Banking Exam Treasury Management 2

Question 1

Which metric measures the sensitivity of a bank's net interest income to changes in interest rates?

Accepted Answer

Interest Rate Sensitivity Gap

Answer

Tier 1 Capital Ratio

Answer

Loan-to-Value Ratio

Answer

Return on Equity

Question 2

The Federal Open Market Committee (FOMC) primarily influences bank treasury operations by:

Accepted Answer

Setting the federal funds rate target

Answer

Setting reserve requirements for all US banks

Answer

Approving bank mergers and acquisitions

Answer

Auditing bank financial statements quarterly

Question 3

In treasury management, 'duration' is best defined as:

Accepted Answer

A measure of a bond's price sensitivity to interest rate changes

Answer

The length of time a bank has been in operation

Answer

The average maturity of a bank's entire loan portfolio

Answer

The time required to process an international wire transfer

Question 4

Which of the following qualifies as a Level 1 High-Quality Liquid Asset (HQLA) under Basel III?

Accepted Answer

U.S. Treasury securities

Answer

Commercial real estate loans

Answer

Subordinated corporate bonds rated BB+

Answer

Private equity fund investments

Question 5

A bank with more rate-sensitive liabilities than rate-sensitive assets is described as:

Accepted Answer

Negatively gapped (liability-sensitive)

Answer

Positively gapped

Answer

Duration neutral

Answer

Overcapitalized

Question 6

The primary purpose of the Net Stable Funding Ratio (NSFR) under Basel III is to:

Accepted Answer

Require banks to fund long-term assets with stable, long-term funding sources

Answer

Ensure banks maintain adequate capital against credit losses

Answer

Limit the size of a bank's derivatives portfolio

Answer

Regulate interest rates offered on consumer deposits

Question 7

What is the primary purpose of a bank's investment securities portfolio in treasury management?

Accepted Answer

To provide liquidity, earn interest income, and manage interest rate risk

Answer

To provide unsecured credit to large corporations

Answer

To generate fee income from trade finance activities

Answer

To fund the bank's overseas expansion plans