Moodle Oct07 Fim Test Qns

TEMASEK POLYTECHNIC FINANCIAL INSTITUTIONS & MARKETS (BAF3009) AY 2007/08 OCT SEM MID­SEMESTRAL TEST Name

:______________________

Adm No

:______________________

Tut Grp : T01 / T02    (Please circle accordingly)

TIME ALLOWED:

ONE HOUR

TOTAL:

40 MARKS

Section A: Multiple Choice Questions 

(10 MARKS)    

Answer all questions in the box provided: QUESTION 1.1 1.2 1.3 1.4 1.5

ANSWER

QUESTION 1.6 1.7 1.8 1.9 1.10

ANSWER

QUESTION 1 (1 mark each) 1.1

The primary function/s of a financial intermediary is/are to  __. A) B) C) D)

1.2

bring about a steady and inexpensive flow of funds from  lenders to borrowers  eliminate credit risks faced by units with surplus funds  bridge the gap between lenders' desire to lend short­term  and borrowers' wish to borrow long­term  all of the above

To   further   liberalise   the   banking   sector,   the   Monetary  Authority of Singapore needs to allow Qualifying Full Banks to  __. i) set up as many branches as they wish ii) set up ATMs in as many locations as they want iii) share ATMs among themselves Page 1

iv)

own shares in local banks

A) B) C) D)

(i) and (ii) (ii) and (iii) (i), (ii) and (iii) (i), (ii), (iii)  & (iv)

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1.3

A Singaporean who places a US Dollar deposit with a bank in  Paris is effectively lending money in France's __. A) B) C) D)

1.4

In syndicated loans, the term 'bad form' generally refers to  the lead manager __. A) B) C) D)

1.5

lower cost of funds  higher deposit interest rates  reduced competition enhanced capital adequacy

The Banking Act governs all banks in Singapore except __. A) B) C) D)

1.9

Riba  Hadith Gharar  Ijarah 

Raising   the   Minimum   Cash   Balance   (MCB)   held   by   commercial  banks will lead to __. A) B) C) D)

1.8

does not have intrinsic value  represents debt owed by the issuer is securitised by an asset that is Shariah­compliant all of the above

Sources of Islamic Law include the Quran and __. A) B) C) D)

1.7

arranging a loan which subsequently turns bad  charging excessive fees not being able to raise the amount required not providing any of the funds

'Sukuk' involves issuance of a document that __. A) B) C) D)

1.6

Asian Currency Market Asian Dollar Market Euro Currency Market domestic banking unit

full banks merchant banks wholesale banks offshore banks

The   Central   Limit   Order   Book   (CLOB)   system   ranks   buy   orders  from the __ and, sell orders from __. A) B)

lowest to highest; lowest to highest lowest to highest; highest to lowest Page 3                                                            

C) D)

highest to lowest; lowest to highest highest to lowest; highest to lowest

1.10 Singapore Exchange's new board to replace SESDAQ is called __. A) B) C) D)

Second Board  Junior Board  Alternative Investment Market (AIM) Catalist *** End of Section A ***

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Section B: Short Questions

(TOTAL 30 MARKS)

Answer all questions in the space provided.

QUESTION 2 (10 marks) DBS Bank has paid-up capital which far exceeds the minimum of $1,500 million stipulated by the MAS.

a)

What does 'capital adequacy' refer to? (2 marks)

b)

Based on your understanding of capital adequacy, explain why it  is not sufficient for DBS Bank to simply maintain a high level  of capital.  (4 marks)

DBS Bank maintains a Capital Adequacy Ratio of 10%, the minimum stipulated by MAS which is higher than the 8% required in many other countries.

c)

What are the implications for DBS Bank in terms of: • Lending activities • Competitiveness (4 marks)

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QUESTION 3 (12 marks) 'Given the current and anticipated volatility of the stock market, with short-selling likely to be aplenty, the Central Depository should act on the less-then-best-practice buy-in process now in force.' Extracted from 'Make stock buy-in process transparent to investors', Business Times dated 28 August 2007.

a)

What is the role of the Central Depository? (3 marks)

b)

What is 'short­selling'? How can a short seller avoid a buy­in  under the current settlement process for scripless trading?     (3 marks)

c)

Describe the trade settlement process and explain the need for  the 'buy­in process' to take place in a short sale. (4 marks)

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d)

Do you agree with the author's view that the 'buy­in process'  is a 'less­than­best­practice'? Why or why not? (2 marks)

QUESTION 4 (8 marks) 'MANDARIN Oriental International, the hotel arm of Jardine Matheson Holdings, said yesterday it has arranged a US$450 million loan to refinance borrowings and provide working capital. Chief financial officer John Witt said the seven-year, HK$3.5 billion equivalent syndicated loan facility with 19 international banks is 'competitively priced' and will 'increase significantly' the average term of the luxury hotel operator's bank debt. The four main banks responsible for arranging the facility are the Bank of Tokyo-Mitsubishi UFJ, HSBC, BNP Paribas and Standard Chartered Bank. The facility was 'substantially oversubscribed', according to Mandarin Oriental.' Extracted from 'Mandarin Oriental arranges loan', Business Times dated 5 September 2007.

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a)

Why   do   you   think   the   facility   had   to   be   a   'syndicated   loan'  rather than a direct loan from a single commercial bank? (4 marks)

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b)

What   is   meant   by   arranging   a   syndicated   loan   on   an  'underwritten   basis'?  Explain   if   this   would   have   posed   a  problem based on the facts provided. (4 marks)

*** End of Paper ***

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