29 Questions
Commercial banks provide financing services to individuals only.
False
Banks act as intermediaries between borrowers and depositors.
True
The minister of finance does not need to approve any banking services.
False
Current account facilities are not provided by commercial banks.
False
Banks do not deal with foreign exchange services.
False
Banking services only include the provision of loans and advances.
False
The primary function of a commercial bank is to make investments in the stock market.
False
The banking industry is highly regulated by government in most countries.
True
The Financial Services Act 2013 defines a bank as a person who carries on insurance business.
False
A commercial bank's primary source of funds is from shareholders.
False
The Anti-money Laundering and Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 is a banking law that regulates commercial banks.
True
Commercial banks are only allowed to accept deposits on current accounts.
False
Banks lend money to low-quality borrowers to maintain or improve the portfolio management of the bank's assets and capital.
False
Islamic banks operate independently of the conventional banking sector.
False
Banks borrow more on long-term debt and provide more short-term loans during maturing transformation.
False
Islamic banks are licensed under the Islamic Financial Services Act 2013 and operate according to Shariah Law.
True
Bank Negara Malaysia (BNM) only approves Islamic banking operations.
False
Banks are required to pay zakat on their net income.
False
Penalty or overdue payment charges are recognized as an expense.
False
Shareholders' interest is not important in Islamic banking.
False
Capital refers to the undistributed profits and other capital reserves.
False
Loan activities utilize less than half of bank resources.
False
Banks' major sources of funds come from borrowings from other financial institutions.
False
The competent authority is responsible for investigating offenses under the AMLATFPUAA.
False
Money laundering involves only two stages: placement and concealment.
False
A person who acquires proceeds of any unlawful activity is not considered to be involved in money laundering.
False
The AMLATFPUAA promotes a collaborative and single-agency approach.
False
Concealing the nature of proceeds of any unlawful activity is not an offense under the AMLATFPUAA.
False
Smuggling currency to foreign land without currency control and legislation against money laundering is not a method of money laundering.
False
Study Notes
Commercial Bank Functions
- Provision of current account facilities where payment can be made through issuing cheques
- Mobilization of savings through current, savings, and fixed deposit accounts
- Provision of various banking facilities and services
- Granting loans and advances to businesses and individuals
- Financing of government through purchase of government securities and TBills
Importance of Banking Business
- Credit intermediation
- Netting and settlement of payments
- Acting as both collection and paying agents for customers
- Participating in interbank clearing and settlement system
Definition of Bank and Commercial Bank
- Legal definition: jurisdiction created and regulated by government
- Definition by Financial Services Act 2013 (FSA): "a person which carries on banking business"
- Activities include: receiving deposits, making advances, paying or collecting cheques, and approving other business by the Minister of Finance
Islamic vs Conventional Bank
- Islamic bank: business operations do not involve anything that is not approved by Shariah Law
- Licensed under the Islamic Financial Services Act 2013
- Based on profit-sharing basis or profit from trading transactions
- Status of relationship with clients is buyer-seller, lessor-lessee, partners, or principal-agent
Sources and Uses of Funds
- Major sources: deposits, savings, current and time deposits, negotiable certificate of deposits (NCDs)
- Amount borrowed from other financial institutions, inter-bank borrowing, capital and reserves, debentures, and notes
- Uses: loan activities, amount due to financial institutions, and others
Anti-Money Laundering and Anti-Terrorism Financing (AMLATFPUAA)
- Promotes a collaborative and multi-agency approach
- Defines the powers and functions of the competent authority, enforcement agencies, and supervisory and regulatory authorities
- Defines money laundering: engaging in a transaction that involves proceeds of any unlawful activity, acquiring, receiving, or concealing proceeds of any unlawful activity
Money Laundering Stages
- Placement: physical disposal of cash proceeds derived from illegal activity
- Methods: using companies with high turnover as a front, smuggling currency to foreign land without currency control and legislation against money laundering
Test your understanding of commercial banking with this quiz, covering topics such as the definition of a bank, functions of commercial banks, and differences between Islamic and Conventional banks. Learn about the sources and uses of funds, banking laws, and regulations. Assess your knowledge of Financial Services Act 2013 and Islamic Financial Service Board.
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