Q21. Explain the concept of mobile financial services. Discuss the various services offered by it
Q22. What are the ways in which an investment-banking firm may be involve in the issuance of a new security?
Q23. What do you mean by reputation risk? What type of losses may be induced in a bank due to reputation risk?
Q24. Explain different types of risks faced by a financial institution
Q25. Discuss the purpose of Market Discipline in relation with accounting disclosures under revised Regulatory Capital Framework for banks in line with Basel-II
Q21. Explain the concept of mobile financial services. Discuss the various services offered by it
Mobile banking refers to the activities of banking and financial services with the help of mobile communications. The scope of offered service may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized transaction.
The mobile banking is consists of 3 inter-related concepts:
i) Mobile accounting,
ii) Mobile brokerage,
iii) Mobile financial information services.
Mobile banking can offer services are:
i) Accounting information: Mini statement, transaction alert, loan & card accessibility, balance checking, order & stop payment of check, etc.
ii) Payments, deposits, withdrawals & transfers: Local & global fund transfer, commercial payments, bill payment, etc.
iii) Investment: Portfolio management service, real time stock quotes, etc.
[As per Bangladesh bank DCMP circular in September 2011, the following mobile financial services may be allowed:
1. Disbursement of inward foreign remittances
2. Cash in-out using mobile account through agents/ bank branches/ ATMs/ Mobile operator’s outlets
3. Person to business payment i.e. utility bill, merchant payments
4. Business to person payment i.e. salary, dividend and refund warrant, vendor payments, etc
5. Govt. to person payment i.e. elderly allowances, freedom-fighter allowances, subsidies, etc
6. Person to govt. payments i.e. tax, levy payments
7. Persons to person payments
8. Other payments like microfinance, overdrawn facility, insurance premium, DPS, etc.]
Q22. What are the ways in which an investment-banking firm may be involve in the issuance of a new security?
Investment banking involves managing pools of asset such as closed and open-end mutual funds. Investment bankers act as agents on a fee basis or a principal, purchasing the securities from the issuer at one price and seeking to place them with public investors at a slightly higher price. The objective in funds management is to select asset portfolio to beat some return-risk performance benchmark. Since this business generates fees that are based on the size of the pool of asset managed, it tends to produce a more stable flow of income than does either investment banking or trading.
Investment banking refers to activities related to underwriting and distributing new issues that can be either first-time issues of debt or equity is already trading seasoned issues. Finally, in addition investment banker operates with corporate securities markets that may participate as an underwriter (primary dealer) in govt., municipal and mortgage-backed securities.
Q23. What do you mean by reputation risk? What type of losses may be induced in a bank due to reputation risk?
Reputational risk is the current or prospective indirect risk to earnings and capital, decline in the customer base, costly litigation arising from adverse perception of the image of the banks on the part of its stakeholders. It may originate from the lack of compliance with service standards, failure to deliver on commitments, lack of customer-friendly service and fair market practices, unreasonably high costs, inappropriate business conduct or unfavorable authority opinion and actions.
Several paths by which reputation risk can induce losses for a firm/Bank:
1. Loss of current or future customers, for example increased advertising costs are necessary to restrain reputation damage.
2. Loss of employees or managers within bank, an increase in hiring costs
3. Reduction in current or future business partners
4. Increased costs of financial funding
5. Increased costs due to govt. policy, supervisory regulations fines or penalties.
Q24. Explain different types of risks faced by a financial institution
As per BB guideline different types of risks faced by a financial institution are:
1. Residual risks: Collaterals can pose the risks like legal and documentation risks
2. Credit concentration risk: Exposure in the same economic or geographic sector and/or in dependent industries
3. Interest rate risk: It in banking book has to be taken into account as a potential risk.
- Gap or mismatch risk
- Basis risk
- Net interest position risk
- Embedded option risk
4. Liquidity risk:
- Term liquidity risk
- Withdrawal/call risk
- Structural liquidity risk
- Market liquidity risk
5. Settlement risk: It arises when an executed transaction is not settled
6. Reputation risk: It arise due to lack of compliance, customer-friendly service, fair market practices, failure to deliver on commitments, high costs, etc.
7. Strategic risk
8. Environmental risk: The uncertainty or probability of losses that originates from any adverse environmental or climate change events
9. Other material risks
Q25. Discuss the purpose of Market Discipline in relation with accounting disclosures under revised Regulatory Capital Framework for banks in line with Basel-II
The purpose of market discipline in the revised adequacy framework is to complement the minimum capital requirements and the supervisory review process that the aim is to establish more transparent and more disciplined financial market so that stakeholders can assess the position of a bank regarding holding of assts and to identify the risks relating to the assts and capital adequacy.
1. It is expected that the disclosure framework does not conflict with requirement under accounting standard as set by BB
2. Under minimum capital requirement, banks will use specified approaches/methodologies for measuring the various risks they faced and the resulting capital requirements.
3. The disclosures should be subject to adequate validation, since information in the annual financial statements would generally be audited and published.
Mobile banking refers to the activities of banking and financial services with the help of mobile communications. The scope of offered service may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized transaction.
The mobile banking is consists of 3 inter-related concepts:
i) Mobile accounting,
ii) Mobile brokerage,
iii) Mobile financial information services.
Mobile banking can offer services are:
i) Accounting information: Mini statement, transaction alert, loan & card accessibility, balance checking, order & stop payment of check, etc.
ii) Payments, deposits, withdrawals & transfers: Local & global fund transfer, commercial payments, bill payment, etc.
iii) Investment: Portfolio management service, real time stock quotes, etc.
[As per Bangladesh bank DCMP circular in September 2011, the following mobile financial services may be allowed:
1. Disbursement of inward foreign remittances
2. Cash in-out using mobile account through agents/ bank branches/ ATMs/ Mobile operator’s outlets
3. Person to business payment i.e. utility bill, merchant payments
4. Business to person payment i.e. salary, dividend and refund warrant, vendor payments, etc
5. Govt. to person payment i.e. elderly allowances, freedom-fighter allowances, subsidies, etc
6. Person to govt. payments i.e. tax, levy payments
7. Persons to person payments
8. Other payments like microfinance, overdrawn facility, insurance premium, DPS, etc.]
Q22. What are the ways in which an investment-banking firm may be involve in the issuance of a new security?
Investment banking involves managing pools of asset such as closed and open-end mutual funds. Investment bankers act as agents on a fee basis or a principal, purchasing the securities from the issuer at one price and seeking to place them with public investors at a slightly higher price. The objective in funds management is to select asset portfolio to beat some return-risk performance benchmark. Since this business generates fees that are based on the size of the pool of asset managed, it tends to produce a more stable flow of income than does either investment banking or trading.
Investment banking refers to activities related to underwriting and distributing new issues that can be either first-time issues of debt or equity is already trading seasoned issues. Finally, in addition investment banker operates with corporate securities markets that may participate as an underwriter (primary dealer) in govt., municipal and mortgage-backed securities.
Q23. What do you mean by reputation risk? What type of losses may be induced in a bank due to reputation risk?
Reputational risk is the current or prospective indirect risk to earnings and capital, decline in the customer base, costly litigation arising from adverse perception of the image of the banks on the part of its stakeholders. It may originate from the lack of compliance with service standards, failure to deliver on commitments, lack of customer-friendly service and fair market practices, unreasonably high costs, inappropriate business conduct or unfavorable authority opinion and actions.
Several paths by which reputation risk can induce losses for a firm/Bank:
1. Loss of current or future customers, for example increased advertising costs are necessary to restrain reputation damage.
2. Loss of employees or managers within bank, an increase in hiring costs
3. Reduction in current or future business partners
4. Increased costs of financial funding
5. Increased costs due to govt. policy, supervisory regulations fines or penalties.
Q24. Explain different types of risks faced by a financial institution
As per BB guideline different types of risks faced by a financial institution are:
1. Residual risks: Collaterals can pose the risks like legal and documentation risks
2. Credit concentration risk: Exposure in the same economic or geographic sector and/or in dependent industries
3. Interest rate risk: It in banking book has to be taken into account as a potential risk.
- Gap or mismatch risk
- Basis risk
- Net interest position risk
- Embedded option risk
4. Liquidity risk:
- Term liquidity risk
- Withdrawal/call risk
- Structural liquidity risk
- Market liquidity risk
5. Settlement risk: It arises when an executed transaction is not settled
6. Reputation risk: It arise due to lack of compliance, customer-friendly service, fair market practices, failure to deliver on commitments, high costs, etc.
7. Strategic risk
8. Environmental risk: The uncertainty or probability of losses that originates from any adverse environmental or climate change events
9. Other material risks
Q25. Discuss the purpose of Market Discipline in relation with accounting disclosures under revised Regulatory Capital Framework for banks in line with Basel-II
The purpose of market discipline in the revised adequacy framework is to complement the minimum capital requirements and the supervisory review process that the aim is to establish more transparent and more disciplined financial market so that stakeholders can assess the position of a bank regarding holding of assts and to identify the risks relating to the assts and capital adequacy.
1. It is expected that the disclosure framework does not conflict with requirement under accounting standard as set by BB
2. Under minimum capital requirement, banks will use specified approaches/methodologies for measuring the various risks they faced and the resulting capital requirements.
3. The disclosures should be subject to adequate validation, since information in the annual financial statements would generally be audited and published.
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