Treasury Operations and Banking Relations Flashcards
7 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Treasury Operations and Banking Relations flashcards as text
A treasury manager is reviewing the company's banking relationships as part of an annual rationalization exercise. Which metric best indicates whether a banking relationship is economically justified?
Answer: The return on the bank relationship measured by fees paid versus services received
Bank relationship rationalization focuses on whether the fees paid (or balances maintained) generate sufficient value from the services received, ensuring each relationship earns its keep.
Under Regulation E, which type of transaction is primarily governed?
Answer: Consumer electronic fund transfers including debit card and ACH transactions
Regulation E (Electronic Fund Transfer Act) governs consumer electronic fund transfers, including ATM, debit card, and ACH transactions, establishing liability and error resolution rights.
A company uses a 'concentration account' as part of its cash management structure. What is the primary function of this account?
Answer: To aggregate funds from multiple collection accounts into a central account for investment or disbursement
Concentration accounts gather cash from dispersed collection points (lockboxes, field locations) into a single central account, maximizing investable funds.
What is the primary risk associated with intraday overdrafts (daylight overdrafts) in Fedwire transactions?
Answer: They expose the Federal Reserve and the banking system to credit risk if a bank fails during the day
Daylight overdrafts create systemic credit risk because if a bank with a large intraday overdraft fails, the Federal Reserve must absorb the loss to maintain payment system stability.
A treasury analyst is calculating the 'net collected balance' for bank fee offset purposes. Which adjustment must be made to the average ledger balance?
Answer: Subtract float (uncollected funds) and the reserve requirement percentage
Net collected balance = average ledger balance minus float (uncollected items) minus the reserve requirement, yielding the investable balance used to calculate earnings credits.
Which payment rail settles transactions in real-time gross settlement (RTGS) on a transaction-by-transaction basis in the United States?
Answer: Fedwire Funds Service
Fedwire is the Federal Reserve's RTGS system, settling each transaction individually and immediately in central bank funds with finality.
A company is evaluating whether to bring wire transfer processing in-house or keep it with its bank. What is the most significant control risk of in-house wire initiation?
Answer: Potential for unauthorized or fraudulent wire transfers if dual control is not enforced
In-house wire initiation increases the risk of fraud or unauthorized transfers if robust dual-control (maker-checker) procedures and system access controls are not implemented.