CPB Credit & Lending Solutions for Private Clients 1

Question 1

What is a Lombard loan in private banking?

Accepted Answer

A loan secured by a portfolio of financial securities

Answer

A loan secured by real estate collateral only

Answer

An unsecured personal loan for high-net-worth clients

Answer

A government-backed mortgage product

Question 2

Which metric is most commonly used to determine the maximum loan amount in securities-backed lending?

Accepted Answer

Loan-to-value (LTV) ratio

Answer

Debt-to-income ratio

Answer

Credit utilization rate

Answer

Net interest margin

Question 3

What typically triggers a margin call in a pledged securities credit facility?

Accepted Answer

The portfolio value falls, pushing the LTV ratio above the agreed maximum

Answer

The client's credit score drops below 700

Answer

The client requests an increase in the credit line

Answer

Interest rates rise by more than 200 basis points

Question 4

What is concentration risk in the context of securities-backed lending collateral?

Accepted Answer

The risk that collateral is heavily weighted in a single security or sector

Answer

The risk that a borrower holds loans at too many different banks

Answer

The risk that interest rates change materially during the loan term

Answer

The risk that the client exits the banking relationship unexpectedly

Question 5

Which type of private banking credit facility provides ongoing, revolving access to funds without a fixed repayment schedule?

Accepted Answer

Line of credit

Answer

Term loan

Answer

Bullet loan

Answer

Amortizing mortgage

Question 6

What is a pledged asset mortgage (PAM)?

Accepted Answer

A home loan where investment assets are pledged as additional collateral to improve terms or eliminate PMI

Answer

A mortgage where the property is pledged to a third-party guarantor

Answer

A commercial real estate loan secured by government bonds

Answer

A reverse mortgage product for clients aged 65 and older

Question 7

In private banking, what distinguishes 'relationship pricing' for credit products?

Accepted Answer

Loan pricing reflects the overall profitability of the client's full relationship, including deposits and investments

Answer

Credit is priced solely based on the prevailing prime rate

Answer

Pricing is set uniformly across all clients regardless of assets held

Answer

Rates are determined exclusively by the client's credit bureau score