Retail and Corporate Banking Flashcards
7 cards from real Banking Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Retail and Corporate Banking flashcards as text
A bank's Asset-Liability Committee (ALCO) is primarily responsible for managing:
Answer: Interest rate risk, liquidity risk, and the overall balance sheet structure
ALCO oversees the bank's balance sheet to optimize net interest income while managing interest rate and liquidity exposures.
Which of the following describes 'relationship banking' in a corporate context?
Answer: Providing a broad suite of financial products to deepen client ties and cross-sell services
Relationship banking aims to serve multiple financial needs of a corporate client — credit, treasury, trade finance, capital markets — to increase switching costs and total revenue.
A 'negative pledge' covenant in a corporate loan agreement means the borrower:
Answer: Cannot pledge its assets as collateral to other creditors without the lender's consent
A negative pledge prevents the borrower from encumbering assets that might otherwise provide implicit security to existing unsecured lenders.
In retail banking, 'non-sufficient funds' (NSF) fees have attracted regulatory scrutiny primarily because:
Answer: They disproportionately burden lower-income customers and generate revenue from financial distress
Regulators and consumer advocates argue NSF and overdraft fees are regressive, hitting lower-income customers hardest and profiting from their hardship.
A corporate client wants to hedge against rising interest rates on a floating-rate loan. The most common derivative solution is a(n):
Answer: Interest rate swap exchanging floating payments for fixed payments
By entering a pay-fixed, receive-floating interest rate swap, the corporate client converts its variable loan cost into a predictable fixed rate.
The Liquidity Coverage Ratio (LCR) under Basel III requires banks to hold enough High-Quality Liquid Assets (HQLA) to cover:
Answer: 30 days of net cash outflows under a stress scenario
The LCR mandates that banks hold sufficient HQLA to survive a 30-day stress scenario of net cash outflows.
Which type of corporate banking client would most likely use a 'borrowing base' structure in their credit facility?
Answer: A company with significant receivables and inventory used as collateral
Borrowing base facilities tie available credit to the value of eligible receivables and inventory, common for manufacturing or distribution companies.