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Questions and Answers
What does the term 'bank credit' primarily refer to?
What does the term 'bank credit' primarily refer to?
Which of the following is NOT a component of the bank lending business as defined by the Financial Services Act 2013?
Which of the following is NOT a component of the bank lending business as defined by the Financial Services Act 2013?
What is one of the major regulations affecting bank credit functions in Malaysia?
What is one of the major regulations affecting bank credit functions in Malaysia?
Which of these statements best describes the importance of bank credit to banking businesses?
Which of these statements best describes the importance of bank credit to banking businesses?
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Which of the following is a key aspect of the credit process cycle?
Which of the following is a key aspect of the credit process cycle?
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What is the primary purpose of the Basel Framework?
What is the primary purpose of the Basel Framework?
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The Basel Framework primarily regulates which aspect of bank operations?
The Basel Framework primarily regulates which aspect of bank operations?
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What is a consequence of bank operations being highly regulated?
What is a consequence of bank operations being highly regulated?
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Which regulation is NOT classified as an external regulation?
Which regulation is NOT classified as an external regulation?
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During the origination phase of the credit process cycle, lenders are primarily focused on:
During the origination phase of the credit process cycle, lenders are primarily focused on:
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Which of the following best describes the lending decision framework in business banking?
Which of the following best describes the lending decision framework in business banking?
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What does RAAC stand for in the lending process?
What does RAAC stand for in the lending process?
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Which factor is generally NOT considered in the RAAC for individual or consumer lending?
Which factor is generally NOT considered in the RAAC for individual or consumer lending?
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What type of information is primarily reviewed during the approval stage of the credit process?
What type of information is primarily reviewed during the approval stage of the credit process?
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What is one of the responsibilities of the Bank's credit officer during the credit evaluation process?
What is one of the responsibilities of the Bank's credit officer during the credit evaluation process?
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The concept of stakeholder theory in regulations primarily emphasizes:
The concept of stakeholder theory in regulations primarily emphasizes:
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What does the loan disbursement department ensure before releasing the loan?
What does the loan disbursement department ensure before releasing the loan?
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Which of the following represents the possible outcomes of a credit proposition review?
Which of the following represents the possible outcomes of a credit proposition review?
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The primary objective of internal regulations like Bank Credit Policy is to:
The primary objective of internal regulations like Bank Credit Policy is to:
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Who is responsible for handling the execution and perfection of loan agreements?
Who is responsible for handling the execution and perfection of loan agreements?
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Which stage involves monitoring the borrower's compliance with repayment obligations?
Which stage involves monitoring the borrower's compliance with repayment obligations?
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What role does the Bank's Credit Approval Committee play in the loan process?
What role does the Bank's Credit Approval Committee play in the loan process?
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What does the Letter of Offer (LO) include?
What does the Letter of Offer (LO) include?
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What is the purpose of involving an independent unit for loan disbursement?
What is the purpose of involving an independent unit for loan disbursement?
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What is the primary purpose of monitoring facility utilization?
What is the primary purpose of monitoring facility utilization?
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Which of the following is NOT a part of loan monitoring?
Which of the following is NOT a part of loan monitoring?
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What actions can be taken during the interim or annual review of a borrower’s account?
What actions can be taken during the interim or annual review of a borrower’s account?
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What is a crucial action a lender must take if a borrower cannot meet loan repayment?
What is a crucial action a lender must take if a borrower cannot meet loan repayment?
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What could indicate a potential warning signal in loan repayment?
What could indicate a potential warning signal in loan repayment?
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What is the last resort for a lender when dealing with a non-performing loan?
What is the last resort for a lender when dealing with a non-performing loan?
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Why is proactive loan account management essential for lenders?
Why is proactive loan account management essential for lenders?
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What should site visitations verify regarding a borrower?
What should site visitations verify regarding a borrower?
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Study Notes
Foundations of Bank Lending - Chapter 1
- Module authors are Jasman Tuyon, PhD; Rapheedah Musneh, PhD; Siti Julea Supar; and Nurziya Muzzawer, from the Faculty of Business and Management, Universiti Teknologi MARA, Sabah Branch, Kota Kinabalu Campus.
- The learning objectives upon completing this chapter are to define bank credit; clarify its importance to the bank's business; understand the credit process cycle; understand the provisions of the Financial Services Act 2013 and BNM guidelines affecting credit; and explain ethics and governance in financial institutions.
- The chapter outlines include fundamental principles of bank credit, rules and regulations governing bank credit in Malaysia, and ethics and corporate governance in bank credit.
1.1 Fundamental Principles of Bank Credit
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1.1.1 Introduction to Bank Credit:
- Bank definition and scope of business: Banks are financial institutions regulated under the Central Bank of Malaysia Act 2009 (Act 701) and the Financial Services Act 2013 (Act 139), with "banking business" defined as accepting deposits, processing payments, and providing financing (includes lending, leasing, factoring, purchasing instruments, and accepting liabilities).
- Bank lending business is highly regulated.
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1.1.1.1 Bank Lending Business (cont.):
- The types of banking operations typically include: wholesale and corporate banking, business/SME banking, retail and consumer banking, treasury, and asset management.
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1.1.1.2 Bank Lending Business (cont.):
- Financial services include lending of money, leasing, factoring, purchasing negotiable instruments, and accepting liabilities.
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1.1.1.3 Bank Operation is Highly Regulated:
- External regulations (e.g., regulations, guidelines, notices, Bank Negara Malaysia directions, Financial Services Act 2013, National Land Code Act 828) and internal policies and guidelines play a critical role in managing the bank's operations and managing risks.
- The Basel Framework provides global standards for banking supervision.
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1.1.2 The Credit Process Cycle:
- The credit process cycle covers origination, approval, administration, monitoring, and settlement/recovery.
- Origination involves initial contact, requirement discussion, and assessment of creditworthiness.
- Approval involves credit risk evaluation using relevant tools like 5Cs and adhering to internal credit policies.
- Administration involves documentation, execution, and security agreements.
- Monitoring tracks repayments, detects potential issues, and proactively manages risk.
- Settlement/recovery handles loan repayment, or if needed, recovery procedures like rescheduling or repossession.
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Description
This quiz covers Chapter 1 of the Foundations of Bank Lending, focusing on the fundamental principles of bank credit. Learn about the credit process cycle, the significance of bank credit, and the ethical guidelines governing financial institutions in Malaysia. After completing this chapter, you will understand the regulations affecting bank credit and the importance of governance in the banking sector.
