CQIB LATEST 2026 CORE EXAM MANUAL QUESTIONS AND
ANSWERS RATED A+
✔✔What is a Bills of exchange and promissory note? - ✔✔Specialised instrument,
unconditional order in writing between parties, where Bank purchases bill amount from
borrower, deducting charges.
✔✔What is Equipment leasing and hire purchase? - ✔✔Finance for plant, machinery
and vehicles by individuals and businesses.
✔✔What is a Trade Finance? - ✔✔Facilitating import and export transactions.
✔✔What are the 4 types of Wealth Management products and services? - ✔✔1.
Allocated Pension
2. Managed Funds and Superannuation
3. Annuity
4. Investment Growth Bonds
✔✔How does the Bank make revenue? - ✔✔Lending money at rates higher than they
pay for deposits.
Charging fees for products and services such as loans, deposit payment services,
travellers cheques or foreign exchange fees.
✔✔What is the different between the interest charged by Bank and interest paid to
customers for deposits? - ✔✔It's the spread, or the net interest income. When the
Banks earning assets divide that net interest income, it is the net interest margin.
✔✔What are the 3 facts of Banking fees in Australia? - ✔✔For households, credit cards
represented the largest component of fee income, followed by housing loan fees and
deposits.
• For businesses, loans represented the largest component of fee income, followed by
fees for merchant services.
• Credit cards represent the largest component of fee income received from the
household sector.
✔✔What is maturity transformation? - ✔✔The practice by financial institutions of
borrowing money on shorter timeframes than they lend the money out on longer times
frames.
✔✔What are the risks associated with maturity transformation? - ✔✔There are three
risk categories:
1. Credit risk
2. Liquidity risk
3. Interest rate risk
,✔✔What is Liquidity? - ✔✔Liquidity is determined by a bank's ability to meet all its
anticipated expenses, such as funding loans or making payments on debt, using only
liquid assets. Liquidity problems arise when a bank does not hold sufficient cash (or
assets that can easily be converted into cash) on their balance sheet to repay
depositors and other creditors.
✔✔What is Solvency? - ✔✔Solvency is the ability of a bank to meet its long-term
financial obligations. Solvency is essential to staying in business as it indicates a
company's ability to continue operations into the foreseeable future.
✔✔What is Profitability? - ✔✔Profitability is the ability to generate earnings compared to
expenses and other relevant costs incurred during a specific period of time. Profitability
ratios such as profit margin, return on assets (ROA) and return on equity (ROE) are
popular metrics used in financial analysis.
✔✔What are the components of "Assets" under the balance sheet? - ✔✔Interest
earning Assets:
• Home loans
• Loans to consumers
• Business and corporate loans
• Cash
Non-lending interest earning assets
Non-earning assets
Premises, e.g. Branches, Offices, Equipment e.g. Computers, Furniture and Vehicles.
✔✔What are Bank Liabilities? - ✔✔Interest Bearing liabilities:
• Transaction deposits
• Savings deposits
• Investment deposits
• Other demand deposits
• Debt issues
Equity
Share Capital
✔✔What are the 2 frameworks under the Basel III Liquidity reform that Banks must
disclose? - ✔✔The framework includes global minimum quantitative requirements that
the Banks are required to disclose:
1. Liquid coverage ratio (LCR)
2. Net Stable Funding Ratio (NFSR)
✔✔What is Liquidity Coverage Ratio (LCR)? - ✔✔Requires Australian ADIs to hold
sufficient liquid assets to meet 30-day net cash outflows projected under an APRA-
prescribed stress scenario (a liquidity measure required by the Basel III reforms and
implemented by APRA in Australia on 1 January 2015).
, ✔✔What is the Net Stable Funding Ratio (NSFR)? - ✔✔Requires Australian ADIs to
fund their assets with sufficient stable funding to reduce funding risk over a one-year
horizon as prescribed by APRA, a requirement of the Basel III reforms and implemented
by APRA in Australia on 1 January 2018.
✔✔What is Capital Adequacy Requirements? - ✔✔A bank's capital, in its simplest form,
represents its ability to withstand losses without becoming insolvent and managing risk.
✔✔What is Tier 1 and Tier 2 in Banks regulatory capital? - ✔✔• Tier 1 capital - includes
ordinary shares and retained earnings (profits not dispersed to shareholders); it can
also include specific types of preference shares and convertible securities.
• Tier 2 capital - funding sources that rank below a bank's depositors and other senior
creditors, i.e. subordinated debt; provides depositors with an additional layer of loss
protection after a bank's Tier 1 capital is exhausted.
✔✔Which regulator makes and enforces rules which govern the capital adequacy of
Australian Banks? - ✔✔The Australian Prudential Regulation Authority (APRA)
✔✔How are Foreign Currencies Exchanged? - ✔✔SWIFT Payment System
Services of international division of major Banks,
which offer:
- Bills of Exchange
- Letters of Credit
- Documentary Credits
✔✔Who regulates the Australian Insurance Industry? - ✔✔The Australian Prudential
Regulation Authority - APRA
✔✔Under which Act is it regulated and what are the requirements? - ✔✔Regulates
insurance under the Insurance Act 1973 (Cth). Insurance businesses are required to:
• Obtain APRAs approval to carry on an insurance business.
• Comply with regulations set by APRA.
• Report all regulatory breaches to APRA.
While APRA sets prudential standards for the insurance industry and issues prudential
practice standards, ASIC is responsible for licensing financial services providers,
including those who offer insurance and provide advice on these products
✔✔The principle of utmost good faith is fundamental to all insurance contracts. It is
established in common law and is also captured in s13 of the Insurance Contracts Act. -
✔✔What is the principle to upmost good faith?
✔✔What are the 2 main types of general insurance? - ✔✔1. Indemnity Policies -
Compensating an individual for a financial loss.
ANSWERS RATED A+
✔✔What is a Bills of exchange and promissory note? - ✔✔Specialised instrument,
unconditional order in writing between parties, where Bank purchases bill amount from
borrower, deducting charges.
✔✔What is Equipment leasing and hire purchase? - ✔✔Finance for plant, machinery
and vehicles by individuals and businesses.
✔✔What is a Trade Finance? - ✔✔Facilitating import and export transactions.
✔✔What are the 4 types of Wealth Management products and services? - ✔✔1.
Allocated Pension
2. Managed Funds and Superannuation
3. Annuity
4. Investment Growth Bonds
✔✔How does the Bank make revenue? - ✔✔Lending money at rates higher than they
pay for deposits.
Charging fees for products and services such as loans, deposit payment services,
travellers cheques or foreign exchange fees.
✔✔What is the different between the interest charged by Bank and interest paid to
customers for deposits? - ✔✔It's the spread, or the net interest income. When the
Banks earning assets divide that net interest income, it is the net interest margin.
✔✔What are the 3 facts of Banking fees in Australia? - ✔✔For households, credit cards
represented the largest component of fee income, followed by housing loan fees and
deposits.
• For businesses, loans represented the largest component of fee income, followed by
fees for merchant services.
• Credit cards represent the largest component of fee income received from the
household sector.
✔✔What is maturity transformation? - ✔✔The practice by financial institutions of
borrowing money on shorter timeframes than they lend the money out on longer times
frames.
✔✔What are the risks associated with maturity transformation? - ✔✔There are three
risk categories:
1. Credit risk
2. Liquidity risk
3. Interest rate risk
,✔✔What is Liquidity? - ✔✔Liquidity is determined by a bank's ability to meet all its
anticipated expenses, such as funding loans or making payments on debt, using only
liquid assets. Liquidity problems arise when a bank does not hold sufficient cash (or
assets that can easily be converted into cash) on their balance sheet to repay
depositors and other creditors.
✔✔What is Solvency? - ✔✔Solvency is the ability of a bank to meet its long-term
financial obligations. Solvency is essential to staying in business as it indicates a
company's ability to continue operations into the foreseeable future.
✔✔What is Profitability? - ✔✔Profitability is the ability to generate earnings compared to
expenses and other relevant costs incurred during a specific period of time. Profitability
ratios such as profit margin, return on assets (ROA) and return on equity (ROE) are
popular metrics used in financial analysis.
✔✔What are the components of "Assets" under the balance sheet? - ✔✔Interest
earning Assets:
• Home loans
• Loans to consumers
• Business and corporate loans
• Cash
Non-lending interest earning assets
Non-earning assets
Premises, e.g. Branches, Offices, Equipment e.g. Computers, Furniture and Vehicles.
✔✔What are Bank Liabilities? - ✔✔Interest Bearing liabilities:
• Transaction deposits
• Savings deposits
• Investment deposits
• Other demand deposits
• Debt issues
Equity
Share Capital
✔✔What are the 2 frameworks under the Basel III Liquidity reform that Banks must
disclose? - ✔✔The framework includes global minimum quantitative requirements that
the Banks are required to disclose:
1. Liquid coverage ratio (LCR)
2. Net Stable Funding Ratio (NFSR)
✔✔What is Liquidity Coverage Ratio (LCR)? - ✔✔Requires Australian ADIs to hold
sufficient liquid assets to meet 30-day net cash outflows projected under an APRA-
prescribed stress scenario (a liquidity measure required by the Basel III reforms and
implemented by APRA in Australia on 1 January 2015).
, ✔✔What is the Net Stable Funding Ratio (NSFR)? - ✔✔Requires Australian ADIs to
fund their assets with sufficient stable funding to reduce funding risk over a one-year
horizon as prescribed by APRA, a requirement of the Basel III reforms and implemented
by APRA in Australia on 1 January 2018.
✔✔What is Capital Adequacy Requirements? - ✔✔A bank's capital, in its simplest form,
represents its ability to withstand losses without becoming insolvent and managing risk.
✔✔What is Tier 1 and Tier 2 in Banks regulatory capital? - ✔✔• Tier 1 capital - includes
ordinary shares and retained earnings (profits not dispersed to shareholders); it can
also include specific types of preference shares and convertible securities.
• Tier 2 capital - funding sources that rank below a bank's depositors and other senior
creditors, i.e. subordinated debt; provides depositors with an additional layer of loss
protection after a bank's Tier 1 capital is exhausted.
✔✔Which regulator makes and enforces rules which govern the capital adequacy of
Australian Banks? - ✔✔The Australian Prudential Regulation Authority (APRA)
✔✔How are Foreign Currencies Exchanged? - ✔✔SWIFT Payment System
Services of international division of major Banks,
which offer:
- Bills of Exchange
- Letters of Credit
- Documentary Credits
✔✔Who regulates the Australian Insurance Industry? - ✔✔The Australian Prudential
Regulation Authority - APRA
✔✔Under which Act is it regulated and what are the requirements? - ✔✔Regulates
insurance under the Insurance Act 1973 (Cth). Insurance businesses are required to:
• Obtain APRAs approval to carry on an insurance business.
• Comply with regulations set by APRA.
• Report all regulatory breaches to APRA.
While APRA sets prudential standards for the insurance industry and issues prudential
practice standards, ASIC is responsible for licensing financial services providers,
including those who offer insurance and provide advice on these products
✔✔The principle of utmost good faith is fundamental to all insurance contracts. It is
established in common law and is also captured in s13 of the Insurance Contracts Act. -
✔✔What is the principle to upmost good faith?
✔✔What are the 2 main types of general insurance? - ✔✔1. Indemnity Policies -
Compensating an individual for a financial loss.
