Foundation of Bank Lending Quiz

Financial institution refers to:

• A person who setup an organization carrying on a financial business regulated under government.

• A person carrying on a financial business regulated under the laws by the bank.

• A person with a license carrying a bank business in collecting of cash, cheques and provision under financing.

• A person has licensed under the Financial Services Act 2023 to carry bank business in market.

Answer explanation

The correct choice defines a financial institution as a person regulated by bank laws, which encompasses various financial activities, making it the most accurate description compared to the other options.

Provision of finance that offered in market refers to:

• bank business.

• bank product and services.

• bank facilities.

• bank interest charge.

Answer explanation

The provision of finance in the market is primarily associated with bank business, which encompasses all financial activities conducted by banks, including lending and investment services.

Which of the following bank services is NOT TRUE about bank business?

• Accepting deposits on current account, deposit account, savings account and other similar account.

• Provision of finance such as leasing, factoring and loan.

• Provide a consultancy to borrower who have a problem in debt payment.

• Accepting and collecting cheques drawn by the customers.

Answer explanation

The statement about providing consultancy to borrowers with debt problems is not a standard bank service. Banks primarily focus on financial transactions and lending, rather than offering debt counseling.

Which of the following components about five areas of banking operations in the market TRUE?

• Corporate banking, business banking, retail customer, treasury and asset management.

• Corporate banking, leasing business, retail customer, treasury and asset investment.

• Corporate banking, wholesales services, retail banking, customer banking and treasury.

• Corporate banking, asset management, bank's funding, business customer and retail customer.

Answer explanation

The correct choice includes 'corporate banking', 'business banking', 'retail customer', 'treasury', and 'asset management', which accurately represent key areas of banking operations in the market.

A several of term such as definition of capital, disclose requirements, and calculation of market risk that refers to:

• internal policies and guidelines.

• external laws and regulations.

• financial services act

• the basel framework.

Answer explanation

The Basel framework provides comprehensive guidelines on capital definitions, disclosure requirements, and market risk calculations, making it the correct choice for the question.

Which of the following is TRUE about the process of credit cycle in bank lending assessment and management?

• Origination, assessment, administration, monitoring and recovery.

• Origination, approval, administration, settlement and loan recovery.

• Origination, administration, approval, monitoring and settlement.

• Origination, approval, administration, monitoring and settlement.

Answer explanation

The correct choice, 'Origination, approval, administration, monitoring and settlement,' accurately reflects the key stages in the credit cycle, ensuring proper assessment and management of bank lending.

Bank's Risk Assets Acceptance (RACC) is an element of assessment based on criteria of

• business lending and consumer lending.

• business lending and corporate lending.

• business lending and services lending.

• business lending and commercial lending.

Answer explanation

The correct choice is 'business lending and corporate lending' because RACC assesses risk based on the criteria relevant to both business and corporate lending activities, which are crucial for evaluating risk assets.

Which of the following statement is NOT TRUE about credit proposition before credit approval in bank lending assessment and management?

• approved with or without conditions.

• refer to the borrowers for more information.

• approved with reduce the limit.

• outright reject due to good of bankable credit.

Answer explanation

The statement 'outright reject due to good of bankable credit' is NOT TRUE because a good credit proposition would not lead to outright rejection; it would typically be approved or referred for more information.

Credit score is a standard process of lending assessment and management based on

• bank and integrated system among the financial intermediaries and third party such as CTOS and CCRIS which provide status of credit risk on the borrowers.

• bank and integrated system among the third party in the market such as CTOS only which provide status of credit risk on the borrowers.

• bank and manual credit judgement by the expertise for evaluation and providing a status of credit risk on the borrower.

• bank and evaluation by the credit risk department that provide status of credit risk on the borrowers.

Answer explanation

The correct choice highlights the role of banks and integrated systems like CTOS and CCRIS, which collectively assess credit risk, unlike the other options that lack comprehensive integration or rely solely on manual judgment.

Asymmetric information is a problem in a bank-customer relationship especially in small and medium enterprise lending assessment. This problem related with the

• Moral suasion and adverse assessment.

• Moral hazard and adverse selection.

• Moral hazard and customer selection.

• Moral hazard and credit evaluation.

Answer explanation

Asymmetric information in bank-customer relationships leads to moral hazard, where borrowers may take risks, and adverse selection, where lenders cannot accurately assess borrower risk, making 'Moral hazard and adverse selection' the correct choice.