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CISI – Managing Operational Risk in Financial Institutions
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Question 1 of 10
1. Question
In a Progress Report in June 2018, it was reported that the major banks ‘ market shares were exceptionally high and stable and that the PCA and branch network had been a strong competitive advantage because of:
Correct
PCA and branch network had been a key competitive advantage, due to significant funding cost advantage from large numbers of customers holding balances in PCAs paying no interest, and in savings accounts which pay lower interest rates than other providers.
Incorrect
PCA and branch network had been a key competitive advantage, due to significant funding cost advantage from large numbers of customers holding balances in PCAs paying no interest, and in savings accounts which pay lower interest rates than other providers.
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Question 2 of 10
2. Question
PCA is a significant source of competitive advantage for big banks. Which of the above does not constitute an advantage?
Correct
Following are the right pros: PCAs bring cheap funding from customer deposits and additional revenues from overdraft fees and other changes, major Banks with large PCA networks have a net advantage even when the costs of providing the PCA and branch network are taken into account and FIIC PCAs depend on banks generating funding benefit from balances as well as fees on overdrafts, interchange revenues, and other fees and charges. The majority of FIIC accounts make a positive contribution to bank profits.
Incorrect
Following are the right pros: PCAs bring cheap funding from customer deposits and additional revenues from overdraft fees and other changes, major Banks with large PCA networks have a net advantage even when the costs of providing the PCA and branch network are taken into account and FIIC PCAs depend on banks generating funding benefit from balances as well as fees on overdrafts, interchange revenues, and other fees and charges. The majority of FIIC accounts make a positive contribution to bank profits.
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Question 3 of 10
3. Question
Excellent business models and rivalry could provide better value and better customer service including:
Correct
Innovative business models and competition could deliver better value and enhanced customer service, including cheaper or more convenient payment or overdraft solutions separate from current accounts, budgeting and money management tools based on analysis of customer data and enabling consumers to search and switch for better deals on savings and lending, and potentially switch to new providers.
Incorrect
Innovative business models and competition could deliver better value and enhanced customer service, including cheaper or more convenient payment or overdraft solutions separate from current accounts, budgeting and money management tools based on analysis of customer data and enabling consumers to search and switch for better deals on savings and lending, and potentially switch to new providers.
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Question 4 of 10
4. Question
Which of the following are potential areas that will need concerted action to ensure a retail banking system that performs well for customers in the future?
Correct
3 potential areas requiring coordinated action in the future to ensure a retail banking sector that works well for consumers includes continued access to banking services, appropriate use of customer data and system resilience and effective prevention of financial crime and fraud.
Incorrect
3 potential areas requiring coordinated action in the future to ensure a retail banking sector that works well for consumers includes continued access to banking services, appropriate use of customer data and system resilience and effective prevention of financial crime and fraud.
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Question 5 of 10
5. Question
Choose the best solutions to address investment and corporate banking services issues on the primary market and insure that the benefits of competition are met.
Correct
A ban on restrictive contractual clauses, ending league table misrepresentation in banks’ pitches to clients, removing incentives for loss-making trades to climb league tables, supervisory programme for initial public offering (IPO) allocations and revised IPO process are the best solutions to address investment and corporate banking services issues on the primary market and insure that the benefits of competition are met.
Incorrect
A ban on restrictive contractual clauses, ending league table misrepresentation in banks’ pitches to clients, removing incentives for loss-making trades to climb league tables, supervisory programme for initial public offering (IPO) allocations and revised IPO process are the best solutions to address investment and corporate banking services issues on the primary market and insure that the benefits of competition are met.
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Question 6 of 10
6. Question
The SM&CR refers to all the businesses controlled by the FCA and PRA in the banking sector. It covers:
Correct
The SM&CR applies to all banking sector firms regulated by the FCA and the PRA. This includes banks, building societies, credit unions, UK branches of foreign banks and the largest investment firms regulated by the PRA and the FCA.
Incorrect
The SM&CR applies to all banking sector firms regulated by the FCA and the PRA. This includes banks, building societies, credit unions, UK branches of foreign banks and the largest investment firms regulated by the PRA and the FCA.
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Question 7 of 10
7. Question
The SM&CR extends to all insurance and reinsurance firms which are controlled by the FCA and the PRA. Hint at the wrong ones.
Correct
The SM&CR applies to all insurance and reinsurance firms regulated by the FCA and the PRA. This includes insurers and reinsurers, ISPVs, the Society of Lloyd’s, managing agents and UK branches of foreign insurers.
Incorrect
The SM&CR applies to all insurance and reinsurance firms regulated by the FCA and the PRA. This includes insurers and reinsurers, ISPVs, the Society of Lloyd’s, managing agents and UK branches of foreign insurers.
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Question 8 of 10
8. Question
Which of the following aspects must be taken into account by the senior managers regime?
Correct
A board member must also be responsible for each company’s business processes and procedures, and organisations must ensure that senior executives are prepared for their role at least once a year.
Incorrect
A board member must also be responsible for each company’s business processes and procedures, and organisations must ensure that senior executives are prepared for their role at least once a year.
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Question 9 of 10
9. Question
The Certification Regime applies to employees whose role means the company or its customers can be significantly harmed by them. This defines the:
Correct
The Certification Regime applies to employees whose role means it’s possible for them to cause significant harm to the firm or its customers. These roles are called ‘certification functions’.
Incorrect
The Certification Regime applies to employees whose role means it’s possible for them to cause significant harm to the firm or its customers. These roles are called ‘certification functions’.
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Question 10 of 10
10. Question
An investment management firm is a firm that allows activities like:
Correct
An investment management firm is a firm that allows activities like a designated investment company which is not an authorised professional company, bank, IFPRU investment firm, BIPRU firm, collective portfolio management firm, credit union, energy market participant, friendly society, ICVC, insurer, media firm, oil market participant, service company, incoming EEA firm (without a top-up permission), incoming Treaty firm (without a top-up permission), or UCITS qualifier (without a top-up permission).
Incorrect
An investment management firm is a firm that allows activities like a designated investment company which is not an authorised professional company, bank, IFPRU investment firm, BIPRU firm, collective portfolio management firm, credit union, energy market participant, friendly society, ICVC, insurer, media firm, oil market participant, service company, incoming EEA firm (without a top-up permission), incoming Treaty firm (without a top-up permission), or UCITS qualifier (without a top-up permission).