Certificate In Credit T28 – 5R Strategic Consultancy Sdn Bhd

Name

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

Intercompany placements

Deposit taking

Insurance coverage for exports

Lending to SMEs

None

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

99 years

60 years

30 years

999 years

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?

Margin

Amount

Character

Ability

None

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

Implementation of prudent accounting policies.

Multiple sources of recurring income.

Change of auditors.

Sudden increase in tangible assets.

None

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

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

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

Must have not more than 50 partners.

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

None

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

Accounting period Going concern and Monetary

Materiality, dual aspect and entity

Accounting period Materiality and Going concern

Going concern Accrual or matching and Conservatism

None

What is one attribute of good security?

Marketability

Loan to value

Location

Ownership

None

Term life policy provides:

insurance against critical illness.

security of savings bond on maturity.

cash value on surrender.

protection without any savings element.

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:

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

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

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

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

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 whether the directors’ guarantee is required.

Determine the maximum loan amount that can be granted.

Ascertain the type of collateral required to secure the loan.

None

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

A listing of tangible assets and their current value.

Documentary evidence of net worth of guarantor.

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

Documentary evidence of current income to support debt servicing capacity.

None

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

Obligations of directors and officers of a borrowing entity.

Obligations of directors and officers of a licensed business.

Acceptance of security or creation of charge on properties.

Acceptance of third-party guarantee from related industry.

None

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

shareholder's equity

current assets

total assets

total liabilities

None

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

Capital Markets and Services (Amendment) Act 2007

Exchange Control Act 1953

Hire Purchase Act 1967 as at 30th July 2012

Personal Data Protection Act 2010

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's guarantee has adversely impacted its performance.

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

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

None

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

Provision of statutory deposit insurance to protect depositors.

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

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

Ensure orderly development of the financial sector.

None

Which of the following situations would render a guarantee superfluous?

Guarantee obtained from the sole proprietor of a borrowing firm.

Guarantee obtained from a foreigner.

Guarantee executed but not stamped within prescribed period.

Execution of guarantee which is not attested.

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?

Conditions

Collateral

Capacity

Capital

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?

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

Good earnings yield indicated Axim Bhd was productive.

Axim Bhd's earnings per share is 30 sen.

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

None

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

Integrated

Value-added

Dynamic

Prospective

None

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

recovery difficulties.

product-market mismatch.

flawed credit decision.

security deficiencies.

None

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

Competitive advantage

Business strategy

Financial projection

Industry attractiveness

None

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

Staff salaries

Manufacturing costs

Loan interest

Office rental

None

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

Net cashflow from investing activities

Net cashflow from financing activities

Net cashflow from operating activities

Net cash flow from other operating activities

None

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

projected cash flow.

projected earnings.

cash reserves.

current sales trend.

None

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

Collateral

Capacity

Capital

Character

None

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

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

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

None

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

Operational

Cash flow

Position

Receivables

None

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

Normal Partnership – Partnership Act 1961 (revised 1974)

Club – Societies Act 1966

Sole proprietorship – Companies Act 2016

Limited Liability Partnership – Partnership Act 1961 (revised 1974)

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:

availability of collateral.

bank’s internal lending policies.

potential debt repayment ability.

sources and application of funds.

None

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

Accounting practices and policies

Financial Reporting Standards

Accounting doctrine and principles

Materiality and disclosure

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

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, integrity, management style and cultural background.

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

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

None

Which of the following represents unproductive lending?

Payment of dividends.

Working capital.

Factory construction.

Fixed assets acquisition.

None

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

rescheduling.

refinancing.

rehabilitation.

legal action.

None

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

standing of the customer in the business circle.

qualification level required to ensure the success of the business.

ability to repay the debts in full and on time.

borrower's willingness to honour its debt service obligations.

None

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

Appropriateness and Amount

Attitude and Advance

Ability and Appropriateness

Ability and Amount

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.

sales comparison.

residual value.

cost approach.

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?

Memorandum of Transfer

Lien holder’s caveat

Negative Pledge

Private caveat

None

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

Impairment of goodwill.

High dividend payout ratio.

Loans to related companies.

Subordination of advances.

None

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

Facilitate the process of financial institutions' continuous growth.

Maintain a healthy banking environment for all types of customers.

Ensure customers perform their fiduciary duties.

Protect the banking system from malicious or accidental human intervention.

None

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

Maturity

Start-up

Growth

Stagnation

None

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

Act on behalf of the borrower in specified circumstances.

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

Appoint a solicitor for preparation of the loan agreements.

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

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.

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

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

None

A society can be sued for recovery of debt in:

the name of trustees.

its own name.

the name of its office bearers.

the name of all its members.

None

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

Condition, character, cash flow, collateral and capacity.

Capacity, character, collateral, industry cycle and condition.

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

Collateral, condition, capacity, character and capital.

None

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

Land Office Title

Registry Title

Qualified Title

Final Title

None

Which of the following is TRUE of revenue reserves?

It cannot be distributed as cash dividends.

It arises from asset revaluation exercise

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

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

None

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

Ensure customers and banks adhere to their fiduciary duties respectively.

Facilitate the process of financial intermediation.

Ensure banks standardise pricing for their products.

Protect the customers from malicious human intervention.

None

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

Non-operating

Core operating

Financing

Investing

None

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

Priority sector lending.

Capital adequacy.

Financial reporting.

Prudential limits and standards.

None

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

Commodity options

Financial futures

Commodity futures

Financial options

None

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

Secondary obligation to pay on default by the Borrower.

Primary obligation to pay on default by the Borrower.

Undertaking to pay after exhaustion of legal remedies against borrower.

Undertaking to pay on demand as a primary obligor.

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

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

Prevent misuse of information.

Specific use of information always.

Maintain decorum when dealing with customers.

Minimise conflict of interest.

None

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

III

None

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

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

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

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

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

None

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

There are uncertainties about the future that cannot be resolved.

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.

None

Which of the following is a positive covenant?

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

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

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.

None

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

net profit after tax

total ordinary dividend declared

net profit after tax minus preference dividend

annual dividend per share

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?

Creative accounting practices.

Misuse of funds.

Slowdown in growth and limited prospects.

Overtrading

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.

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

operationally efficient with fair treatment of all stakeholders' interest.

financially healthy to ensure continuous growth and profitability.

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.

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

Regulated under the Financial Services Act 2013.

Permitted to underwrite all types of risks.

None

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

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 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 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 of the following statements relates to the alienation of land?

Lodgment of private caveat to land title.

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

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

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

None

Which of the following relates to the accounting equation principle?

Equity = Liabilities – Assets

Liabilities = Capital + Assets

Assets = Liabilities + Capital

Capital = Assets + Liabilities

None

The banking industry in Malaysia is regulated by: respect of the banking system?

Financial Services Act 2013 and Islamic Financial Services Act 2013

Financial Services Act 2013 and Development Financial Institutions Act 2002

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

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

None

Which statement on the Malaysian financial system is TRUE?

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

It is made up solely of institutions governed by BNM.

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

It refers to the commercial and Islamic banking institutions.

None

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

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

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

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

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

None

Banks prefer shares of public listed companies as security because:

these are all trustee stocks.

disposal is simple.

market values are stable.

they have dividend payments

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:

Public company limited by shares.

Normal partnership.

Private company limited by shares.

Limited Liability Partnership.

None

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

Power of Attorney

Deed of Receipt and Reassignment

Loan Agreement

Charge Annexure

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

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:

integrity of records.

misuse of information.

conflict of interest.

abuse of banking principles.

None

Why should a loan agreement contain restrictive covenants?

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

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

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

Exercise some control over the borrower’s business operations.

None

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

Loan Agreement, Deed of Receipt and Reassignment and Charge.

Loan Agreement, Deed of Assignment and Power of Attorney.

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

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

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.

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

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

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

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.

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

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

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

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:

strata titles.

all titles after 2018 in the Federal Territory of Malaysia.

freehold titles for gated community.

leasehold titles for gated community.

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

Time's up

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