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Questions and Answers
Like Primary Functions of Bank, the secondary functions are also classified into two parts:
Like Primary Functions of Bank, the secondary functions are also classified into two parts:
Liquidity management:
Liquidity management:
Asset management:
Asset management:
Capital adequacy management:
Capital adequacy management:
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Licensing:
Licensing:
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Supervision:
Supervision:
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One of the objectives of bank regulation is to avoid misuse of banks that means:
One of the objectives of bank regulation is to avoid misuse of banks that means:
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Supervision of the bank's activities should done by:
Supervision of the bank's activities should done by:
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One of the objectives of bank regulation is the systemic risk reduction that means:
One of the objectives of bank regulation is the systemic risk reduction that means:
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It refers to the risks associated with changes to exchange rates:
It refers to the risks associated with changes to exchange rates:
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Study Notes
Bank Functions and Management
- Secondary Bank Functions: Classified into agency functions and utility functions.
- Liquidity Management: Involves obtaining favorable interest rates from borrowers, managing loans, and using cash to fulfill obligations. It aims to maintain proper levels of capital adequacy.
- Asset Management: Also focuses on obtaining favorable interest rates and managing loan risks.
- Liability Management: Focuses on securing cheap funding sources, using the funds as loans, and managing liquidity and obligations.
- Capital Adequacy Management: Maintaining suitable levels of capital within the bank, balancing the amount to avoid too little or too much.
Bank Regulation
- Licensing: Supervision of bank activities by a government authority. This process involves issuing licenses, ensuring compliance, and oversight.
- Supervision: A continuous process ensuring banks comply with regulations and monitoring for deviations. Also involves assessing risks associated with a bank.
- Bank Regulation Objective: Preventing misuse of banks; reducing the risk of bank failures and misuse for criminal activity; and protecting bank creditors.
- Supervision Body: Consists of a government regulatory body and not a private sector entity, insurance company or competitor.
- Systemic Risk Reduction: Aimed at avoiding bank disruptions and reducing the risks of various failures.
- Exchange Rate Risks: Risks associated with fluctuations in exchange rates.
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Description
This quiz covers essential aspects of bank functions and management, including liquidity, asset, and liability management. It also delves into capital adequacy and regulatory practices like licensing and supervision. Test your understanding of these crucial banking concepts.
