Financial Liquidity and Cost Management Quiz

False

False

True

<p>False</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>False</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>False</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>False</p> Signup and view all the answers

<p>True</p> Signup and view all the answers

<p>False</p> Signup and view all the answers

<p>Primary credit, Secondary credit, Seasonal credit</p> Signup and view all the answers

<p>To protect liability holders from unexpected losses affecting the bank's assets</p> Signup and view all the answers

<p>Regulatory Capital = Tier 1 + Tier 2</p> Signup and view all the answers

<p>The different types of transaction deposits are non-interest bearing (checking accounts) and interest bearing (negotiable order of withdrawal -NOW- accounts, money market deposits accounts -MMDA).</p> Signup and view all the answers

<p>The different types of non-transaction savings deposits are passbook savings deposits and time deposits (e.g. certificate of deposits).</p> Signup and view all the answers

<p>The pricing strategies for deposits include cost-plus profit margin, marginal cost, conditional pricing, and relationship pricing.</p> Signup and view all the answers

<p>Some reasons include liquidity, risk management, diversification, tax efficiency, and stabilizing income.</p> Signup and view all the answers

<p>Some examples include Treasury Bills (T-bills), Short-Term Government Bonds, and Certificates of Deposits (CDs).</p> Signup and view all the answers

<p>Some strategies include the Ladder or Spaced Maturity Policy, the Front-End Load Maturity Policy, the Back-End Load Maturity Policy, the Barbell Strategy, and the Rate Expectation Approach.</p> Signup and view all the answers

<p>Systemic risk is a risk that an event will trigger a loss of confidence in a substantial portion of the financial system that is serious enough to have adverse consequences for the real economy.</p> Signup and view all the answers

<p>The benefits of selling non-performing loans include: releasing risk-weighted assets, improving capital ratios, improving asset quality indicators/market perception, removing the risk of further credit deterioration/increase of coverage, potentially reducing loan loss provisions, and potentially increasing profits and return on equity.</p> Signup and view all the answers

<p>The price-to-book value ratio (PBV) of a stock is influenced by factors such as return on equity (ROE), long-term/stable growth rate, payout ratio, and the risk of the firm.</p> Signup and view all the answers

<p>The three common methods for estimating financial institutions' liquidity needs are: 1) Sources and Uses of Funds Approach, 2) Structure of Funds Approach, and 3) Liquidity Indicator Approach.</p> Signup and view all the answers

<p>The key principles for financial institutions' financial statement analysis are: adoption of IFRS/IAS, understanding the bank's business model, analyzing main items based on their business model, and conducting benchmarking analysis.</p> Signup and view all the answers

<p>Consolidated accounts need to be analyzed for a comprehensive understanding of a bank's financial performance.</p> Signup and view all the answers

<p>Retail funding is more stable than wholesale funding due to several factors. Firstly, depositors tend to be loyal to banks, especially for small amounts, resulting in low interest rate sensitivity. Additionally, retail deposits are insured, reducing sensitivity to changes in the bank's credit risk. Finally, retail deposits are pooled and managed according to the law of large numbers, further enhancing stability.</p> Signup and view all the answers

<p>Wholesale funding is more volatile than core deposits due to its characteristics. Wholesale funds commonly have short maturities, sometimes overnight, making them more susceptible to market interest rate fluctuations. Furthermore, wholesale funding is commonly unsecured, increasing the bank's exposure to liquidity and interest rate risks. Lastly, large banks often rely on wholesale funding at market rates, which results in less customer loyalty and greater sensitivity to market interest rates and borrower creditworthiness.</p> Signup and view all the answers

<p>Wholesale funding provides banks with flexibility but exposes them to risks. The benefits include the ability to access funds quickly and the potential for lower funding costs. However, wholesale funding also carries risks such as liquidity risk and interest rate risk. Banks relying heavily on wholesale funding are more vulnerable to sudden liquidity shortages and fluctuations in market interest rates.</p> Signup and view all the answers

<p>The purpose of reclassification methodology in a bank's balance sheet is to separate interest earning assets from interest bearing liabilities.</p> Signup and view all the answers

<p>The key element of interest earning assets is loans.</p> Signup and view all the answers

<p>The key component of interest bearing liabilities is due to customers.</p> Signup and view all the answers

<p>Net Interest Income Weight = \frac{Total Operating Income and Commissions Income}{Net Interest Income}</p> Signup and view all the answers

<p>Net Fees and Commissions Weight = \frac{Net Fees and Commissions}{Total Operating Income}</p> Signup and view all the answers

<p>Net Trading and Other Operating Income Weight = \frac{Net Trading and Other Op Income}{Total Operating Income}</p> Signup and view all the answers

<p>Loan to Deposit Ratio (LD Ratio) = \frac{Customer Direct Funding}{Direct Funding}</p> Signup and view all the answers