8009 Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition Questions and Answers

The Board of Directors, but only if the Blue Ribbon Panel affirms the change

The Board of Directors and a majority of the Members

The Board of Directors alone

34 of all Members

Offer loans directly to the consumer

Compete directly with banks in selling mortgaged to would-be home owners

Repackage mortgage loans made by banks and sell them on to investors as asset backed securities

Buy mortgage-backed loans for banks and keep them all on their books, using them as collateral for the US government to borrow

Define the organization's definition of risk management as articulated by the Board in clear and uncertain terms

Include financial risk management, compliance and external reporting and, to the extent that resources allow, should exclude legal or accounting

Be independently staffed and report to an employee who is on the Executive Committee (Operating Committee) but who is NOT a business unit leader

Review continually the application of the Principles of Good Governance to the Risk Management Infrastructure, financial accounting and reporting infrastructure and the organization as a whole

Recapitalise Fannie Mae and Freddie Mac with US$2.4 billion of additional capital to ensure they weathered the risks associated with any future downturn in the housing markets

Provide grants of US$800 million to help home buyers with down-payment and closing costs

Allow risky, high-cost loans to be credited towards affordable housing goals

Provide tax credits of nearly US$2.4 billion over the next 5 years to investors and builders who developed affordable single-family housing in poor and distressed areas

II, III and IV only

I, II and IV only

All of the above

I and II only

Gives an accurate result in most cases

Captures portfolio effects but not tenor differences

Can easily reflect the impact of netting

Overstates exposure in most cases

Realized losses on short-term contracts against unrealized gains on the long-run contract

The final price of the underlying being higher than the initial price

The initial price of the underlying being higher than the final price

The short-term price of the underlying being higher than the long-run contract

Parliamentarian

Secretary

Vice Chair

Chair only

to buy puts and sell calls

to buy calls and sell puts

to sell puts and buy calls

to sell calls and buy puts

Lending to consumers and small businesses.

Deposit taking activities which generated net interest income.

The provision of fee based services to its customers.

Complex derivative trades based on volatility indices.

as being the market norm for similarly situated personnel in competitive organizations

using external references and benchmarks, and in a framework which is consistent with the type of risk-taking behavior expected of employees

using the risk reward profile for each business line in the organization

as commensurate with policies to attract and retain high income / revenue earners

Dynamic hedging

A stacked hedge

A differential hedge

Nothing because MG Refining & Marketing did not hedge its position

Large customer withdrawals despite the UK regulator and the UK Treasury giving assurances that the bank was solvent

Doubts arising about the viability of the business model which necessitated Bank of England intervention

A general lack of confidence in mortgage backed securities associated in large part with developments in the US sub-prime mortgage market, and doubts emerging about the viability of the Northern Rock business model

A depositor run on the bank, following doubts about the viability of the Northern Rock business model