Exam (elaborations)
CQIB NZ QUESTIONS AND ANSWERS
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CQIB NZ QUESTIONS AND ANSWERS
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CQIB NZ QUESTIONS AND ANSWERSWhat is the role of banks? - Answers- Act as a financial intermediary, create products
and services, and develop mechanisms for making payments.
What is financial intermediation? - Answers- Pools funds from savers and provides
loans to borrowers.
What is retail banking? - Answers- Taking deposits and lending to individuals.
What is business banking? - Answers- Taking deposits and lending to small or medium
sized business enterprises.
What is wholesale banking? - Answers- Borrowing from and lending to corporate clients
or other financial institutions.
What is investment banking? - Answers- Serve high net worth customers in functions of
capital market activities, i.e bonds & shares, trading and mergers and acquisitions.
What are debt capital markets? - Answers- Where capital is raised through the issue of
bonds. Investment banks are involved to plan, manage and sell the bonds.
What are equity capital markets? - Answers- Where funds are raised by undertaking an
Initial Public Offering (IPO), selling shares to the public for the first time.
What are private placements? - Answers- Plan an offering of bonds with an institutional
investor that has lower regulatory requirements.
What is mergers and acquisitions? - Answers- Companies look to purchase another
company and investment banks offer advice on the process and pricing.
What are Chinese walls? - Answers- Barriers to mitigate exchanges of information that
could lead to conflict of interest.
What is accepting deposits? - Answers- The banks first core function. It is how banks
source the majority of their funds.
What is granting loans? - Answers- The banks second core function.
What is an overdraft? - Answers- A defined credit limit attached to a bank account that
can be drawn against.
What is a credit card? - Answers- Allows for the purchase of goods and services within
a certain limit that can be paid back later.
,What are bills of exchange and promissory notes? - Answers- Specialised instruments,
an unconditional order between parties where the bank purchases the bill amount and
on maturity the borrower pays the full amount.
What is equipment leasing and hire purchase? - Answers- Forms of borrowing to
finance plant, machinery and vehicles.
What is trade finance? - Answers- Facilitation of import and export transactions e.g
lending, letters of credit, insurance.
What is a short term loan? - Answers- Principal and interest repayments are made over
a period of say five years, e.g for a car.
What is a long term loan? - Answers- Principal and interest repayments are made over
a period of say 25 years, e.g for a house.
What is Electronic Funds Transfer (ETF)? - Answers- Funds transferred electronically
between banks.
What are negotiable instruments? - Answers- Banks drafts, cheques and letters of
credit.
What are periodic payments? - Answers- Direct Debits and Standing Orders, where the
bank makes payments on behalf of the customer.
What are periodic collections? - Answers- Direct Credits, where the bank collects
payments on behalf of the customer.
What are debit cards? - Answers- Allows for the purchase of goods and services, and,
deducts the money directly from the customers bank account.
What are international money transfers? - Answers- Allows for the transfer of funds
overseas.
What are E-Commerce Payment Systems? - Answers- Allows businesses to accept
electronic payments with settlement on the same day.
What is insurance? - Answers- A contract between two parties, whereby one party
agrees to make payment to another party, who will assume liability should an agreed
event occur.
What is transfer of risk? - Answers- A risk management technique whereby risk of loss
is transferred to another party.
What is wealth management? - Answers- Investment + Superannuation + Retirement
Products.
, What are safe custody services? - Answers- The Safekeeping of valuable assets and
documents.
What is portfolio management? - Answers- Personalised management of a customer's
investments.
What are personal advisory services? - Answers- Private Bank function supplying
specialist advice.
What are corporate advisory services? - Answers- Specialist area of banking
associated with raising capital for corporate clients.
What is liquidity? - Answers- Bank's ability to meet all of its anticipated expenses
including making payments on debt using only liquid assets.
What is solvency? - Answers- Ability of a bank to meet its long term financial
obligations.
What is profitability? - Answers- Ability to generate earnings compared to its expenses.
When did banks make an appearance in New Zealand? - Answers- 1800s and early
1900s
When were bank notes issued in New Zealand? - Answers- 1920
What was the Great Depression? - Answers- World Economy crisis in 1930s
What happened in New Zealand during World War Two? - Answers- Pastoral Prosperity
When did Union Bank of Australia and Bank of Australasia merge to form ANZ? -
Answers- 1951
When were trading banks able to operate savings banks? - Answers- 1960
What happened to the New Zealand Economy in the 1970s? - Answers- Heavily
regulated and the first Oil Shock
What are the two categories of financial institution in New Zealand? - Answers-
Registered banks and non-bank financials
What happened to the New Zealand economy in the 1990s-2000s? - Answers- Open
economy with many banks which struggled to remain profitable
What was the Global Financial Crisis? - Answers- Economic crisis in 2008
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