Financial Liquidity and Cost Management Quiz

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Which liquidity management strategy involves storing liquidity in cash and marketable securities?

Asset Liquidity Management (correct)

Borrowed Liquidity Management

Balanced Liquidity Management

None of the above

Which approach for estimating financial institutions' liquidity needs involves forecasting loans demand and deposits availability?

Sources and Uses of Funds Approach (correct)

Structure of Funds Approach

Liquidity Indicator Approach

None of the above

Who is interested in analyzing banks' financial statements?

Regulators

Investors

Auditors

All of the above (correct)

Which type of investment instrument typically reaches maturity within 1 year and has low risk?

Treasury Bills Signup and view all the answers

Which investment maturity strategy aims to maximize income potential and requires availability of other sources of funding for short-term liquidity assets?

The Back-End Load Maturity Policy Signup and view all the answers

Which approach to investment strategy involves deciding and adapting based on expectations or forecasts on interest rate movements?

The Rate Expectation Approach Signup and view all the answers

Which of the following funding sources is considered the most stable for commercial banks?

Customer deposits Signup and view all the answers

Why are retail funding sources more stable than wholesale funding sources?

All of the above Signup and view all the answers

Why are wholesale funding sources more volatile than core deposits?

All of the above Signup and view all the answers

What are the risks associated with wholesale funding based banks?

All of the above Signup and view all the answers

Which one of the following is NOT a type of transaction deposit mentioned in the text?

Passbook savings deposit Signup and view all the answers

Which one of the following is a characteristic of non-transaction savings deposits?

Higher interest rates than transaction deposits Signup and view all the answers

Which pricing strategy sets fees based on the number of transactions passing through the account and the average balance held in the account over a period?

Conditional pricing Signup and view all the answers

What is the purpose of relationship pricing for deposits?

To target high-quality customer relationships Signup and view all the answers

Which of the following is a benefit of selling non-performing loans from banks' balance sheets?

Release of RWAs Signup and view all the answers

What is the relationship between Return on Equity (ROE) and Price to Tangible Book Value (P/TBV)?

Positive correlation Signup and view all the answers

What is the main challenge faced by the banking sector in relation to profitability?

Heavy cost structures Signup and view all the answers

What is the definition of systemic risk?

A risk that an event will trigger a loss of confidence in a substantial portion of the financial system Signup and view all the answers

According to the text, what is the purpose of a bank's capital?

To protect liability holders from unexpected losses Signup and view all the answers

What is the Total Risk Based Capital Ratio formula?

Regulatory Capital = Tier1 + Tier2 Signup and view all the answers

What is the purpose of the Basel III agreements?

To strengthen global capital and liquidity rules Signup and view all the answers

What is the method used to measure credit risk exposure in the standard approach?

External rating given by credit agencies Signup and view all the answers

Which of the following is a key component of Interest Earning Assets (IEA) for banks?

Loans Signup and view all the answers

What is the most important indicator of a bank's funding strategy?

Due to customers Signup and view all the answers

What is the formula for Loan to Deposit Ratio (LD Ratio)?

LD Ratio = Loans / Deposits Signup and view all the answers

Which of the following is a component of Net Interest Income?

Total Operating Income Signup and view all the answers

What is the formula for Positive Yield on Assets (A)?

Positive Yield on Assets (A) = Interest / Interest Earning Assets (IEA) Signup and view all the answers

Which of the following is a key component of Interest Bearing Liabilities (IBL) for banks?

Due to banks Signup and view all the answers

Financial Liquidity and Cost Management Quiz

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Questions and Answers

Which liquidity management strategy involves storing liquidity in cash and marketable securities?

Which approach for estimating financial institutions' liquidity needs involves forecasting loans demand and deposits availability?

Who is interested in analyzing banks' financial statements?

Which type of investment instrument typically reaches maturity within 1 year and has low risk?

Which investment maturity strategy aims to maximize income potential and requires availability of other sources of funding for short-term liquidity assets?

Which approach to investment strategy involves deciding and adapting based on expectations or forecasts on interest rate movements?

Which of the following funding sources is considered the most stable for commercial banks?

Why are retail funding sources more stable than wholesale funding sources?

Why are wholesale funding sources more volatile than core deposits?

What are the risks associated with wholesale funding based banks?

Which one of the following is NOT a type of transaction deposit mentioned in the text?

Which one of the following is a characteristic of non-transaction savings deposits?

Which pricing strategy sets fees based on the number of transactions passing through the account and the average balance held in the account over a period?

What is the purpose of relationship pricing for deposits?

Which of the following is a benefit of selling non-performing loans from banks' balance sheets?

What is the relationship between Return on Equity (ROE) and Price to Tangible Book Value (P/TBV)?

What is the main challenge faced by the banking sector in relation to profitability?

What is the definition of systemic risk?

According to the text, what is the purpose of a bank's capital?

What is the Total Risk Based Capital Ratio formula?

What is the purpose of the Basel III agreements?

What is the method used to measure credit risk exposure in the standard approach?

Which of the following is a key component of Interest Earning Assets (IEA) for banks?

What is the most important indicator of a bank's funding strategy?

What is the formula for Loan to Deposit Ratio (LD Ratio)?

Which of the following is a component of Net Interest Income?

What is the formula for Positive Yield on Assets (A)?

Which of the following is a key component of Interest Bearing Liabilities (IBL) for banks?

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