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 retail bank customer applies for a mortgage and the bank's underwriter calculates a debt-to-income (DTI) ratio of 46%. Under conventional lending standards, this result most likely means:
Answer: The application may face challenges, as most conventional guidelines prefer DTI at or below 43–45%
Conventional guidelines from Fannie Mae typically cap DTI around 45% (with strong compensating factors up to 50%), so 46% puts this borrower at or beyond the limit.
What is the primary difference between a commercial bank and an investment bank?
Answer: Commercial banks accept deposits and make loans; investment banks primarily raise capital and advise on transactions
Commercial banks take deposits and extend credit; investment banks focus on underwriting securities, M&A advisory, and capital markets activities.
A corporate bank's 'middle market' segment typically refers to companies with:
Answer: Annual revenues between $10 million and $1 billion
Middle-market companies are generally defined as those with revenues roughly between $10 million and $1 billion, requiring more sophisticated banking than small business but less than large corporate clients.
Under the Equal Credit Opportunity Act (ECOA), a bank must notify an applicant of an adverse action within how many days of a completed credit application?
Answer: 30 calendar days
ECOA and Regulation B require lenders to provide adverse action notices within 30 days of receiving a completed application.
A bank's 'funds transfer pricing' (FTP) mechanism is primarily used to:
Answer: Allocate the cost and benefit of funds internally between business units
FTP assigns a cost to funding-consuming units (lending) and a credit to funding-generating units (deposits), enabling true profitability measurement by business line.
Which of the following is an example of 'cross-selling' in retail banking?
Answer: Offering a checking account customer a home equity line of credit
Cross-selling means offering existing customers additional products, such as a HELOC to a checking account holder, increasing wallet share.
A corporate client needs short-term financing to bridge the gap between paying suppliers and collecting from customers. The most appropriate product is:
Answer: A working capital line of credit
A working capital line of credit is designed to fund the operating cycle gap between payables and receivables, providing flexible short-term liquidity.