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CQIB Exam Study Guide: Australian Banking Industry History and Key Concepts, Exams of Finance

This study guide provides a comprehensive overview of the australian banking industry, covering its historical development, key players, financial markets, and economic concepts. It includes questions and answers related to the australian prudential regulation authority (apra), the reserve bank of australia (rba), financial intermediation, investment banking, and wealth management products. The guide is particularly useful for students studying finance, economics, or business.

Typology: Exams

2024/2025

Available from 12/30/2024

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CQIB Exam Study Guide | 100% Correct Answers | Verified |
Latest 2025 Version
Which regulator makes and enforces rules which govern the capital adequacy of Australian Banks? -
✔✔The Australian Prudential Regulation Authority - APRA
What events occurred in the Banking Industry in 1800s and early 1900s? - ✔✔First Bank in Australia was
Bank of NSW, Established in 1817 Sydney.
Discovery of gold in 1851 led to minting of Australia's own gold coins spurring development of Banking.
Boom in Australian property market in 1800s led to Banking crisis in 1893.
What events occurred in 1910-1920 in the Banking Industry? - ✔✔Australian pound was issues as the
Legal tender in Australia and the Australian Notes act 1910 assigned responsibility for the issue of Bank
notes to the Commonwealth Treasury.
What events occurred in 1911-1913 in the Banking Industry? - ✔✔Federal government established the
Commonwealth Bank, which by 1913 had branches in 6 states.
What events occurred in 1920 in the Banking Industry? - ✔✔Commonwealth performed some central
Bank functions, which greatly expanded in World War II.
What events occurred in 1930-1931 in the Banking Industry? - ✔✔1931 - The Great Depression, By the
end Banking Industry became tightly regulated. Banks classified as either savings or trading Banks.
What events occurred in 1990-2000 in the Banking Industry? - ✔✔14/01/1960 - Reserve Bank of
Australia was created
1969 - Rolled out ATMs, and early 1970 BSB identifier was introduced.
What events occurred in 2000-2017 in the Banking Industry? - ✔✔Renewed emphasis on corporate
governance, values, ethics. Jan 17 - Better Banking program launched with initiatives:
- Independent review of retail Banking remuneration and how we pay staff.
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CQIB Exam Study Guide | 100% Correct Answers | Verified |

Latest 202 5 Version

Which regulator makes and enforces rules which govern the capital adequacy of Australian Banks? - ✔✔The Australian Prudential Regulation Authority - APRA What events occurred in the Banking Industry in 1800s and early 1900s? - ✔✔First Bank in Australia was Bank of NSW, Established in 1817 Sydney. Discovery of gold in 1851 led to minting of Australia's own gold coins spurring development of Banking. Boom in Australian property market in 1800s led to Banking crisis in 1893. What events occurred in 1910-1920 in the Banking Industry? - ✔✔Australian pound was issues as the Legal tender in Australia and the Australian Notes act 1910 assigned responsibility for the issue of Bank notes to the Commonwealth Treasury. What events occurred in 1911 - 1913 in the Banking Industry? - ✔✔Federal government established the Commonwealth Bank, which by 1913 had branches in 6 states. What events occurred in 1920 in the Banking Industry? - ✔✔Commonwealth performed some central Bank functions, which greatly expanded in World War II. What events occurred in 1930 - 1931 in the Banking Industry? - ✔✔ 1931 - The Great Depression, By the end Banking Industry became tightly regulated. Banks classified as either savings or trading Banks. What events occurred in 1990 - 2000 in the Banking Industry? - ✔✔14/01/1960 - Reserve Bank of Australia was created 1969 - Rolled out ATMs, and early 1970 BSB identifier was introduced. What events occurred in 2000 - 2017 in the Banking Industry? - ✔✔Renewed emphasis on corporate governance, values, ethics. Jan 17 - Better Banking program launched with initiatives:

  • Independent review of retail Banking remuneration and how we pay staff.
  • Getting problems fixed
  • Protecting whistle-blowers
  • Stopping poor conduct, and review of code of Banking practise What are other Finance service providers? Authorised Deposit-Taking Institutions (ADI's) - ✔✔Building Societies: Credit Unions: What is a Building Society? - ✔✔A mutual institution, which means that most people who have a savings account, or mortgage are members. Each building society and are responsible for setting its strategy.
  • Owner by and for the members
  • Limit on proportion of their funds that building societies can raise from wholesale money market
  • Reinvest surplus revenue into the business to provide new products and services. What is a credit union? - ✔✔a non-profit-making money cooperative whose members can borrow from pooled deposits at low interest rates. What are non-ADI's financial intermediaries? - ✔✔- Money Markets Corporations
  • Finance Companies
  • Securitisation Vehicles What are the 4 types of financial markets - ✔✔1. Primary Markets
  1. Secondary Market
  2. Exchange Traded Markets
  3. Over the counter markets What is the Interest rate or Debt market. - ✔✔Trading (Buying and Selling) includes shart term securities and long term securities such as government and corporate bonds.

What events occurred in 1980's in the Banking Industry? - ✔✔Government adopted the four pillars policy. Announced it would reject any mergers between the Big 4 Banks.

  • NAB
  • CBA
  • Westpac
  • ANZ What is the role of the Bank? - ✔✔1. Act as a financial intermediary between savers & borrowers.
  1. Contributes to the development of the economy What is financial intermediation? - ✔✔The process of pooling funds from savers and using these funds to provide loans to borrowers. The Bank acts as a go between, or intermediary for those who have extra money and those who want to borrow. What are the 4 types of investment Banking? - ✔✔1. Debt Capital Markets
  2. Equity Capital Markets
  3. Private Placements
  4. Mergers and Acquisitions What is Debt Capital Markets? - ✔✔Where a large company may want to build a factory and is looking to issue bond financing to finance its expansion, or if a government wants to finance the building of an airport, highway, or other large municipal project, it may issue bonds to raise capital. What is Equity Capital Markets? - ✔✔Where a company needs more money to grow and decides to raise the funds by undertaking an initial public offering (IPO) whereby it sells its shares to the public and a wider pool of investors for the first time. What is Private Placements? - ✔✔Where customers place an offering of bonds with an institutional investor such as an insurance company or a retirement fund. Often this can be a fast-track option due to lower regulatory requirements.

What is Mergers and Acquisitions? - ✔✔Where a company is looking to buy another company, investment banks offer advice on how the company should proceed with the acquisition, including the pricing of the offer. What is a Key Risk for Investment Bankers? - ✔✔Conflicts of interest - can occur when investment bankers, who have access to confidential information from clients related to their business and prospects, can pass information to their firm's traders. Investment banks need to establish barriers known as 'Chinese walls', or information barriers, within the organisation to prevent exchanges or communication that could lead to conflicts of interest. What are the main differences between commercial banking and investment banking? - ✔✔Commercial banks tend to serve clients ranging from individuals, small to medium size businesses up to large corporate clients, other financial institutions, public agencies and governments. Investment banks tend to serve a diversified client base which can include corporations, financial institutions, governments and, in some cases, high net worth individuals. How do Banks source their funds? - ✔✔Accepting Deposits: Fixed term deposits (Lump sum deposited for Specific period Current Deposits (Business Accounts) Saving Deposits (From salary and wag earners) What are the type of Bank Loans and Advances? - ✔✔Overdraft Credit Card Short Term Loan - 12 months Medium Term Loan - 5yrs Loan Term Loan - 30yrs Bills of exchange and promissory notes Equipment leasing and hire purchase Trade Finance

  1. Credit risk
  2. Liquidity risk
  3. Interest rate risk What is Liquidity? - ✔✔Liquidity is determined by a bank's ability to meet all its anticipated expenses, such as funding loans or making payments on debt, using only liquid assets. Liquidity problems arise when a bank does not hold sufficient cash (or assets that can easily be converted into cash) on their balance sheet to repay depositors and other creditors. What is Solvency? - ✔✔Solvency is the ability of a bank to meet its long-term financial obligations. Solvency is essential to staying in business as it indicates a company's ability to continue operations into the foreseeable future. What is Profitability? - ✔✔Profitability is the ability to generate earnings compared to expenses and other relevant costs incurred during a specific period of time. Profitability ratios such as profit margin, return on assets (ROA) and return on equity (ROE) are popular metrics used in financial analysis. What are the components of "Assets" under the balance sheet? - ✔✔Interest earning Assets:
  • Home loans
  • Loans to consumers
  • Business and corporate loans
  • Cash Non-lending interest earning assets Non-earning assets Premises, e.g. Branches, Offices, Equipment e.g. Computers, Furniture and Vehicles. What are Bank Liabilities? - ✔✔Interest Bearing liabilities:
  • Transaction deposits
  • Savings deposits
  • Investment deposits
  • Other demand deposits
  • Debt issues Equity Share Capital What are the 2 frameworks under the Basel III Liquidity reform that Banks must disclose? - ✔✔The framework includes global minimum quantitative requirements that the Banks are required to disclose:
  1. Liquid coverage ratio (LCR)
  2. Net Stable Funding Ratio (NFSR) What is Liquidity Coverage Ratio (LCR)? - ✔✔Requires Australian ADIs to hold sufficient liquid assets to meet 30 - day net cash outflows projected under an APRA-prescribed stress scenario (a liquidity measure required by the Basel III reforms and implemented by APRA in Australia on 1 January 2015). What is the Net Stable Funding Ratio (NSFR)? - ✔✔Requires Australian ADIs to fund their assets with sufficient stable funding to reduce funding risk over a one-year horizon as prescribed by APRA, a requirement of the Basel III reforms and implemented by APRA in Australia on 1 January 2018. What is Capital Adequacy Requirements? - ✔✔A bank's capital, in its simplest form, represents its ability to withstand losses without becoming insolvent and managing risk. What is Tier 1 and Tier 2 in Banks regulatory capital? - ✔✔• Tier 1 capital - includes ordinary shares and retained earnings (profits not dispersed to shareholders); it can also include specific types of preference shares and convertible securities.
  • Tier 2 capital - funding sources that rank below a bank's depositors and other senior creditors, i.e. subordinated debt; provides depositors with an additional layer of loss protection after a bank's Tier 1 capital is exhausted. Which regulator makes and enforces rules which govern the capital adequacy of Australian Banks? - ✔✔The Australian Prudential Regulation Authority (APRA) How are Foreign Currencies Exchanged? - ✔✔SWIFT Payment System
  1. Insurance Bond
  2. Trauma Insurance
  3. Income Protection Insurance What is the timeframe to respond to a complaint? - ✔✔Standard Complaint - 30 calendar days Traditional Trustee Complaint - 45 calendar days Superannuation Trustee Complaints - 45 calendar days Compliant about Superannuation death benefits - 90 days after expiry of 28 calendar days for objecting to proposed death benefits Credit - related compliant involving defaults - Within 21 calendar days Credit - related involving hardship/request to postpone legal proceedings - Within 21 calendar days receiving complaint. If credit provider/lessor has insufficient information must request info within 21 days. Agreement reached = 30 days to confirm terms in writing. Character, Capacity, Collateral, Capital - ✔✔What are the 4 Cs of Credit? What is Net Position? - ✔✔Value of investment position. It's a summation of the client's assets minus their liabilities. What are the 2 obligations under the NCCP? - ✔✔To act efficiently, honestly and fairly To ensure clients are not disadvantaged by any conflict of interest. What are the additional regulatory requirements for mortgage lending by APRA? - ✔✔Limit flow of new interest-only lending to 30% of new residential mortgage lending.
  • Strict internal limits on IOL above 80% LVR
  • Strong scrutiny of IOL above 90% IOL Manage lending to investors to remain below the benchmark of 10% growth. What are the 4 types of disclosure documents and what do they do? - ✔✔1. Credit Guide
  1. Quote
  1. Proposal Document
  2. Written Assessment What are the 2 categories of Risk? - ✔✔Speculative Risk - The possibility of a loss or a gain based on a decision to accept or decline a risk. Absolute Risk - The situation where there is either a chance of loss, or no loss. But there is no chance of gain. What are the 6 types of Risks? - ✔✔1. Credit Risk
  3. Liquidity Risk
  4. Market Risk
  5. Conduct Risk
  6. Operational Risk
  7. Compliance Risk What is related entity (Contagion) Risk? - ✔✔The risk that problems arising in other internal business channels compromise the financial and operational position of the wider ADI. What are the 4 BEAR Measures? - ✔✔1. Executive registration with APRA
  8. APRA Power over remuneration policy
  9. Remuneration deferral
  10. ADIs - APRA will impose civil penalties of up to $200 million on ADIs that do not appropriately monitor the suitability of their executives to hold senior positions What is ACIS responsibility in Risk? - ✔✔ASIC also has an interest in conduct risk; "The risk of inappropriate unethical or unlawful behaviour on the part of an organisation's management or employees". What is the RAS (Risk Appetite System)? - ✔✔APRA requires that all ADIs maintain a clear and concise RAS that addresses material risks. The RAS provides direction to senior management on the type of activity the Board feels is appropriate to engage in, and what constitutes appropriate limits, or tolerances, for such activities.

Who are the Key Risk Indicators managed by and why? - ✔✔The risk committee will escalate risk matters triggered by the Key Risk indicators to the Board. The Board will specify the indicators to be monitored, and they will decide at which point the Bank is comfortable to operate. What is the Key Information required in the Risk Register? - ✔✔1. Name of the project/business unit/division

  1. Date last reviewed and modified, and by whom
  2. Reference numbers assigned to each identified risk
  3. Identified risk
  4. The probability or likelihood of the risk occurring
  5. A rating based on the extent of damage the risk could cause
  6. A risk score
  7. The control measures identified for handling the risk
  8. Whether the risk is within appetite
  9. Residual risk rating (after controls have been applied) What is ASIC? - ✔✔Australian Securities and Investments Commission What is the role of the Bank? - ✔✔• Acts as a financial intermediary between savers and borrowers, which results in efficient use of pooled resources.
  • Contributes to the development of the economy. What is the role of the Basel Committee on Banking supervision (BCBS)? - ✔✔International body for corporation on Banking supervisory matters. It's mandate is to strengthen the regulation supervision and practices of Banks world wide with purpose of enhancing financial stability. What are the Basel Committee on Banking supervisions obligations introduced in BASEL I 1998? - ✔✔1. Credit Risk

What are the Basel Committee on Banking supervisions obligations introduced in BASEL II 2007? - ✔✔Establish a global risk management framework. Three pillars covering:

  1. Credit Risk
  2. Operational Risk
  3. Market Risk What are the Basel Committee on Banking supervisions obligations introduced in BASEL III 2010? - ✔✔Establish a global risk management framework. Three pillars covering:
  4. Credit Risk
  5. Operational Risk
  6. Market Risk
  7. Liquidity Risk What is a financial stability board (FSB)? - ✔✔An international body that coordinates the work of national financial authorities and international standard setting bodies, and develops and promotes the implementation of effective regulatory, supervisory and other financial sector policies. What is the Legal Relationship between Bank and Customer? - ✔✔Contractual relationship, which begins when an account is open. What is common law? - ✔✔Relies on precedent, meaning courts are guided by previous court decisions and not by statute. What is Statue Law? - ✔✔Legislation developed by the government If there is a conflict between statute and common law which one prevails? - ✔✔Statute Law What is contract law? - ✔✔A legally binding or valid agreement between two parties.

What is a partnership? - ✔✔A business structure that involves a number of people who operate the business together. Individuals must be registered for GST if make over $75k + What is a company? - ✔✔A separate legal entity. This means the company has the naming rights as a natural person and can incur debt, sue and be sued. Owners can limit their personal liability and are generally not liable for company debts. Must be registered for GST if make over $75k + / not-for-profit - 150K+ What is a trust? - ✔✔An arrangement where a person or a company (the trustee) holds assets (trust property) in trust for the benefit of others (the beneficiaries). What are the 4 topics Corporate Governance typically concerned with? - ✔✔1. Effectiveness and Efficiency of a company's operations.

  1. Reliability of financial reporting
  2. Compliance with laws and regulations
  3. Safeguarding of assets What is ASIC'S role in Corporate Governance? - ✔✔ASIC provides regulatory guidance on various aspects of corporate governance. What groups or purpose are the following accounts used for? - ✔✔1. Basic Banking Account - Everyday Transactions - Designed for low-income or disadvantage people
  4. Deeming Account - Everyday Transactions - Designed for people for pensioners/ people of 55 years and retired, with an account which reflects Federal Government deeming rules.
  5. Youth and Student Account - Low to zero cost account for student and children.
  6. Tax-effective account - Allows primary producers to set aside pre-tax income as cash reserve. How does Term Deposits operate? - ✔✔- Single amount lodged over a specific term
  • Level of interest payable, dependent on longer term. higher the rate
  • Amount invested influences interest rate
  • Term offered ranges from 1 - 60 months
  • Withdrawing funds prior to term ended will incur penalties How does retirement savings account operate? - ✔✔They don't operate as a trust structure like other super accounts but are subject to the same laws and restrictions and benefit from concessional tax treatment. How does a savings account operates? - ✔✔• Used to hold medium to long term surpluses of funds.
  • Typically operated with a plastic card, mobile app or in a few cases by passbook
  • Interest is paid by the bank, based on the amount of money lodged in the account
  • Payment of interest will vary product to product.
  • Level of interest rate varies depending on both the balance of the account and the terms of the account.
  • Terms of the account will also affect the level of interest paid
  • The account will tend to pay a higher rate of interest with a limited number of withdrawals What is crowd sourcing funding? - ✔✔Is an alternative way for start-ups and small and medium sized companies to raise money. Under Australian law, each investor can invest up to $10,000 a year in a company and in exchange they will receive securities in the form of shares. The company can raise $5m on crowd funding. What are the 6 safeguards in Professionalism to accepting deposits? - ✔✔1. New entrants must meet minimum education, training requirements
  1. People complete CPD's
  2. Adherence to corporate governance regulation 4, Abiding by industry wide professional standards
  3. Professional or Regulatory monitoring and disciplinary procedures
  4. External review by a legally empowered third party What is corporate social responsibility? - ✔✔How a Bank managed it's business in order to have a positive impact on society.

What is the RBA's role in Payments and Infrastructure? - ✔✔RBA ACTS AS:

  1. Policy maker
  2. Overseer
  3. Supervisor
  4. Owner and operator of key national payments infrastructure Policy making, RBA
  5. Controls risk in financial system
  6. Promote efficiency payments systems
  7. Promote competition in market for payment services What is the RBA's role in bank? - ✔✔RBA acts as Banker for the Commonwealth. Provides Banking services to number of overseas Banks and Institutions What is the RBA's role in Banknotes? - ✔✔RBA works with note printing Design and arranges production Maintenance of quality, withdraws unfit notes. What are the 10 Regulatory influences on Banks? - ✔✔1. Maintaining customer accounts
  8. Providing payment services such as BPAY and international transactions
  9. Lending to borrowers and sourcing funds from depositors
  10. Providing efficient customer service
  11. Managing risk
  12. Marketing products and services
  13. Managing customer information and maintaining confidentiality
  14. Disclosing and reporting financial information
  15. Dealing with customer complaints
  16. Governing and managing business operations, such as policies and procedures

Reserve Bank Act 1959 - What are the two boards? - ✔✔1. Reserve Bank Board

  1. Payments System Board What are the three types of Payment Systems? - ✔✔1. Consumer Payment Methods:
  • Cash
  • eftpos
  • Cheque
  • PayPal
  1. Payment Systems (Funds Transfer System):
  • High Value Clearing Systems (HVCS)
  1. Clearing and Settlement Systems:
  • ASX Clear
  • Austraclear
  • CHESS What requirements are needed to be wholesale clients? - ✔✔Product Value - The product has been invested in, or advised on, has a value exceeding $500,000. Individual Wealth - Net assets of at least $2.5 million or Gross income for each of the last two financial years of at least $250,000 as certified by an accountant. What are the AFSL Obligations under the Corporations Act? - ✔✔Disclosure Documents:
  1. Financial Service Guide (FSG)
  2. Statement of Advice (SOA)
  3. Product Disclosure Statement (PDS) What are the 2012 amendments to the Corporations Act? - ✔✔1. Conflicted remuneration - A ban on certain remuneration structure such as commissions and volume based payments, resulting from the distribution and advice about a range of retail investment products