PART 1 – MULTIPLE CHOICE QUESTIONS

1. Select whether the following statement is true or false: The effect of insolvency, liquidation and bankruptcy legislation is that collateral rights of a bank could be set aside whenever insolvency or bankruptcy of a customer occurs

a. True 

b. False 

2. Select whether the following statement is true or false: Handwriting on a collateral document should preferably be completed entirely by the same person with the same pen.

a. True 

b. False 

3. Select whether the following statement is true or false: Banks require that collateral documents should be attested by two witnesses because if the customer or surety claims at a later stage that he/she never signed the collateral document, the two witnesses can testify in this regard.

a. True 

b. False 

4. Read the paragraph below and answer the question by selecting the most appropriate answer from the list provided:

 When assessing a credit application, it must be determined whether the customer previously had any loans or accounts with the same bank at which the customer now applies for a loan, and to assess how well such accounts were managed by their customer. 

Select one of the listed items below that will be the best source of information for this purpose. 

(Please note: only ONE of the options is correct). 

a. Trade references. 

b. Bank statements. 

c. Credit bureau report. 

d. Internal bank references. 

e. Application form. 

5. Select whether you agree or disagree with the following statement: When the profitability of a transaction is considered, prospective or future business with the same customer should also be considered.

a. Agree 

b. Disagree 

6. Read the scenario below and select the correct response from the options provided.

Scenario:

A customer has an unsecured overdraft facility of $10 000 with an exposure of $11 000 and a mortgage of $400 000 on a house with an outstanding amount of $397500. The customer applies for increased overdraft facilities. Internal bank records indicate that frequent excesses occur on the existing overdraft and the mortgage bond in the personal name of the owner is two months in arrears. Further investigations prove that the customer lost an arm in an accident and is not able to continue with his previous career. 

Question

Which one of the following persons within the bank would be able to provide the best advice about future prospects of the customer:

a. Insolvency practitioner 

b. Credit specialist advisor 

c. Trust advisor 

d. Financial planning advisor 

e. Health services advisor

7. Investigate the following statement and answer the question that follows: A new customer applies for credit and indicates on the application form that he does not have any trade references due to the fact that he never had any credit facilities before. Credit bureau enquiries also display no existing records for the customer. The customer is 35 years of age.

Select which one of the following statements is true in terms of the statement.  

a. This case is a clear indication of fraud, it should be reported. 

b. No credit should be provided to this individual. 

c. Depending on background, this could be normal. 

d. It is the type of individual a bank does not want to conduct business with. 

8. Nola Treadway is a loan officer with Island Bank. Mr. Tocher Haupt applied for a personal loan at Island Bank. According to Island Bank's credit policy Mr. Haupt did not specify sufficient collateral in his application form. 

Required:

Advise Nola which ONE of the following decisions would be the best regarding Mr. Haupt's application. 

a. Because Mr. Haupt has insufficient collateral the application should be declined outright. 

b. Nola may enquire from Mr. Haupt whether he may have access to additional collateral to offer to the bank.  

9. Paul works for Conservebank. Newspapers speculate that the country’s Central Bank may increase interest rates soon. 

Paul drafted a memorandum to his co-workers at Conservebank about the effect the increase in interest rates will have on the bank's business and on the bank's consumers, and made different statements. Select the statement that is incorrect. 

a. High interest rates may reduce the number of good credit applications. 

b. Increased interest rates will increase the profit of the bank. 

c. A decrease in expenditure on durable consumer goods may be experienced. 

d. The use of debt when interest rates are high restricts the cash position of customers. 

10. Steven Jones is a credit manager at Safebank. He is currently considering the credit application of Martha Mulligan who is a technical specialist at the company Slidequick Mixes. Though Martha earns a good salary and is in the position to provide sound collateral, Steven has heard about the fact that Slidequick Mixes may be in financial trouble. Slidequick Mixes also banks with Safebank. During confidential discussions with the bank the management of Slidequick stated that the company may be forced into liquidation. 

Required:

What should Steven Jones do in this situation? Select the best alternative.

a. Tell Martha Mulligan that she will soon be out of a job and decline the application. 

b. Try and establish how difficult it will be for Martha Mulligan to find alternative employment before making a decision. 

c. Decline the application and inform Martha Mulligan that the reason  is confidential and cannot be shared with her.