BMO Foundational Concepts & Principles 3

Question 1

A BMO relationship manager discovers a long-time client is structuring cash deposits just below the $10,000 FINTRAC reporting threshold. What should the manager do?

Accepted Answer

File a Suspicious Transaction Report (STR) with FINTRAC

Answer

Deliberately keeping deposits below reporting thresholds (structuring) is a red flag for money laundering and must be reported to FINTRAC as a suspicious transaction.

Question 2

Which Basel III capital requirement specifically addresses a bank's ability to survive a 30-day stress scenario using liquid assets?

Accepted Answer

Liquidity Coverage Ratio (LCR)

Answer

The LCR requires banks to hold enough high-quality liquid assets (HQLA) to cover net cash outflows over a 30-day stress period.

Question 3

In the context of BMO's credit risk framework, what does 'probability of default (PD)' measure?

Accepted Answer

The likelihood a borrower will fail to meet obligations within a given period

Answer

PD is the statistical estimate of how likely a borrower is to default on their obligations within a specified time horizon, typically one year.

Question 4

A BMO teller receives a cheque made out to 'cash.' What is the correct handling procedure?

Accepted Answer

Treat it like a cash transaction, verify the presenter's ID, and apply cash reporting rules

Answer

Cheques payable to 'cash' are bearer instruments; the bank must verify the presenter's identity and follow cash transaction reporting rules.

Question 5

Which of the following best describes the concept of 'net interest margin (NIM)' for BMO?

Accepted Answer

The spread between interest earned on assets and interest paid on liabilities, as a percentage of assets

Answer

NIM is calculated as (interest income minus interest expense) divided by average earning assets, reflecting core banking profitability.

(BMO) Bank of Montreal Assessment Practice Test

(BMO) Bank of Montreal Assessment Practice Test

BMO Foundational Concepts & Principles 3