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    Credit Risk Ass 2 Nov 2014

    Uploaded by

    Basilio Maliwanga
    This document outlines the instructions and questions for an examination on Credit Risk Assessment 2 given by the Institute of Bankers in Malawi. It is divided into two sections, with Section A containing 4 questions worth 15 marks each and Section B containing 4 questions worth 20 marks each, where candidates must answer any two. The questions cover topics like the essential characteristics of good security, guarantees, matching loan terms to purpose, credit risk factors within a bank, interest rates for long and short term loans, the use of debentures as security, training a credit department employee, the safety principle in lending decisions, and using Porter's Five Forces model to assess credit proposals. Candidates have 3 hours to complete the paper

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    © All Rights Reserved
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    Credit Risk Ass 2 Nov 2014

    Uploaded by

    Basilio Maliwanga
    20 views4 pages
    This document outlines the instructions and questions for an examination on Credit Risk Assessment 2 given by the Institute of Bankers in Malawi. It is divided into two sections, with Section A containing 4 questions worth 15 marks each and Section B containing 4 questions worth 20 marks each, where candidates must answer any two. The questions cover topics like the essential characteristics of good security, guarantees, matching loan terms to purpose, credit risk factors within a bank, interest rates for long and short term loans, the use of debentures as security, training a credit department employee, the safety principle in lending decisions, and using Porter's Five Forces model to assess credit proposals. Candidates have 3 hours to complete the paper

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    CREDIT RISK ASS 2 NOV 2014

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    This document outlines the instructions and questions for an examination on Credit Risk Assessment 2 given by the Institute of Bankers in Malawi. It is divided into two sections, with Section A containing 4 questions worth 15 marks each and Section B containing 4 questions worth 20 marks each, where candidates must answer any two. The questions cover topics like the essential characteristics of good security, guarantees, matching loan terms to purpose, credit risk factors within a bank, interest rates for long and short term loans, the use of debentures as security, training a credit department employee, the safety principle in lending decisions, and using Porter's Five Forces model to assess credit proposals. Candidates have 3 hours to complete the paper

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    20 views4 pages

    Credit Risk Ass 2 Nov 2014

    Uploaded by

    Basilio Maliwanga
    This document outlines the instructions and questions for an examination on Credit Risk Assessment 2 given by the Institute of Bankers in Malawi. It is divided into two sections, with Section A containing 4 questions worth 15 marks each and Section B containing 4 questions worth 20 marks each, where candidates must answer any two. The questions cover topics like the essential characteristics of good security, guarantees, matching loan terms to purpose, credit risk factors within a bank, interest rates for long and short term loans, the use of debentures as security, training a credit department employee, the safety principle in lending decisions, and using Porter's Five Forces model to assess credit proposals. Candidates have 3 hours to complete the paper

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    INSTITUTE OF BANKERS IN MALAWI

    ADVANCED DIPLOMA IN BANKING EXAMINATION

    SUBJECT: CREDIT RISK ASSESSMENT 2 (IOBM – AD303)

    Date: Sunday, 16th November 2014

    Time Allocated: 3 hours (08:00- 11:00 hours)

    INSTRUCTIONS TO CANDIDATES

    1 This paper consists of TWO Sections, A and B.

    2 Section A consists of 4 questions, each question carries 15 marks.


    Answer ALL questions.

    3 Section B consists of 4 questions, each question carries 20 marks. Answer


    ANY TWO questions.

    4 You will be allowed 10 minutes to go through the paper before the start of the
    examination, you may write on this paper but not in the answer book.

    5 Begin each answer on a new page.

    6 Please write your examination number on each answer book used.


    Answer books without examination numbers will not be marked.

    7 All persons writing examinations without payment will risk expulsion from the
    Institute.

    8 If you are caught cheating, you will be automatically disqualified in all subjects
    seated this semester.

    9 DO NOT open this question paper until instructed to do so.


    SECTION A (60 MARKS)

    Answer ALL questions from this section.

    QUESTION 1

    Explain, with examples, the four essential characteristics of good security/collateral


    on which banks place great reliance when making a decision to lend.

    (Total 15 marks)

    QUESTION 2

    a) Mention three characteristics of guarantees. (3 marks)

    b) Discuss the advantages and disadvantages of guarantees that are offered in


    support of borrowers’ obligations to banks. (12 marks)
    (Total 15 marks)

    QUESTION 3

    a) It is believed that it is good banking practice to match the period of finance to the
    purpose for which it is required. Explain. (10 marks)

    b) What are the justifications for banks to consider hard core overdrafts as being
    potentially toxic debts? (5 marks)
    (Total 15 marks)

    QUESTION 4

    a) Provide brief notes on the factors within the bank’s internal environment that may
    affect credit risk. (12 marks)

    b) Why do banks charge higher rates if interest for credit facilities of a long term
    nature than those required for a relatively short term? (3 marks)

    A qualification examined by the Institute of Bankers in Malawi 2


    (Total 15 marks)

    SECTION B (40 MARKS)

    Answer ANY TWO questions from this section

    QUESTION 5

    Debentures that create a floating charge over a company’s undertakings and property
    do not usually constitute desirable security. Discuss.

    (Total 20 marks)

    QUESTION 6

    A graduate trainee officer has been assigned to your credit department and the bank
    has given you charge to oversee her training and development. While perusing her
    monthly report you came across the following statement:

    “I have heard a lot of talk about characteristics of a good credit proposal from among
    my colleagues in the department. Yet no one has really sat down with me to guide me
    on how those characteristics are applied.”

    Required:

    Prepare notes that you would use when conducting a training session with her on this
    area of her concern.

    (Total 20 marks)

    QUESTION 7

    a) Under the Safety Principle, what are the three main factors that, ceteris paribus,
    predicate the decision to lend? (3 marks)

    b) With reference to (a) above what are the eight crucial factors to be taken aboard
    when considering the assessment under the Safety Principle. (17 marks)

    (Total 20 marks)

    A qualification examined by the Institute of Bankers in Malawi 3


    QUESTION 8

    The Porters Five –Forces Model is taken into consideration when assessing a
    customer’s credit proposal.

    Putting each of the 5 – forces on the table, explain how this model is used.

    (Total 20 marks)

    END OF THE EXAMINATION PAPER

    A qualification examined by the Institute of Bankers in Malawi 4

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