3I0-013 Sample Questions Answers

Assets lent by members of a payment system collectively available to the system as collateral to enable them to obtain funds in specific circumstances

Liabilities owned by members of a payments system collectively available to the system as collateral to enable them to obtain funds in specific circumstances

Assets owned by members of a payment system collectively available to the system as collateral to enable them to obtain funds in specific circumstances

Assets swapped by members of a payment system collectively available to the system as collateral to enable them to obtain funds in specific circumstances

Solely those of the electronic trading platforms vendors

Exclusively ACI's Model Code Best Practices

ACI's Model Code Best Practices and ICMA's Market Practice & Regulatory Policy

The electronic trading platforms vendors' and the ACI's Model Code Best Practices guidelines

Account reconciliations are necessary for the early detection of missing, failed or erroneous entries.

Custody accounts should be reconciled after each account movement or at least once a month.

Reconciliations related to transactions and balances should only be conducted for cash accounts.

Cash accounts should be reconciled as soon as an updated account statement is available.

30/360

ACT/365

ACT/ACT

ACT/360

A higher volume on settlement

Government borrowing to fall

Bond prices to rise in response to higher interest rates

Bond prices to fall

Expect a credit statement on your JPY nostro account on the near date

Be required to obtain and execute the ICMA Master Agreement to document the transaction

Need to instruct your USD nostro bank to pay out USD on the far date

Anticipate no movement of principal, but a cash settlement on the far date

Certificate of Deposit (CD)

FRA

US Treasury Note

ECP

Short USD 1,500,000.00 at 94.60

Short USD 1,500,000.00 at 94.5857

Long USD 1,500,000.00 at 94.60

Short USD 1,500,000.00 at 93.55

12 months

18 months

5 years

2 years

Are commonly used to register off-balance sheet movements

Are used to book internal tax related items

Generally mirror the nostro statements

Are reserved for audit and compliance purposes only

The settlement of a FRA is paid at maturity date.

The settlement amount is paid at the trade date of a FRA.

The cash settlement amount on a FRA is usually a discounted amount.

The settlement amount on a FRA is not based on the LIBOR for the relevant period.

Only market risk

Only credit risk

Market risk and credit risk

Market risk, credit risk and delivery risk

The front office

The back office (Operations)

The U department

The middle office

Money market taking and placing, sale and repurchase agreements (repos)

Currency options and currency futures

Spot FX transactions

Caps, floors, collars, and interest rate futures

18 June against 19 June

19 June against 20 June

20 June against 21 June

21 June against 22 June

The notional amount of a contract

A deposit amount per contract that is determined by the futures exchange

The maximum net loss during the contract period

The minimum net loss during the contract period

17:00 (5:00 p.m.) Eastern Time (ET)

17:30 (5:30 p.m.) Eastern Time (ET)

18:00 (6:00 p.m.) Eastern Time (ET)

19:00 (7:00 p.m.) Eastern Time (ET)

Receive USD 3,496.50

Pay USD 3,496.50

Pay USD 3,500.00

Pay USD 3,448.65

At the end of the FRA period

When the deal is done

Two business days before the start date of the FRA period

On the third Monday of the contract month

The front office

The back office

The middle office

The compliance department

Official prices calculated by the exchange at the close of trading for the purpose of making margin calculations

Official prices calculated by a panel of central banks

Official prices calculated by the central bank where the stock exchange is located

Never used

Netting, trade entry, settlement, confirmation, nostro reconciliation

Confirmation, netting, trade entry, settlement, nostro reconciliation

Trade entry, confirmation, netting, settlement, nostro reconciliation

Trade entry, confirmation, settlement, nostro reconciliation, netting

VoIP

Mail, fax

Phone, SWIFT

Reuter Dealing

There are no more than two participants involved in the netting process

There is no redistribution of default risk

There is a central clearing house

No legal entity is required

Its correspondent bank in Canada

Its national central bank

The European Central Bank

Its correspondent bank in the USA

The date a trade is undertaken

The date the fixing rate is agreed upon

The date the settlement occurs

The date confirmations are exchanged between counterparties

An exposure in Singapore Dollar (SGD)

An exposure in Thai Baht (THB)

An exposure in Philippine Peso (PHP)

An exposure in Hong Kong Dollar (HKD)

TARGET2

Euro Link System (ELS)

Euroclear

Clearstream

Saturday, 31 May

Tuesday, 3 June

Monday, 2 June

Friday, 30 May

Quarterly tests / updates as needed

At least every second year

Half-yearly tests / yearly updates

At least yearly

The fixed rate and the floating rate payers know the cash value of their payments at the outset

There is exchange of principal at the start and at the end of the swap

Payment netting is only allowed through a third party

The notional amount of the swap is generally not exchanged between counterparties

The most recently processed deal

The counterparties in your own country

The counterparty which claims first

Those positions with the highest loss potential

Daily fixing of EUR interest rates within the EMU zone

Daily fixing of EUR interest rates in London

A rate used for the settlement of USD FRAs between European counterparties

The official successor to LIBOR rates

No action is required. The credit interest earned on the credit balance will offset the debit interest incurred on the short balance

You should borrow USD 5,000,000.00 to cover the short balance and leave the long balance as it is

You should lend the surplus USD 5,000,000.00 in order to compensate the overdraft charges on the short balance with the interest earned on the loan

You should instruct the bank with the long balance to transfer USD 5,000,000.00 to your nostro account at the other bank

To keep the multilateral limits updated

To invest funds at the highest available interest rate

To keep the balance or position of the accounts or nostros in each currency representing the accounts held by the bank’s agents

To keep the management informed about interest rate developments

The close-out process

The customer matching process

The settlement process

The securities lending process

Auction markets conducted by the U.S. Treasury for U.S. Treasury bills

The repo market

The foreign exchange market

The over-the-counter market for U.S. Government Bonds

Matching should be performed by no later than the day after trading day

Matching processes are manual and may not be automated

Matching should be performed as soon as possible upon receipt of the confirmation

Confirmation matching should be a post-settlement workflow activity

MT 3XX

MT 2XX

MT 5XX

MT 1XX

Liquid assets pledged by one or both counterparties to the other to reduce credit risk

Deposits placed by a commercial bank with a central bank to fulfill reserve asset ratios

Any deposit placed by an institution with another institution of a lower credit rating

Any cross border payment of currency

1. Basic header block, 2. Communication header block, 3. Currency block, 4. Text block, 5. Trailers block

1. Basic header block, 2. Application header block, 3. User header block (optional), 4. Text block, 5. Trailers block

1. Sending header block, 2. Application header block, 3. User header block, 4. Text block (optional), 5. Transmission block

1. Basic header block, 2. System header blocks (optional), 3. User header block, 4. Text block, 5. Security block

The difference between the current price of an asset and its previous close

A statistical measure of price fluctuations as an annualized percentage

The measure of the liquidity of a contract or security

The difference between the annual high and low of a security

If EURIBOR is higher than 0.75%

If EURIBOR is lower than 0.75%

If LIBOR is lower than 0.75%

If LIBOR is higher than 0.75%

can be used to show the counterparty the amounts it has to pay

can be used as the basis of reporting the bank’s position to the relevant central bank of the country concerned, against the limit granted for the bank

can be used as the basis of reporting the bank’s position to the relevant tax regulations office of the country concerned

can be used to adjust the country limits

Thursday, 27 June

Friday, 28 June

Saturday, 29 June

Monday, 1 July

It gives the counterparty more time to cancel a deal

It reduces errors and costs

It gives front-office staff more time to process the payment orders

It reduces the number of trades

Claims are not expected to be submitted after 15 days from the actual settlement date.

Claims of less than USD 5,000.00 are not expected to be submitted.

Claims are calculated on the full principal amount of the failed transaction. Interest rates are imposed by the agent banks, unless a higher negotiated rate is to be applied.

Acknowledgement of receipt of a claim should be confirmed within 48 hours by email or SWIFT.

The price of the underlying instrument at the time of the transaction

The price at which the transaction on the underlying instrument will be carried out if the option is exercised

The price the buyer of the option pays to the seller when entering into the options trade

The price at which the two counterparties can closeout their position

USD 38,250,000.00

USD 38,262,500.00

GBP 25,000,000.00

USD 16,339,869.28

EUR 8,219.18

EUR 8,333.33

EUR 18,219.18

EUR 18,333.33

The volume of confirmations that have to be sent to the counterparties

Foreign exchange dealing limits and the currency risk exposure of the banks

The potential foreign exchange trading losses incurred by banks

Interbank payments, counterparty credit risk exposure, as well as the amount of capital allocated to foreign exchange activity

Standard settlement instructions

Netting agreement

Terms of engagement

Master agreement

Pay AUD 2,447.65

Receive AUD 2,500.00

Pay AUD 2,481.39

Receive AUD 2,481.39

SWIFT MT 300

SWIFT MT 292

SWIFT MT 571 (i.e. a statement of holdings)

SWIFT MT 940 and MT 950 (i.e. a statement of account)