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16 Questions

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Bank Ratings Importance

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Questions and Answers

What is the specific provision for Doubtful Credit Facilities according to the text?

20% of the outstanding balance

10% of the outstanding balance

50% of the outstanding balance (correct)

100% of the outstanding balance

What is one of the key reasons for using bank ratings?

To increase the bank's liquidity

To help investors understand the risk profile of the bank (correct)

To limit regulatory oversight

To decrease exposure to market risks

How do provisions impact a bank's asset value according to the text?

Have no impact on the asset value

Increase the asset value

Make the asset value volatile

Reduce the asset value (correct)

How do ratings help depositors, correspondent banks, and fund managers?

By providing information for pricing and management ability Signup and view all the answers

Which category of credit facilities requires a provision of 100% of the outstanding balance?

Lost Credit Facilities Signup and view all the answers

What is one potential consequence of a bank having a good rating?

Improvement in the bank's overall financial standing Signup and view all the answers

How do provisions impact a bank's profitability according to the text?

Reduce profit Signup and view all the answers

Which of the following is NOT a benefit of ratings mentioned in the text?

Focusing solely on local [Naira] obligations Signup and view all the answers

What is the general provision as a percentage of net assets according to the text?

2% Signup and view all the answers

What role do ratings play in the eligibility for listing on some exchanges?

They sometimes depend on the rating of the concerned bank Signup and view all the answers

What is the primary factor in determining the health of a bank?

Asset quality Signup and view all the answers

What is the significance of having a substantial portion of a bank's assets performing well?

It implies good asset quality and performance Signup and view all the answers

What does the evaluation of asset quality include, according to the text?

Quality of loan documentation Signup and view all the answers

Why is having a high Capital Adequacy Ratio (CAR) beneficial for a bank?

It demonstrates sound capital base relative to risk Signup and view all the answers

What is one key aspect that affects Management Quality in a bank?

Experience and integrity of management Signup and view all the answers

What is used as a measure to assess the adequacy of a bank's capital?

Comparison with Risk Weighted Assets Signup and view all the answers