48 Questions
What is the main issue in the brick and mortar distribution channel?
Cost perspective
Wholesale banking involves lending money on a long-term basis.
False
What is the main characteristic of a committed facility in wholesale banking?
It has a fixed term up to 7 years and carries a floating rate linked to the interbank market.
A ______________ credit allows drawing down in tranches without losing the availability of the undrawn part.
standby
What is the main concern in retail banking?
Cost control
Revolving credit does not allow re-drawing repaid funds.
True
Match the following types of facilities with their characteristics:
Uncommitted facilities = No commitment to lend money Committed facilities = Fixed term up to 7 years Revolving credit = Allows re-drawing repaid funds Standby credit = Allows drawing down in tranches
What is the term for a long-term project-related term loan?
Project Finance
What is the traditional banking business of commercial banking?
Accepting deposits and granting loans
Merchant banks are only found in the UK.
False
What do investment banks help people to do?
find money
Commercial banking and investment banking are not fully separated activities due to possible overlaps in areas such as _______________.
interbank borrowing
Match the following terms with their descriptions:
Retail Banking = Handling money, deposits, loans, and advising Commercial Banking = Accepting deposits and granting loans Investment Banking = Helping people to find money
Bank failures are a result of concentrated business.
True
What is the source of the graph showing concentrated business?
Liikanen Report (2012)
What is NOT a part of retail banking?
Trading and derivatives
What type of loan is secured on a property and typically has a lower interest rate than unsecured overdrafts or personal loans?
Mortgage loan
A personal loan's annual percentage rate takes into account only the nominal interest rate.
False
What is the main difference between a fixed rate mortgage loan and a variable rate mortgage loan?
Fixed rate mortgage loans have a fixed interest rate, while variable rate mortgage loans have an interest rate that can change over time.
Mortgage loans can be transformed into _______________________ (MBS).
mortgage-backed securities (MBS)
What is one of the services offered by commercial banks?
Securities purchases
Commercial banks do not offer insurance products.
False
Match the following banking services with their descriptions:
Securities custody = From unregistered bearer format to dematerialised securities Foreign exchange = Exchange and transfer services Advice = Providing guidance on financial matters
What is the main purpose of a bank's delivery channels?
To interact with customers.
What is the primary issue with the brick and mortar distribution channel?
Changed customer behavior
Wholesale banking involves lending money on a long-term basis.
False
What type of loan has a fixed term up to 7 years and carries a floating rate linked to the interbank market?
Term loan
A ______________ facility allows drawing down in tranches without losing the availability of the undrawn part.
Standby credit
What is the main concern in retail banking?
All of the above
What type of facility has the possibility to re-draw repaid funds?
Revolving credit
Match the following types of facilities with their characteristics:
Term loan = Fixed term up to 7 years and carries a floating rate Standby credit = Allows drawing down in tranches without losing the availability of the undrawn part Revolving credit = Has the possibility to re-draw repaid funds
What is the term for a long-term project-related term loan?
Project Finance
What is a characteristic of personal loans?
Set sum monthly repayments
Mortgage loans can be transformed into asset-backed securities (ABS).
False
What is the main purpose of a bank's delivery channels?
To interact with customers
Commercial banks offer _______________________ as a service to customers.
advice
What is a type of loan that is secured on a property?
Mortgage loan
Commercial banks do not offer insurance products.
False
Match the following services with their descriptions:
Securities purchases = Buying and selling securities on behalf of customers Securities custody = Holding and safekeeping securities for customers Mutual funds = Investing in a diversified portfolio of securities Foreign exchange = Converting one currency to another
What is the annual percentage rate (APR) on a personal loan?
A rate that takes into account the timing of repayments and costs
What is the traditional banking business of commercial banking?
Accepting deposits and granting loans
Merchant banks are only found in the UK.
False
What do investment banks help people to do?
find money
Commercial banking and investment banking are not fully separated activities due to possible overlaps in areas such as _______________.
interbank borrowing, discounting bills of exchange, forex
Match the following services with their descriptions:
Retail Banking = Handling money, deposits, loans, advise Wholesale Banking = Lending money on a long-term basis
What is a result of concentrated business in commercial banking?
Both A and B
What is the source of the graph showing concentrated business?
Liikanen Report (2012)
Commercial banks offer insurance products.
True
Study Notes
Commercial Banking
- Commercial banking involves traditional banking business of accepting deposits and granting loans.
- Key retail banking issues include:
- Capital strength
- Liquidity
- Risk management
- Executive pay
- Competition
- Cost control
- Sale of non-banking products
- Use of IT
Wholesale Banking
- Uncommitted facilities include:
- Overdrafts for corporates
- Lines of credit
- Banker's acceptances
- Committed facilities include:
- Term loans with a fixed term up to 7 years and a floating rate linked to the interbank market
- Standby credit with the possibility to draw down in tranches without losing the availability of the undrawn part
- Revolving credit with the possibility to redraw
- Project Finance, a long-term project-related term loan
Terminology
- Commercial banking and investment banking are not fully separated activities and may overlap in areas such as:
- Interbank borrowing
- Discounting bills of exchange
- Forex
- Investment banking is not uniquely defined globally and may be referred to as merchant banking in the UK, which is involved in takeover and merger activities
Retail Banking
- Retail banking involves:
- Money banking (handling money, deposits)
- Loans
- Advice
- Loans include:
- Personal loans with a specific amount and period, set sum monthly repayments, and an annual percentage rate that takes into account the timing of repayments and costs
- Mortgage loans secured on property, with fixed or variable rates, and Loan to Value (LTV) ratios
Services
- Services offered by commercial banks include:
- Securities purchases (as a broker or agent)
- Securities custody (from unregistered bearer format to dematerialized securities)
- Mutual funds (own product range can be extended through open architecture)
- Insurance products (life insurance and property and casualty insurances)
- Advice
- Safe deposit boxes
- Foreign exchange (exchange and transfer services)
Delivery Channels
- Delivery channels refer to how banks interact with customers, including:
- Branch network
- Telephone banking
- Internet banking
- Mobile banking driven by data science and artificial intelligence
Commercial Banking
- Commercial banking involves traditional banking business of accepting deposits and granting loans.
- Key retail banking issues include:
- Capital strength
- Liquidity
- Risk management
- Executive pay
- Competition
- Cost control
- Sale of non-banking products
- Use of IT
Wholesale Banking
- Uncommitted facilities include:
- Overdrafts for corporates
- Lines of credit
- Banker's acceptances
- Committed facilities include:
- Term loans with a fixed term up to 7 years and a floating rate linked to the interbank market
- Standby credit with the possibility to draw down in tranches without losing the availability of the undrawn part
- Revolving credit with the possibility to redraw
- Project Finance, a long-term project-related term loan
Terminology
- Commercial banking and investment banking are not fully separated activities and may overlap in areas such as:
- Interbank borrowing
- Discounting bills of exchange
- Forex
- Investment banking is not uniquely defined globally and may be referred to as merchant banking in the UK, which is involved in takeover and merger activities
Retail Banking
- Retail banking involves:
- Money banking (handling money, deposits)
- Loans
- Advice
- Loans include:
- Personal loans with a specific amount and period, set sum monthly repayments, and an annual percentage rate that takes into account the timing of repayments and costs
- Mortgage loans secured on property, with fixed or variable rates, and Loan to Value (LTV) ratios
Services
- Services offered by commercial banks include:
- Securities purchases (as a broker or agent)
- Securities custody (from unregistered bearer format to dematerialized securities)
- Mutual funds (own product range can be extended through open architecture)
- Insurance products (life insurance and property and casualty insurances)
- Advice
- Safe deposit boxes
- Foreign exchange (exchange and transfer services)
Delivery Channels
- Delivery channels refer to how banks interact with customers, including:
- Branch network
- Telephone banking
- Internet banking
- Mobile banking driven by data science and artificial intelligence
This quiz covers key concepts in retail banking, including distribution channels, banking services, and risk management, as well as the introduction to financial markets.
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