CBP Banking Operations and Services 3

Question 1

What is the primary purpose of a bank's asset-liability committee (ALCO)?

Accepted Answer

To manage interest rate risk and liquidity across the balance sheet

Answer

ALCO monitors and manages the balance sheet's exposure to interest rate risk and ensures adequate liquidity.

Question 2

Which of the following best describes a revolving line of credit?

Accepted Answer

A commitment allowing repeated borrowing up to an approved limit

Answer

A revolving line lets borrowers draw, repay, and redraw funds repeatedly up to an established credit limit.

Question 3

In the context of check processing, an MICR line contains:

Accepted Answer

Routing number, account number, and check number encoded in magnetic ink

Answer

MICR (Magnetic Ink Character Recognition) encodes routing, account, and check numbers at the bottom of each check for automated processing.

Question 4

A bank issues a cashier's check. The primary obligor on this instrument is:

Accepted Answer

The issuing bank itself

Answer

A cashier's check is a direct obligation of the issuing bank, making it more secure than a personal check.

Question 5

Which ratio measures a bank's ability to cover short-term liquidity needs using high-quality liquid assets?

Accepted Answer

Liquidity coverage ratio (LCR)

Answer

The LCR requires banks to hold enough high-quality liquid assets to survive a 30-day stress scenario under Basel III.

(CBP) Certified Banking Professional Practice Test