AFF 5050 past exam paper (2)

Semester One Examination 2008

QUESTION 1
Most international banks’ products and services are similar to those of domestic banks. Do you agree with this statement? Why or why not?
5 marks
No. international banks do everything domestic banks do and:
Arrange trade financing
Arrange foreign exchange
Offer hedging services for foreign currency
Receivable and payables through forward and option contract
Offer investment banking services


QUESTION 2
What are the common criticisms against the International Monetary Fund (IMF)?
5 marks
No. international banks do everything domestic banks do and:
Arrange trade financing
Arrange foreign exchange
Offer hedging services for foreign currency
Receivable and payables through forward and option contract
Offer investment banking services



QUESTION 3
What were the main objectives of Basel II agreement?
5 marksPromote safety and soundless of financial system
Enhance competitive equality
Include a more comprehensive coverage of risks
Take a more risk sensitive approach
Focus on internationally active banks but also be suitable for other banks

QUESTION 4
Discuss the major functions of international commercial banks. Provide examples.Given before

QUESTION 5
Identify and discuss the key features of international investment banks.
5 marksGiven before

QUESTION 6
Project financing is one of the major activities of international banks. Who are the major participants in a project financing venture?
5 marks1. Direct owner/ sponsors
2. Ultimate owners/ completion guarantors
3. Australian bank lenders
4. Foreign bank lenders
5. Guaranteed lender
6. Lessors
7. Off take purchasers
8. Project suppliers
9. Engineering consultants
10. Auditors
11. Financial advisors
12. Legal consel
13. Federal, state and local government

QUESTION 7
What are the main stages in a generic money laundering model?given before


QUESTION 8
What are the major reasons for the existence and expansion of international banks?
5 marks1. Low marginal costs: managerial and marketing knowledge developed at home can be used abroad with low marginal costs
2. Knowledge advantage: the foreign bank subsidiary can draw on the parent bank’s knowledge of personal contacts and credit investigations for use in the foreign market
3. Home nation information services: local firms in a foreign market may be able to obtain more complete information on trade and financial markets in the multinational banks home nation is obtainable from domestic banks
4. Prestige: very large multinational banks have high perceived prestige, which can be attractive to new clients
5. Regulatory advantage: multinational banks are often not subject to the same regulations as domestic banks
6. Wholesale defensive strategy: Banks follow their multinational customers abroad to avoid losing their business at home and abroad
7. Retail defensive strategy: multinational banks also compete for retail services such as travellers checks, tourist and foreign business market
8. Transactions cost: multinational banks may be able to circumvent government currency controls
9. Growth: foreign markets may offer opportunities to growth not found domestically
10. Risk reduction:


QUESTION 9
Do international banks face different level of risk compared to domestic banks?
5 marksyes, and should talk about country risk

QUESTION 10
Identify and discuss types of country risk faced by international banks.
5 markscountry risk is a potential loss in cross border banking activities such as lending/investment
it is caused by a country specific economic politial and social events
there are three types of country risk
1. sovereign risk: potential losses in lending directily to the foreign government
2. political risk: potential losses on claims to foreign private and government and on direct investment/lendingg
3. transfer risk: regulatory problems such as exchange cotrol prevent bank activities.