CPB Credit & Lending Solutions for Private Clients 3

Question 1

What is a subscription line of credit (capital call facility) used for in private banking?

Accepted Answer

A short-term credit facility secured by committed but uncalled capital from fund investors

Answer

A loan to subscribe to a managed portfolio advisory service

Answer

A revolving line tied to subscription-based recurring business revenues

Answer

A fixed mortgage for properties acquired through auction

Question 2

What characterizes a bullet repayment loan structure?

Accepted Answer

Principal is repaid in a single lump sum at maturity, with only interest paid during the term

Answer

The loan is repaid in progressively smaller increments over many years

Answer

Repayment amounts increase progressively throughout the loan term

Answer

The loan automatically renews at maturity with no repayment required

Question 3

Which lending product is specifically designed to help private banking clients monetize concentrated equity positions without immediately selling shares?

Accepted Answer

Margin loan or exchange fund structure

Answer

Reverse mortgage

Answer

Jumbo conforming mortgage

Answer

Student loan consolidation product

Question 4

What is a non-recourse loan in private banking?

Accepted Answer

A loan where the lender's recovery is limited solely to the pledged collateral

Answer

A loan where the borrower is personally liable for any deficiency remaining after collateral liquidation

Answer

A loan extended without any collateral requirement whatsoever

Answer

A loan fully guaranteed by a government or quasi-government agency

Question 5

What is the primary purpose of a collateral management agreement (CMA) in private banking lending?

Accepted Answer

To define the terms, maintenance requirements, and remedies governing pledged collateral

Answer

To govern the day-to-day management of the client's investment portfolio strategy

Answer

To replace the client's existing brokerage account agreement entirely

Answer

To set the loan's interest rate automatically based on market conditions

Question 6

What is the main advantage of using a Lombard credit line over liquidating a portfolio to meet a client's liquidity need?

Accepted Answer

A Lombard line preserves the investment position and defers potential capital gains taxes

Answer

Lombard lines generate higher investment returns than the underlying portfolio

Answer

Liquidating assets always eliminates all interest costs for the client

Answer

Lombard lines are always interest-free for high-net-worth clients

Question 7

Which U.S. regulation most directly governs the extension of credit on securities by brokers and dealers, affecting private bank margin lending?

Accepted Answer

Regulation T, issued by the Federal Reserve

Answer

The Community Reinvestment Act (CRA) lending requirements

Answer

The Dodd-Frank Act's Volcker Rule provisions

Answer

Basel III capital adequacy requirements for mortgage lending