Q26. What are the components of Tier-I & Tier-II capital according to Basel Accord?
Q27. Short Note: Securitization, Loan Sales, Mobile Banking, Spread & Burden
Q28. Name the financial statements prepared by a bank
Q29. Describe the functions of Credit Administration Department of a bank
Q30. What are the principal money market and capital market instruments available to the banks in Bangladesh?
Q26. What are the components of Tier-I & Tier-II capital according to Basel Accord?
The components of Tier-I & Tier-II capital according to BASEL accord are: TIER-1 (core capital):
1. Paid up capital
2. Non payable share premium a/c
3. Statutory reserve
4. General reserve
5. Retained earning
6. Minority interest to subsidiaries
7. Non cumulative irredeemable preference shares
8. Dividend equalization account
TIRE 2 (supplementary capital):
1. General provision (1% of CL)
2. Assets revaluation reserves
3. All other preference shares
4. Exchange equalization a/c
Q27. Short Note: Securitization, Loan Sales, Mobile Banking, Spread & Burden
Securitization of loan: Securitization is taken to mean a device of structured financing where an entity seeks to pool together its interest in identifiable cash flows over time, transfer the same to investors either with or without the support of further collaterals and thereby achieve the purpose of financing. It is the financial practice of pooling various types of contractual debt. The principal and interest on the debt, underlying the security, is paid back to the various investors regularly.
Loan sales: A loan sale is a commodity used term for the sale of loan pools. Loans acquired from failed financial institutions are generally sold in pools through sealed bid sale. Typically sale contains loans that have similar characteristics. The loans are refined into pools according to specific criteria. Pooling considerations may include loan size, quality type, collateral and location.
Mobile banking: Mobile banking refers to the activities of banking and financial services with the help of mobile communications. It is consists of 3 inter-related concepts:
i. Mobile accounting,
ii. Mobile brokerage,
iii. Mobile financial information services. The services may be offered are:
i. Accounting information: Mini statement, transaction alert, balance checking etc.
ii. Payments, deposits, withdrawals & transfers: Local & global fund transfer, bill payment, etc.
iii. Investment: Portfolio management service, real time stock quotes, etc.
The components of Tier-I & Tier-II capital according to BASEL accord are: TIER-1 (core capital):
1. Paid up capital
2. Non payable share premium a/c
3. Statutory reserve
4. General reserve
5. Retained earning
6. Minority interest to subsidiaries
7. Non cumulative irredeemable preference shares
8. Dividend equalization account
TIRE 2 (supplementary capital):
1. General provision (1% of CL)
2. Assets revaluation reserves
3. All other preference shares
4. Exchange equalization a/c
Q27. Short Note: Securitization, Loan Sales, Mobile Banking, Spread & Burden
Securitization of loan: Securitization is taken to mean a device of structured financing where an entity seeks to pool together its interest in identifiable cash flows over time, transfer the same to investors either with or without the support of further collaterals and thereby achieve the purpose of financing. It is the financial practice of pooling various types of contractual debt. The principal and interest on the debt, underlying the security, is paid back to the various investors regularly.
Loan sales: A loan sale is a commodity used term for the sale of loan pools. Loans acquired from failed financial institutions are generally sold in pools through sealed bid sale. Typically sale contains loans that have similar characteristics. The loans are refined into pools according to specific criteria. Pooling considerations may include loan size, quality type, collateral and location.
Mobile banking: Mobile banking refers to the activities of banking and financial services with the help of mobile communications. It is consists of 3 inter-related concepts:
i. Mobile accounting,
ii. Mobile brokerage,
iii. Mobile financial information services. The services may be offered are:
i. Accounting information: Mini statement, transaction alert, balance checking etc.
ii. Payments, deposits, withdrawals & transfers: Local & global fund transfer, bill payment, etc.
iii. Investment: Portfolio management service, real time stock quotes, etc.
Q28. Name the financial statements prepared by a bank
The financial statement has prepared by a bank are listed in 4 categories:
1. Balance Sheet: It presents the financial position at a given date by-Assets
Liabilities Equity
2. Income Statement: represents the company's financial performance in terms of net profit or loss that composed-
Income: Expense
3. Cash Flow Statement: It presents the movement in cash and bank balances by-
Operating Activities Investing Activities Financing Activities
4. Statement of Retained Earnings: It presents the movement in owners' equity that derived by-
Net Profit or loss
Share capital issued or repaid Dividend payments
Gains or losses recognized directly in equity
Effects of a change or correction in accounting policy or error
Q29. Describe the functions of Credit Administration Department of a bank
A typical credit administration unit performs following functions:
1. Documentation: To ensure that all security documentation complies with the terms of approval and is enforceable
2. Disbursement: To control facility disbursements only after all terms and conditions of approval have been met, and all security documentation is in place
3. Credit Monitoring: Keep track of borrowers’ compliance with credit terms, identifying early signs of irregularity, conducting periodic valuation of collateral and monitoring timely repayments.
4. Custodial Duties: Storage of security documents should be centralized. Appropriate insurance coverage should be maintained on assets pledged as collateral.
5. To maintain control over all security documentation
6. Compliance monitoring: To monitor borrower’s compliance with covenants and agreed terms and conditions, and general monitoring of account conduct/performance
Q30. What are the principal money market and capital market instruments available to the banks in Bangladesh?
The financial market in Bangladesh is mainly of following types:
1. Money Market: The instruments that are generally traded in the money market constitute:
a) treasury bills
b) short-term bonds of govt. & central bank
c) negotiable certificates of deposits
d) bankers acceptances
e) commercial papers
- bills of exchange
- promissory notes
- mutual funds
2. Capital Market: The instruments that are generally traded in the capital market for medium and long term and, in cases such as equities, for unspecified periods are constitute:
a) long-term government securities
b) corporate bonds
c) stocks
d) municipal bonds issued by state and local government units
e) mortgages
The financial statement has prepared by a bank are listed in 4 categories:
1. Balance Sheet: It presents the financial position at a given date by-Assets
Liabilities Equity
2. Income Statement: represents the company's financial performance in terms of net profit or loss that composed-
Income: Expense
3. Cash Flow Statement: It presents the movement in cash and bank balances by-
Operating Activities Investing Activities Financing Activities
4. Statement of Retained Earnings: It presents the movement in owners' equity that derived by-
Net Profit or loss
Share capital issued or repaid Dividend payments
Gains or losses recognized directly in equity
Effects of a change or correction in accounting policy or error
Q29. Describe the functions of Credit Administration Department of a bank
A typical credit administration unit performs following functions:
1. Documentation: To ensure that all security documentation complies with the terms of approval and is enforceable
2. Disbursement: To control facility disbursements only after all terms and conditions of approval have been met, and all security documentation is in place
3. Credit Monitoring: Keep track of borrowers’ compliance with credit terms, identifying early signs of irregularity, conducting periodic valuation of collateral and monitoring timely repayments.
4. Custodial Duties: Storage of security documents should be centralized. Appropriate insurance coverage should be maintained on assets pledged as collateral.
5. To maintain control over all security documentation
6. Compliance monitoring: To monitor borrower’s compliance with covenants and agreed terms and conditions, and general monitoring of account conduct/performance
Q30. What are the principal money market and capital market instruments available to the banks in Bangladesh?
The financial market in Bangladesh is mainly of following types:
1. Money Market: The instruments that are generally traded in the money market constitute:
a) treasury bills
b) short-term bonds of govt. & central bank
c) negotiable certificates of deposits
d) bankers acceptances
e) commercial papers
- bills of exchange
- promissory notes
- mutual funds
2. Capital Market: The instruments that are generally traded in the capital market for medium and long term and, in cases such as equities, for unspecified periods are constitute:
a) long-term government securities
b) corporate bonds
c) stocks
d) municipal bonds issued by state and local government units
e) mortgages
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