International Banking Flashcards
7 cards from real NAB practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 International Banking flashcards as text
What is an IBAN (International Bank Account Number) used for?
Answer: Uniquely identifying a bank account for cross-border transfers within participating countries
An IBAN is a standardized account number format that uniquely identifies a bank account in cross-border transactions, reducing errors and improving straight-through processing in international payments.
What does SEPA stand for and which transactions does it cover?
Answer: Single Euro Payments Area; euro-denominated credit transfers, direct debits, and card payments across member countries
SEPA (Single Euro Payments Area) enables individuals and businesses to make euro-denominated payments across 36 participating countries as easily and cheaply as domestic payments.
What is 'Herstatt risk' (also called settlement risk) in international banking?
Answer: The risk that one party to a foreign exchange trade pays but the counterparty fails to deliver before the end of the settlement day
Herstatt risk arises in FX settlement when one leg of a currency exchange is paid but the counterparty fails before delivering the other currency, named after the 1974 collapse of Bankhaus Herstatt.
What is a currency swap used for in international banking?
Answer: Exchanging principal and interest payments in different currencies to hedge FX and interest rate risk
A currency swap involves two parties exchanging principal amounts in different currencies and paying each other's interest obligations, used to hedge foreign exchange risk or obtain cheaper funding in a foreign currency.
What is the CHIPS system and what role does it play in international banking?
Answer: A large-value USD payment system that settles most US dollar international wire transfers
CHIPS (Clearing House Interbank Payments System) is a private US large-value payment system that settles the vast majority of international USD transactions, netting obligations to reduce liquidity needs.
Which method of international payment carries the MOST risk for an exporter?
Answer: Open account (payment after delivery)
Open account terms — where the exporter ships goods and invoices the importer for later payment — carry the most risk for the exporter because payment is entirely dependent on the buyer's willingness and ability to pay.
How does blockchain technology have the potential to improve international payments?
Answer: By enabling faster, cheaper, and more transparent cross-border settlements by reducing intermediaries
Blockchain can enable near-real-time cross-border settlement with full transaction transparency and reduced reliance on correspondent banking intermediaries, lowering costs and settlement times significantly.