Certificate In Credit T28 – 5R Strategic Consultancy Sdn Bhd

Name

Which statement on the Malaysian financial system is TRUE?

It refers to the commercial and Islamic banking institutions.

It is made up solely of institutions governed by BNM.

It plays the main role in reallocating funds from institutions to borrowers.

Its two major components are the Banking System and the Capital Markets.

None

Which of the following correctly describes Bank Negara Malaysia’s key responsibilities?

Provision of statutory deposit insurance to protect depositors.

Establish a code of conduct for accountants functioning within the financial system.

Ensure orderly development of the financial sector.

Alignment of Malaysian Financial Reporting Standards to the International Financial Reporting Standards (IFRS).

None

Which of the following characteristics is true of conventional licensed insurers in Malaysia?

Licensed under either the Insurance Act 1996 or the Takaful Act 1984.

Permitted to underwrite all types of risks.

Regulated under the Financial Services Act 2013.

Allowed to undertake both conventional and Shariah-compliant insurance businesses.

None

Of the capital market instruments listed below, identify which does not come under the purview of the Securities Commission.

Commodity options

Financial options

Commodity futures

Financial futures

None

Which of the following is an explicit reason for imposing legislative and regulatory controls in respect of the banking system?

Protect the customers from malicious human intervention.

Facilitate the process of financial intermediation.

Ensure banks standardise pricing for their products.

Ensure customers and banks adhere to their fiduciary duties respectively.

None

The banking industry in Malaysia is regulated by:

Financial Services Act 2013 and Islamic Financial Services Act 2013

Banking and Financial Institution Act 1989 and Development Financial Institutions Act 2002

Financial Services Act 2013 and Development Financial Institutions Act 2002

Banking and Financial Institution Act 1989 and Islamic Financial Services Act 2013

None

Which of the following is a reason for Legislative and Regulatory Controls of the banking industry in Malaysia?

Ensure customers perform their fiduciary duties.

Maintain a healthy banking environment for all types of customers.

Protect the banking system from malicious or accidental human intervention.

Facilitate the process of financial institutions' continuous growth.

None

Under the pertinent financial services regulations, which of the following is normally under Bank Negara Malaysia's purview?

Oversight of the overnight interbank limits.

Determination of the effective rate applicable for overnight placements with foreign institutions.

Oversight to ensure the safety and soundness of licensed financial institutions.

Determination of the currency band for foreign currency trading against Malaysian Ringgit.

None

Which of the following activities requires a license under the pertinent financial services regulations?

Lending to SMEs

Intercompany placements

Deposit taking

Insurance coverage for exports

None

Which of the following is under the three broad categories of credit related provisions of Financial Service Act 2013?

Acceptance of security or creation of charge on properties.

Obligations of directors and officers of a borrowing entity.

Acceptance of third-party guarantee from related industry.

Obligations of directors and officers of a licensed business.

None

Definition of a single customer and the credit exposure to various customers groups is addressed by Bank Negara Malaysia's guidelines under:

Financial reporting.

Priority sector lending.

Capital adequacy.

Prudential limits and standards.

None

Which of the following Acts was repealed with the introduction of FSA 2013?

Hire Purchase Act 1967 as at 30th July 2012

Exchange Control Act 1953

Capital Markets and Services (Amendment) Act 2007

Personal Data Protection Act 2010

None

Sinaran Sdn Bhd (SSB) located in Ipoh, Malaysia, is a resident company enjoying credit facilities with a local bank. It exports finished products to Europe denominated in USD and raw materials are sourced from Indonesia in USD as well. SSB plans to raise USD financing from a bank in Indonesia. Under the Foreign Exchange Administration (FEA) Rules, is this allowed?

Yes, but subject to an aggregate limit of RM10 million equivalent.

No, only residents without domestic borrowing are allowed to borrow in foreign currency.

No, residents are only allowed to borrow in foreign currency from licensed onshore banks.

Yes, but up to a prudential limit of RM100 million equivalent.

None

The formation of a management corporation with powers to collect financial contributions for the maintenance of common areas is part of the law on the issuance of:

leasehold titles for gated community.

strata titles.

all titles after 2018 in the Federal Territory of Malaysia.

freehold titles for gated community.

None

Identify one core principle of the Professional Code of Conduct for Banking Executives?

Minimise conflict of interest.

Specific use of information always.

Maintain decorum when dealing with customers.

Prevent misuse of information.

None

Ismail, a credit officer with Bank Hexagon was asked by his client for some information relating to another client of the Bank operating in the same industry. Under the Professional Code of Conduct for Banking Executives, disclosure of such information by Ismail is tantamount to:

abuse of banking principles.

conflict of interest.

integrity of records.

misuse of information.

None

Corporate governance is not legally binding but is strongly encouraged to ensure the banks are

able to compete fairly in a well-managed banking environment.

operationally efficient with fair treatment of all stakeholders' interest.

exposed to reasonable amount of risk and resources best employed objectives to achieve.

financially healthy to ensure continuous growth and profitability.

None

One key change introduced by Bank Negara Malaysia's standards on Corporate Governance issued in August 2016 in respect of the banking industry covers:

Expectation for boards to set a tenure limit for independent directors, generally not exceeding nine year.

Requirement for all related party transactions to be scrutinised by the Board.

Strengthening the board composition requiring a minimum thirty percent of independent directors.

Adoption of code of ethics endorsed by BNM subject to review every three years.

None

Describe the 5 phases of credit risk process cycle in sequential order when assessing a loan request:

defining a written report, monitoring loan performance, loan security documentation, credit risk analysis and structuring, loan settlement and recovery.

defining a written report, loan security documentation, monitoring loan performance, credit risk analysis and structuring, loan settlement and recovery.

credit risk analysis and structuring, defining a written report, loan security documentation, monitoring loan performance, loan settlement and recovery.

defining a written report, credit risk analysis and structuring, loan security documentation, monitoring loan performance, loan settlement and recovery.

None

In loan origination, the credit officer commences with defining a written report by identifying the target market’s risk asset acceptance criteria (RAAC) based on the:

sources and application of funds.

potential debt repayment ability.

bank’s internal lending policies.

availability of collateral.

None

The loan recovery process for a debt owed by a company that has ceased business includes:

rescheduling.

rehabilitation.

refinancing.

legal action.

None

Which of the following represents unproductive lending?

Working capital.

Payment of dividends.

Fixed assets acquisition.

Factory construction.

None

Which of the following demonstrates the shareholders' financial commitment to the lender?

Subordination of advances.

Loans to related companies.

Impairment of goodwill.

High dividend payout ratio.

None

Which quadrant in the diagram reflects the borrower's willingness to repay but not the means?

III

None

What are the five (5) elements a credit officer should consider when evaluating a loan application?

Condition, character, cash flow, collateral and capacity.

Collateral, condition of loan, character, capacity, and capital.

Collateral, condition, capacity, character and capital.

Capacity, character, collateral, industry cycle and condition.

None

When analysing CHARACTER under the 5Cs framework, its attributes include:

corporate vision and business plan, borrower's trustworthiness, payment record, and integrity.

borrower's genuineness, willingness to pay, management moral strength, and integrity.

willingness to pay, management competence, reliability of repayment source and integrity.

borrower's genuineness, integrity, management style and cultural background.

None

Which phase of the industry cycle is characterised by improving profits, low competition, and increasing demand?

Growth

Stagnation

Start-up

Maturity

None

What are the leading indicators of economic recovery?

Output at maximum, unrestrained spending, and slowly rising interest rates.

GDP growing, interest rates are low, and rising employment.

GDP at a low point and recuperating process are underway.

GDP slows, unemployment rises, and prices stagnate.

None

The KEY factor to consider when evaluating the “Capacity” component of 5Cs framework at loan origination is:

cash reserves.

projected earnings.

projected cash flow.

current sales trend.

None

In support of Loftus Sdn Bhd's (Loftus) loan application, the parent company has agreed to provide a charge over its factory land. Which component of the 5Cs framework is demonstrated by this action?

Capital

Collateral

Capacity

Conditions

None

What is one attribute of good security?

Marketability

Ownership

Loan to value

Location

None

Which of the following is a component of the CAMPARI model?

Collateral

Capital

Character

Capacity

None

Which statement BEST illustrates the difference between the 5Cs Credit Risk Assessment Framework and the CAMPARI model?

Assessment of a loan application under the 5Cs framework usually results in a lower margin of financing when compared with the CAMPARI model.

The 5Cs framework is usually applied in assessing business lending propositions and the CAMPARI model for consumer loan applications.

Processing and approval of a loan application assessed using the 5Cs framework is faster when compared with the CAMPARI model.

The 5Cs framework has five components to consider credit risk assessment whereas the CAMPARI model has eight.

None

What do the two "A" represent in the CAMPARI acronym?

Appropriateness and Amount

Ability and Appropriateness

Ability and Amount

Attitude and Advance

None

Mr. Remy submitted a loan application to Mega Bank to purchase a shophouse worth RM500,000. He enquired on the level of financing available. The credit officer indicated that banks seldom grant 100% financing. Ultimately the credit decision including the percentage of financing would depend on the assessment of Remy’s overall credit risk profile. Which component of the CAMPARI model does this scenario MOST appropriately relate to?

Ability

Character

Amount

Margin

None

Why is it necessary for the credit officer to be familiar with the characteristics of different borrowing entities?

Understand the risks involved and the avenues for recourse if recovery action is required.

Determine the maximum loan amount that can be granted.

Determine whether the directors’ guarantee is required.

Ascertain the type of collateral required to secure the loan.

None

Choose the statement which correctly matches the type of business entity with the governing legislation.

Limited Liability Partnership – Partnership Act 1961 (revised 1974)

Normal Partnership – Partnership Act 1961 (revised 1974)

Sole proprietorship – Companies Act 2016

Club – Societies Act 1966

None

Which of the following is correct in respect of a normal partnership?

Must have not more than 50 partners.

Must be registered under the Registration of Businesses Act 1956 (revised 1978).

Can own and register properties under the National Land Code 1965.

Capital contributions can be changed provided the number of partners remains the same.

None

A business customer has a share capital of RM1.0 million. It is 40%-owned by XYZ Berhad and eight other individuals, all of whom are not permitted to sell their shares to parties other than existing shareholders. Based on the above description, the customer is MOST likely a:

Limited Liability Partnership.

Public company limited by shares.

Private company limited by shares.

Normal partnership.

None

A society can be sued for recovery of debt in:

the name of trustees.

the name of all its members.

its own name.

the name of its office bearers.

None

Which of the following is the least reliable source of information for credit risk assessment?

News reports and articles from a business publication.

Bankruptcy search.

Credit reference agencies.

Posts and blogs in the electronic and social media.

None

Which of the following quantitative information is essential to evaluate a business loan application?

Industry attractiveness

Financial projection

Business strategy

Competitive advantage

None

Unavailability of complete information when processing a loan application could result in:

recovery difficulties.

product-market mismatch.

flawed credit decision.

security deficiencies.

None

When a non-salaried individual borrower applies for a term loan, the credit officer should request the following financial information:

Documentary evidence of net worth of guarantor.

Documentary evidence of current income to support debt servicing capacity.

Last six months’ bank statements to demonstrate sufficient balance to cover the loan amount.

A listing of tangible assets and their current value.

None

A valuation method that applies the market-supported yields to projected future cashflow to arrive at a present value indication is referred to as the:

discounted cashflow.

residual value.

cost approach.

sales comparison.

None

What is the purpose of a loan agreement?

Sets out in full detail the contractual and legal relationship between the lending bank and the borrower.

Broad outline of terms and conditions governing the loan and responsibilities of all parties.

Contains terms and conditions identical to loan facility letter of offer.

Sets out terms and conditions for registration at Companies Commission of Malaysia.

None

Why should a loan agreement contain restrictive covenants?

Additional conditions to be observed by the borrower during the facility tenor.

Exercise some control over the borrower’s business operations.

Ensure an immediate recall of the facility if there is a breach.

Credit risk profile is adequately maintained at a minimum acceptable level.

None

Which of the following is a positive covenant?

Refrain from paying dividends if the company post losses in the latest financial year.

Disposal of interest in key subsidiaries requires the bank’s prior written consent.

Not to dispose assets of more than 5% of the company’s net asset value without the bank’s prior written consent.

Undertaking to inject sufficient capital to maintain the company’s solvency during facility tenor.

None

Why should the lender ensure that legal documentation is in proper order?

Effectively enforce its rights to recover the debt and realisation of collateral.

Comply with all laws and regulations on the payment of stamp duty.

Ensure registration of such documents when presented at the relevant registry.

Incorporate additional conditions as necessary due to changes in the borrower’s credit risk profile

None

Banks prefer shares of public listed companies as security because:

they have dividend payments

these are all trustee stocks.

disposal is simple.

market values are stable.

None

Term life policy provides:

protection without any savings element.

security of savings bond on maturity.

cash value on surrender.

insurance against critical illness.

None

Which of the following statements is TRUE in respect of the rights under a Power of Attorney granted to a bank?

Appoint a solicitor for preparation of the loan agreements.

Act on behalf of the borrower in specified circumstances.

Take control of operations immediately upon death of a key shareholder.

Sell any of the borrower’s assets to avoid credit loss.

None

Which of the following statements relates to the alienation of land?

Approval by the state authority to the application of land title.

Approval by the state of authority to transfer of land title.

Lodgment of private caveat to land title.

Issuance of Certificate of Occupation to land by Registrar of titles.

None

Which form of title confers indefeasible ownership of the land to the person or entity?

Land Office Title

Registry Title

Final Title

Qualified Title

None

Under the National Land Code 1965, the maximum tenor of lease granted by the state authority in Peninsular Malaysia is:

99 years

999 years

30 years

60 years

None

In a sub-sale land transaction, 10% deposit has been paid by the purchaser. Which instrument will protect the purchaser’s interest and concurrently prevent the vendor from further dealings in the underlying asset?

Private caveat

Memorandum of Transfer

Lien holder’s caveat

Negative Pledge

None

Which of the following processes will alleviate the land charge from being invalidated through forgery?

Execution in the presence of the bank officer, charged documents if taken out of bank’s premise must be returned, duly signed the same day.

Execution in the presence of branch manager, photocopy of identity card obtained, charge documents not leaving the bank’s premise.

Execution in the presence of solicitor, charge document cannot be taken out of the solicitor’s office and sighting of chargor’s original identity card by solicitor.

Execution in the presence of solicitor, charged documents if taken out of bank’s premise must be returned, duly signed, the same day, and sighting of chargor’s original identity card by solicitor.

None

Which legal documents apply when securing properties where individual titles have not been issued?

Loan Agreement, Power of Attorney, and Memorandum of Transfer.

Loan Agreement, Deed of Receipt and Reassignment and Charge.

Loan Agreement, Deed of Assignment and Power of Attorney.

Loan Agreement, Charge together with Form 16A and Private caveat.

None

Which of the following documents is required to be registered in the High Court to ensure its validity?

Deed of Receipt and Reassignment

Power of Attorney

Loan Agreement

Charge Annexure

None

Which of the following situations would render a guarantee superfluous?

Guarantee obtained from a foreigner.

Execution of guarantee which is not attested.

Guarantee executed but not stamped within prescribed period.

Guarantee obtained from the sole proprietor of a borrowing firm.

None

Joint and several guarantee is BEST described as:

the discharge of one guarantor being tantamount to release of the remaining.

issued by parties resident in Malaysia.

an option for the lender to select which guarantor to sue.

requiring the lender to simultaneously initiate legal proceedings against all guarantors.

None

Which of the following describes the key features of an indemnity:

Secondary obligation to pay on default by the Borrower.

Undertaking to pay on demand as a primary obligor.

Primary obligation to pay on default by the Borrower.

Undertaking to pay after exhaustion of legal remedies against borrower.

None

A company preparing the business accounts and the form in which they are reported must adopt certain accepted rules known as:

Materiality and disclosure

Accounting practices and policies

Accounting doctrine and principles

Financial Reporting Standards

None

Which of the following are some of the MOST commonly adopted accounting principles?

Materiality, dual aspect and entity

Accounting period Materiality and Going concern

Accounting period Going concern and Monetary

Going concern Accrual or matching and Conservatism

None

Which of the following relates to the accounting equation principle?

Capital = Assets + Liabilities

Assets = Liabilities + Capital

Equity = Liabilities – Assets

Liabilities = Capital + Assets

None

Which of the following is an external auditor's qualified opinion?

The statements do not conform to generally accepted accounting principles.

Some doubt as to whether the statements present fairly the financial position.

The statements do not present fairly the financial position.

There are uncertainties about the future that cannot be resolved.

None

Which of the following is TRUE of revenue reserves?

It cannot be distributed as cash dividends.

It is part of net worth and subject to capital leakage.

In a bonus share issue, the corresponding share capital will reduce.

It arises from asset revaluation exercise

None

Company BBB Sdn Bhd (CBSB) is confident of returning to profitability with further productivity improvement and imposition of cost-cutting measures. In addition, CBSB has revalued upwards of two of its properties, located in the Klang Valley, Malaysia. CBSB has also provided guarantees for RM3million to support the borrowing of its subsidiary. Based on the above information, which of the following statements is CORRECT?

The value of CBSB's assets has increased

CBSB must outsource its production processes to reduce investment in fixed assets

CBSB's guarantee has adversely impacted its performance.

Disposal of the two properties will increase CBSB's revenue reserves

None

Which of the following is a component of cost of goods sold?

Loan interest

Staff salaries

Office rental

Manufacturing costs

None

Which component of the cash flow statement examines the effects of the company's strategic decisions such as capital expenditure?

Core operating

Financing

Non-operating

Investing

None

In analysing the cash flow statement, which of the following is the numerator when computing the debt service ratio?

Net cashflow from financing activities

Net cashflow from operating activities

Net cash flow from other operating activities

Net cashflow from investing activities

None

Mosaic theory is related to which of the following financial analysis?

Dynamic

Value-added

Prospective

Integrated

None

Which denominator is common to the computation of debt-asset and equity ratios?

total assets

shareholder's equity

total liabilities

current assets

None

Axiom Bhd paid half-yearly dividend per share of 5 sen each time, to ordinary shareholders. As at 31 May 202X, the market price was RM3.85 per share. Calculate the annual dividend yield.

2.6%

1.2%

1.3%

2.4%

None

Which of the following is the numerator in the computation of the dividend cover ratio?

net profit after tax minus preference dividend

annual dividend per share

net profit after tax

total ordinary dividend declared

None

Axim Bhd's earnings yield in 202X was 5.3%. If the market price was RM2.80 per share, which of the following statements is TRUE?

Axim Bhd's performance was strong to sustain current dividend payment.

Good earnings yield indicated Axim Bhd was productive.

Axim Bhd's earnings per share is 30 sen.

Ordinary shares of Axim Bhd were sold at 18.9 times of current profit.

None

In assessing the non-financial variables of a company, Character represents an important factor as it determines the:

qualification level required to ensure the success of the business.

borrower's willingness to honour its debt service obligations.

ability to repay the debts in full and on time.

standing of the customer in the business circle.

None

In assessing the credit risk of an existing borrower, which of the following is an indication of a red flag?

Sudden increase in tangible assets.

Multiple sources of recurring income.

Change of auditors.

Implementation of prudent accounting policies.

None

Osman Sdn Bhd, an active trading company has been accumulating reserves derived from high profits since inception except for the last two years. What would be a MAIN risk concern to the lender?

Overtrading

Misuse of funds.

Creative accounting practices.

Slowdown in growth and limited prospects.

None

Manufacturing based on confirmed orders only is considered a prudent business practice in some industries. What risk is mitigated by this modus operandi?

Position

Receivables

Operational

Cash flow

None

Time's up

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