CBP International Banking Practices 2

Question 1

Which international body sets the Basel III capital adequacy standards for banks?

Accepted Answer

Bank for International Settlements

Answer

The Basel III framework was developed by the Basel Committee on Banking Supervision, which operates under the Bank for International Settlements (BIS).

Question 2

A US bank receives a demand deposit from a foreign national who is a Politically Exposed Person (PEP). What is the MOST critical immediate step?

Accepted Answer

Apply enhanced due diligence procedures

Answer

BSA/AML regulations require enhanced due diligence (EDD) for PEPs, not automatic refusal or immediate reporting unless suspicious activity is identified.

Question 3

Under a Confirmed Irrevocable Letter of Credit, who bears the payment obligation if the issuing bank defaults?

Accepted Answer

The confirming bank

Answer

In a confirmed LC, the confirming bank adds its own independent payment guarantee, so it must pay even if the issuing bank fails.

Question 4

Which SWIFT message type is used for interbank funds transfers (cover payments)?

Accepted Answer

MT 202

Answer

MT 202 is the SWIFT General Financial Institution Transfer used for bank-to-bank (cover) payments, while MT 103 handles customer credit transfers.

Question 5

What is 'transfer pricing' in the context of international banking?

Accepted Answer

The internal rate charged between subsidiaries within a multinational banking group

Answer

Transfer pricing refers to the internal rates that different entities within the same banking group charge each other for funds or services, subject to arm's-length standards.

(CBP) Certified Banking Professional Practice Test

(CBP) Certified Banking Professional Practice Test

CBP International Banking Practices 2