Free Case Studies; Standards: Governance, Best Practices and Ethics – 2015 Edition Exam 8009 Exam Practice Test

When considering the performance of Northern Rock within its peer group of banks, which of the following is not correct?

• Only a few months previously it had reported record profits.
• The quality of its' assets was never in question.
• For many years it was regarded as a star-performer in the financial markets.
• Its' loan loss record was poor by industry standards.

According to the PwC report China Aviation Oil, in order to avoid recording and reporting losses, the company adopted which approach covering up its losses?

• selling short-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
• selling long-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
• selling short-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
• selling long-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions

With respect to the Purpose of Professional Standards, in the event of any difference in standards between local laws/rules and those of PRMIA, members must

• use their best judgment
• abide by the applicable laws, rules, and regulations of PRMIA and any government and/or regulatory bodies
• comply with the higher standard under all circumstances
• refer the matter to their supervisor

National Australia Bank and Barings cases are similar in that:

• Losses kept increasing while rogue trader(s) hid their positions
• The back offices had inadequate procedures
• Both A and B
• None of the above

Metallgesellschaft's retail contracts were

• unhedged
• hedged using exchange-traded futures with longer maturities than the retail contracts
• hedged using exchange-traded futures with shorter maturities than the retail contracts
• fully hedged using exchange-traded futures of the same maturities as the retail contracts

According to the Group of 30 Report, deriving aggregate potential credit exposure for a counterparty by adding up the potential exposure of multiple transactions:

• Gives an accurate result in most cases
• Captures portfolio effects but not tenor differences
• Can easily reflect the impact of netting
• Overstates exposure in most cases

Unlike the case at Barings Bank, National Australia Bank:

• Had a risk management infrastructure that was credited with doing its' job well, despite the losses
• Was not dealing in derivatives
• Had a Board of Directors that was unaware of the true nature of trading activities
• Had a separation of duties between trading and back office

The 'Renewing the Dream' program signed into law by President George W Bush in 2002 was designed to

• Recapitalise Fannie Mae and Freddie Mac with US$2.4 billion of additional capital to ensure they weathered the risks associated with any future downturn in the housing markets
• Provide grants of US$800 million to help home buyers with down-payment and closing costs
• Allow risky, high-cost loans to be credited towards affordable housing goals
• Provide tax credits of nearly US$2.4 billion over the next 5 years to investors and builders who developed affordable single-family housing in poor and distressed areas

For the sentence'The organization should have at its disposal employees who have adequate _________, ________ and _______ to perform the tasks assigned to them',Choose the correct combination of words from the following options:

• knowledge, skills, expertise
• experience, skills, previous successes
• risk appetite, knowledge, expertise
• track record, expertise, skills

Employees shall be remunerated adequately for the roles that they perform, where 'adequately' is defined

• as being the market norm for similarly situated personnel in competitive organizations
• using external references and benchmarks, and in a framework which is consistent with the type of risk-taking behavior expected of employees
• using the risk reward profile for each business line in the organization
• as commensurate with policies to attract and retain high income / revenue earners