are included in financial system EXCEPT:

Money

Central banks

Financial markets

Credit cards.

The financial system is the system that allows the transfer of money between savers and borrowers. It comprises a set of complex and closely interconnected financial institutions, markets, instruments, services, practices, and transactions.

AIL refers to which of the following?

Audio interface library

Aggregate investment in leasing

Asset interchange language

Automated integrated language

Which of the following is a form of risk that arises from the change in price of one money against another?

Currency

Transaction

Translation

Interest rate

Currency risk is a form of risk that arises from the change in price of one currency against another.

Which one of the following is the best describes the word ISC?

Buy when exchange rate is high sell when rate is too low

Buy & sell when exchange rate is at moderate level

Buy when exchange rate is low sell when rate is too high

Buy & sell when exchange rate is too high.

Which of the following is the market which facilitates the redistribution of various risks?

Insurance market

Forex market

Derivative market

Money market

Insurance markets – which facilitates the redistribution of various risks.

Which one of the following is charged to strive for soundness & stability of the financial system and safeguard interest of stakeholders?

Banking inspection

Finance department

Banking surveillance department

Islamic banking department

Banking Surveillance Department: To promote soundness and stability of the Banking System through proactive and effective supervision.

In which of the following year SWIFT was established?

1965

1970

1973

1980

Swift was established in 1973 as a cooperative association in Belgium between financial institutions in Europe.

SWIFT was established in which country?

Norway

Germany

France

Belgium

Ownership of asset is transferred to the lessee in which form of the lease?

Financial lease

Operating lease

Net lease

Fractional lease

Financial lease: ownership of the asset is transferred to the lessee at the end of the lease term.

All are the benefits attached with of foreign currency account for a customer EXCEPT:

Deposits facility

Limited cash withdrawals

Profit accrued on a daily basis

Automatic rollover of deposits

A banking transaction through ATM costs ______ as much a transaction conducted over the counter in a traditional branch.

One half

One third

One forth

One fifth

It has been estimated that a banking transaction through ATM costs one fourth as much a transaction conducted over the counter in a traditional branch.

Which of the following factor is important for the growth of Pakistan’s economy?

Political stability

Supporting institutions

Good governance

All of the given options

Initially how many banks supported the SWIFT?

225

230

239

250

It was founded in Brussels in 1973, supported by 239 banks in 15 countries.

Short-term financial instrument used in the money market is known as:

Document

Paper

Bond

Bill

Commercial paper provides a liquid, short-term investment for savers and a source of funds for corporations.

Damage or any loss to a property during construction is called:

Social insurance

Retrospectively rated insurance

Builder’s risk insurance

Pollution insurance

Builder’s risk insurance: Builders risk coverage is a property insurance policy design to provide protection from loss to property  during construction.

Enron Corporation was dealing in:

Lawyers

Medicines

Natural gas

Petroleum

Which country has introduced the mutual funds for the first time?

Norway

Italy

Holland

China

The idea of Mutual Fund first came from a Dutch Merchant ling back in 1774.

Under the provisions of which of the following law, banks are given a reasonable time after receipt of documents to honor the draft?

Company ordinance 1984

Banking company ordinance 1962

Prudential regulations

Uniform customs and practice for documentary credits

Under the provisions of the Uniform Customs and Practice for Documentary Credits, the bank is given a reasonable amount of time after receipt of the documents to honor the draft.

Which of the following strategies should give recognition to the goals of credit quality, earnings and growth?

The intensive strategy

The integration strategy

The diversification strategy

The credit risk strategy

The credit risk strategy should give recognition to the goals of credit quality, earnings and growth.

The letter of credit includes all the following documents, EXCEPT:

A commercial invoice

A transport document

A certificate of origin

A certificate of investment

LESSON 32

Documents requested in a Letter of Credit would often include: a commercial invoice; a transport document such as a Bill of lading or Airway bill; an insurance document; an inspection certificate; and/or a certificate of origin. Other documents could be required, depending on the underlying transaction.

Which of the following is NOT the essential of a cheque?

It must be in writing

It must by signed by drawer

The amount must be certain amount

It must not have date of issue

Essentials of a Cheque:

A cheque must fulfill the following requirements:

•  It must be in writing
•  It should contained unconditional order
•  It must by signed by drawer
•  Cheque is always payable on demand
•  The cheque is always drawn on a specified banker
•  As a matter of practice, cheque leaves are in printed form
•  The amount payable should be specified in the form of legal tender money and is paid accordingly.
•  The amount must be certain amount
•  The cheque is payable to specified person or order of or to bearer.
•  Date of issue must be mentioned on the cheque.

When prudential regulations were introduced for the first time?

1974

1989

1992

2001

These regulations were made effective from 1st of July, 1992.

In the financial marketplace, SWIFT services fall under four areas that are Securities, Treasury & Derivatives, Payments & Cash Management and________.

Trade Services

Import Services

Export Services

None of the given options

As of 2010, SWIFT offers services in four different areas that are crucial in the financial world. These four areas are:

1. Securities

1. Treasury and Derivatives

1. Cash Management

1. Trade Services

Which of the following is TRUE for a commercial invoice?

A commercial invoice must appear to have been issued by the beneficiary (except as provided in article 38)

A commercial invoice must be made out in the name of the applicant (except as provided in sub-article 38 (g))

A commercial invoice must be made out in the same currency as the credit

All of the given options

According to URR525, which of the following is a bank that has issued a Credit and the Reimbursement Authorization under that credit?

Issuing bank

Paying bank

Advising bank

Confirming bank

Which of the following is TRUE for potential future exposures?

These should be calculated over multiple space horizons

These should be calculated over single time horizon

These should be calculated over single space horizon

These should be calculated over multiple time horizons

Potential future exposure quantifies the counterparty risk/credit risk by evaluating existing trades done against the possible market prices in future during the lifetime of transactions. It can be called sensitivity of risk w.r.t market prices. Potential future exposures should therefore be calculated over multiple time horizons.

Which of the following exposures poses special challenges to the credit processed at banks?

Digital and light sensitive

Market and liquidity sensitive

Activity and profitability sensitive

Debt and activity sensitive

Growing liquidity on the secondary market are special challenges to credit risk management at the present time.

The credit information bureau (CIB) is a part of banking Surveillance Department of which of the following?

State Bank of Pakistan

Government of Pakistan

Institute of Bankers Pakistan

Central Board of Revenue, Pakistan

According to URR525, which of the following is a bank instructed and/or authorized to provide reimbursement pursuant to a Reimbursement Authorization issued by the Issuing Bank?

Reimbursing bank

Paying bank

Advising bank

Confirming bank

According to Prudential Regulations, which of the following refers to “loans to individuals for the payment of goods, services and expenses and include Running Finance / Revolving Credit to individuals”?

Business loan

Personal loan

Micro financing

House financing

According to Prudential Regulations, which of the following refers to “the assets which are readily convertible into cash without recourse to a court of law”? 

Current assets

Liquid assets

Contingent assets

Physical assets

Which of the following is opened in Pak rupees and advised through local branch of issuing bank?

Inland letter of credit

Irrevocable confirmed letter of credit

Revolving credit

Transferable letter of credit

Inland Letter of Credit: Procedure for inland letter of credit is same as for international letter of credit. Inland letter of credit is opened in Pak rupees and advised through local branch of issuing bank.

According to Prudential Regulations for auto loan, which of the following is classified as “Doubtful”?

Where interest or principal is overdue by 45 days or more from the due date

Where interest or principal is overdue by 90 days or more from the due date

Where interest or principal is overdue by 180 days or more from the due date

Where interest or principal is overdue by one year or more from the due date

According to Prudential Regulations, unless there has been no transaction or no outstanding balance on the account, the Banks / DFIs shall provide statement of account to the credit card holders on:

Monthly basis

Quarterly basis

Half yearly basis

Annual basis

Which of the following international trade financing methods refers to “that the goods are shipped and delivered before payment is due, usually in 30 to 90 days”?

Letter of credit

Open account

Documentary collection

Payment in advance

Under hire-purchase, at the time of delivery and possession of goods, which of the following is issued by the bank?

Delivery order

Delivery note

Delivery memo

Physical delivery of goods

According to URR525, which of the following is the bank that pays, incurs a deferred payment undertaking, accepts draft(s), or negotiates under a Credit and presents a Reimbursement Claim to the Reimbursing Bank?

Claiming bank

Paying bank

Advising bank

Confirming bank

Who, among the following should setting prudential limits to restrict bank exposures to single borrower or groups of connected counterparties?

Top level mangers

Supervisors 

Lower level managers

Middle level managers

Ref: Supervisors should consider setting prudential limits to restrict bank exposures to single borrowers or groups of connected counterparties.

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