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PROFESSIONAL BANKER CERTIFICATE
QUESTIONS WITH DETAILED VERIFIED
ANSWERS
Commercial Banks Ans: Financial institutions that serve personal,
business, and corporate customers, primarily through accepting deposits
and providing loans.
Savings Banks Ans: Institutions that provide savings products for
individuals with surplus money and lend to those in need of borrowing.
Co-operative Banks Ans: Banks owned by members, providing deposit
and loan products while operating on co-operative principles.
Building Societies Ans: Mutual financial institutions primarily offering
mortgage lending services, along with personal financial services.
Challenger Banks Ans: Recently created retail banks that challenge the
market dominance of bigger, established banks through innovation and
good service.
Banks with High Street Presence Ans: Challenger banks that offer full
banking services through physical branches and digital channels.
Digital-Only Banks Ans: Banks operating exclusively through app-based,
mobile, online, and phone banking, without physical branches.
Fintech Companies Ans: Companies that integrate technology with
banking services to offer digital financial solutions.
Fintech Unicorns Ans: Fintech companies valued at over $1 billion.
Core bank functions Ans: - Operating Payments mechanisms
- Accepting Deposits
- Making Loans
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Financial Intermediation Ans: The process of linking lenders and
borrowers through banks.
Assets and Liabilities Ans: The two main sections of a bank's balance
sheet, detailing financial positions.
Lenders Ans: Customers with a money surplus who deposit their funds
in banks.
Borrowers Ans: Customers with a money shortfall who obtain funds from
banks.
Creditor Ans: A customer who deposits money in the bank, effectively
lending it to the bank.
Debtor Ans: A customer to whom the bank lends money.
Customer Liquidity Ans: The ability of customers to quickly access their
funds in cash.
Rate of Return Ans: The profit earned by the bank from lending out
deposited funds.
Size Transformation Ans: The process of aggregating small deposits
from savers into larger loans for borrowers.
Maturity Transformation Ans: Adjusting the time frame between the
short-term deposits and long-term loans.
Risk Transformation Ans: Managing and mitigating the risk associated
with lending.
Profitability Ans: The ability of a bank to generate profit to maximise
returns for its shareholders.
Rate of Interest Ans: The interest rate disparity between depositors and
borrowers that contributes to bank profits.
Bank's Liquidity Ans: The capacity of a bank to convert assets into cash
quickly and without significant loss.
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Run on the Bank Ans: A situation where many customers simultaneously
demand their deposits, fearing the bank's inability to pay.
Money Supply Ans: The total amount of currency and liquid assets in a
country's economy at any given time.
Bank Deposits Ans: Funds that individuals or businesses place in banks,
which are recorded as electronic entries in bank ledgers.
Central Bank Ans: The institution responsible for managing a country's
currency, money supply, and interest rates.
Economic Growth Ans: An increase in the production of goods and
services in an economy over time.
Credit Creation Multiplier Ans: The mechanism by which banks increase
the money supply by lending out a portion of their deposits while
retaining a required reserve.
Disintermediation Ans: The process where lenders and borrowers, or
sellers and buyers, of financial products deal directly with each other
rather than using a bank as an intermediary.
Peer-to-Peer (P2P) Lending Ans: A form of disintermediation where
individuals lend and borrow money directly through online platforms.
Crowdfunding Ans: A method of raising funds where individuals
contribute money directly to projects or ventures through online
platforms.
Pension Fund Direct Bond Purchase Ans: The process where pension
funds buy bonds directly from companies in the financial markets.
Advantages of Disintermediation Ans: Benefits gained from direct
financial transactions without intermediaries.
Disadvantages of Disintermediation Ans: Challenges associated with
direct financial transactions without intermediaries.
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Fractional Reserve Banking Ans: Banks keep a portion of deposits in
reserve to ensure they can meet withdrawal requests. The reserve
requirement is set by central banks and dictates the percentage that
must be held back.
Open Banking Ans: Open Banking is a system that uses open APIs
(Application Programming Interfaces) to allow third-party developers to
build applications and services around financial institutions. It facilitates
secure sharing of financial data, where customers give permission to their
banks to share their information with authorised service providers.
Conversational User Interface (CUI) Ans: A system enabling interaction
and conversation between a human user and a computer. e.g. chatbot
Risk Appetite Ans: The level of risk a bank is prepared to take to achieve
its strategic objectives.
Risk Tolerance Ans: The level of risk a bank can absorb with its available
resources.
Credit Risk Ans: Credit risk arises when borrowers fail to repay their
loans, impacting bank profitability and liquidity. This risk is central to
banking operations given their focus on lending.
Liquidity Risk Ans: Liquidity risk is the threat that a bank cannot meet
its short-term financial obligations, potentially leading to a loss of trust
and bank failure.
Concentration Risk Ans: Concentration risk occurs when a bank's assets
are overly focused in a specific sector, making it vulnerable to sector-
specific downturns.
Market Risk Ans: Market risk involves losses from changes in market
prices, including interest rate risk and foreign exchange risk. These risks
influence the bank's profitability through impacts on deposits and loans
as well as foreign investments.
Strategic Risks Ans: Strategic risks stem from long-term business
strategy changes, which can lead to reduced profits if unsuccessful.
However, failure to adapt may also pose risks.
PROFESSIONAL BANKER CERTIFICATE
QUESTIONS WITH DETAILED VERIFIED
ANSWERS
Commercial Banks Ans: Financial institutions that serve personal,
business, and corporate customers, primarily through accepting deposits
and providing loans.
Savings Banks Ans: Institutions that provide savings products for
individuals with surplus money and lend to those in need of borrowing.
Co-operative Banks Ans: Banks owned by members, providing deposit
and loan products while operating on co-operative principles.
Building Societies Ans: Mutual financial institutions primarily offering
mortgage lending services, along with personal financial services.
Challenger Banks Ans: Recently created retail banks that challenge the
market dominance of bigger, established banks through innovation and
good service.
Banks with High Street Presence Ans: Challenger banks that offer full
banking services through physical branches and digital channels.
Digital-Only Banks Ans: Banks operating exclusively through app-based,
mobile, online, and phone banking, without physical branches.
Fintech Companies Ans: Companies that integrate technology with
banking services to offer digital financial solutions.
Fintech Unicorns Ans: Fintech companies valued at over $1 billion.
Core bank functions Ans: - Operating Payments mechanisms
- Accepting Deposits
- Making Loans
, Page | 2
Financial Intermediation Ans: The process of linking lenders and
borrowers through banks.
Assets and Liabilities Ans: The two main sections of a bank's balance
sheet, detailing financial positions.
Lenders Ans: Customers with a money surplus who deposit their funds
in banks.
Borrowers Ans: Customers with a money shortfall who obtain funds from
banks.
Creditor Ans: A customer who deposits money in the bank, effectively
lending it to the bank.
Debtor Ans: A customer to whom the bank lends money.
Customer Liquidity Ans: The ability of customers to quickly access their
funds in cash.
Rate of Return Ans: The profit earned by the bank from lending out
deposited funds.
Size Transformation Ans: The process of aggregating small deposits
from savers into larger loans for borrowers.
Maturity Transformation Ans: Adjusting the time frame between the
short-term deposits and long-term loans.
Risk Transformation Ans: Managing and mitigating the risk associated
with lending.
Profitability Ans: The ability of a bank to generate profit to maximise
returns for its shareholders.
Rate of Interest Ans: The interest rate disparity between depositors and
borrowers that contributes to bank profits.
Bank's Liquidity Ans: The capacity of a bank to convert assets into cash
quickly and without significant loss.
, Page | 3
Run on the Bank Ans: A situation where many customers simultaneously
demand their deposits, fearing the bank's inability to pay.
Money Supply Ans: The total amount of currency and liquid assets in a
country's economy at any given time.
Bank Deposits Ans: Funds that individuals or businesses place in banks,
which are recorded as electronic entries in bank ledgers.
Central Bank Ans: The institution responsible for managing a country's
currency, money supply, and interest rates.
Economic Growth Ans: An increase in the production of goods and
services in an economy over time.
Credit Creation Multiplier Ans: The mechanism by which banks increase
the money supply by lending out a portion of their deposits while
retaining a required reserve.
Disintermediation Ans: The process where lenders and borrowers, or
sellers and buyers, of financial products deal directly with each other
rather than using a bank as an intermediary.
Peer-to-Peer (P2P) Lending Ans: A form of disintermediation where
individuals lend and borrow money directly through online platforms.
Crowdfunding Ans: A method of raising funds where individuals
contribute money directly to projects or ventures through online
platforms.
Pension Fund Direct Bond Purchase Ans: The process where pension
funds buy bonds directly from companies in the financial markets.
Advantages of Disintermediation Ans: Benefits gained from direct
financial transactions without intermediaries.
Disadvantages of Disintermediation Ans: Challenges associated with
direct financial transactions without intermediaries.
, Page | 4
Fractional Reserve Banking Ans: Banks keep a portion of deposits in
reserve to ensure they can meet withdrawal requests. The reserve
requirement is set by central banks and dictates the percentage that
must be held back.
Open Banking Ans: Open Banking is a system that uses open APIs
(Application Programming Interfaces) to allow third-party developers to
build applications and services around financial institutions. It facilitates
secure sharing of financial data, where customers give permission to their
banks to share their information with authorised service providers.
Conversational User Interface (CUI) Ans: A system enabling interaction
and conversation between a human user and a computer. e.g. chatbot
Risk Appetite Ans: The level of risk a bank is prepared to take to achieve
its strategic objectives.
Risk Tolerance Ans: The level of risk a bank can absorb with its available
resources.
Credit Risk Ans: Credit risk arises when borrowers fail to repay their
loans, impacting bank profitability and liquidity. This risk is central to
banking operations given their focus on lending.
Liquidity Risk Ans: Liquidity risk is the threat that a bank cannot meet
its short-term financial obligations, potentially leading to a loss of trust
and bank failure.
Concentration Risk Ans: Concentration risk occurs when a bank's assets
are overly focused in a specific sector, making it vulnerable to sector-
specific downturns.
Market Risk Ans: Market risk involves losses from changes in market
prices, including interest rate risk and foreign exchange risk. These risks
influence the bank's profitability through impacts on deposits and loans
as well as foreign investments.
Strategic Risks Ans: Strategic risks stem from long-term business
strategy changes, which can lead to reduced profits if unsuccessful.
However, failure to adapt may also pose risks.
