Approved

Campus Greenwich Maritime/International Partners

Faculty Business

Department Accounting and Finance

Module Code FINA 1094

Module Title Banking: Principles, Practice and Regulation

Level 5

Duration THREE HOURS

Date May 2020

Module Leader: Dr Olufemi Sallyanne Decker

Answer FOUR questions only.

All questions carry equal marks.

This is a CLOSED book examination.

Non-programmable calculators are permitted.

TAKE HOME EXAM INSTRUCTIONS

Follow the word limits in each question shown in RED

May 2020
Module Title Banking: Principles, Practice and Regulation
Module Code FINA 1094
Page 1 of 5
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Answer FOUR questions only.

Question One

‘Several factors may create barriers to entry for challenger banks, but developments in
the UK market suggest they can still adopt effective competitive strategies’. Do you
agree with this statement? Give reasons for your answer. Word Limit - 750
25 marks

Question Two

a) New York is consistently ranked as either the leading or second most important
international financial centre. Using examples, discuss factors that would give a
location a comparative advantage in providing international banking services.
Word Limit – 400

13 marks

b) Outline three strategic motives banks may have for pursuing multinational
banking. Word Limit - 350
12 marks

Total 25 Marks

Question Three

Discuss how banks as financial intermediaries could contribute towards progressing the
Sustainable Development Goals. Word Limit - 750
25 Marks

Question Four

Following the global financial crisis, the Basel Committee revised its Corporate
Governance Principles to improve corporate governance in banks.

a) Discuss the role that bank boards can play in promoting good corporate
governance in banks Word Limit - 300
10 marks

b) What recommendations did the Walker Review make about how bank boards
could be strengthened? Word Limit - 150
5 marks

c) Explain why good corporate governance is important in banks

Word Limit - 300
10 marks
Total 25 Marks
May 2020
Module Title Banking: Principles, Practice and Regulation
Module Code FINA 1094
Page 2 of 5
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Question Five

a) Explain how any four of the following risks may arise in banking

i) credit risk
ii) interest rate risk
iii) liquidity risk
iv) market risk
v) operational risk
vi) conduct risk
Word Limit - 500
16 marks

b) Explain the relationship between liquidity and solvency risk. Word Limit - 250
9 marks

Total 25 marks

Question Six

Discuss how the following measures are used in bank regulation and supervision

a) LOLR Lending Word Limit - 300

8 marks

b) Capital standards Word Limit - 300

8 marks

c) Treating Customers Fairly principles Word Limit - 150

9 marks

Total 25 marks

Question Seven

a) Discuss how Basel III may have improved capital regulation.

Word Limit - 480
16 marks

b) Outline the structure of regulation in a country of your choice.

Word Limit - 270
9 marks

Total 25 marks

May 2020
Module Title Banking: Principles, Practice and Regulation
Module Code FINA 1094
Page 3 of 5
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Question 8

You have recently been employed as an analyst with Bank of Mum and you have
been attached to the equities desk. Your manager has provided you with a summary
balance sheet for Bank of Mum and some additional information from the bank’s
income statement. He has also given you some ratios for the bank’s peer group.

Bank of Mum Balance Sheet

2019 (in Millions)

Cash 400
Treasury Bills 100
long investments 220
Loans 1400
Premises 30
All other assets 230
Total assets 2380

Demand Deposits 534

Time and savings Deposits 700
All other deposits 504
Other liabilities 470
Reserves 52
Equity 120
Total liabilities and capital 2,380

Additional Information:

Total operating income £ 338m

Interest income £ 296m
Interest expenses £ 160m
Net income £ 44m

Financial ratios for Bank of Mum’s Peer Group

Return on equity 20%

Return on Assets 1%
Net interest margin 5.2%
Equity multiplier 16%
Leverage ratio 5%
Temporary Investments ratio 36%
Loan to Assets ratio 55%

May 2020
Module Title Banking: Principles, Practice and Regulation
Module Code FINA 1094
Page 4 of 5
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a) You are required to use ratio analysis to compare the performance of Bank of
Mum with that of the peer group. You should report back to your manager
with calculations of the same ratios for Bank of Mum and comments on the
bank’s strengths and weaknesses based on these ratios
Word Limit – 300 (Excluding Calculations)
21 marks

b) Outline the limitations of ratio analysis. Word Limit - 150

4 marks

Total 25 marks

May 2020
Module Title Banking: Principles, Practice and Regulation
Module Code FINA 1094
Page 5 of 5