CREDIT GOVERNANCE AND COMPLIANCE AUGUST 2022 PAST PAPER

WEDNESDAY: 3 August 2022. Afternoon paper. Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Do NOT write anything on this paper.

QUESTION ONE

1. With reference to cooperative societies, identify eight rules that apply when a member is guaranteeing another member for a loan. (8 marks)

2. Examine four objectives of Basel Accords. (8 marks)

3. Identify four restrictions on banking institutions while granting facilities to insiders on preferential terms. (4 marks)

(Total: 20 marks)

QUESTION TWO

1. Enumerate six consumer rights that are sought and protected. (6 marks)

2. Highlight four features of Shariah-compliant valid financial contracts. (4 marks)

3. Distinguish between liberal and strict credit policy. (4 marks)

Outline six circumstances when a credit manager would prefer a liberal credit policy. (6 marks)

(Total: 20 marks)

QUESTION THREE

1. Explain the following terms as used in the management of non-performing assets (NPAs) in lending institutions:

Impaired loan. (2 marks)

Credit loss ratio. (2 marks)

Nonperforming loans to total gross loans ratio. (2 marks)

2. Outline four issues addressed a microfinance (MFI) liquidity risk management plan. (4 marks)

3. Discuss three sources of ethical standards. (6 marks)

4. Examine four objectives of the Corporate Governance framework in banking. (4 marks)

(Total: 20 marks)

QUESTION FOUR

1. Regulators of financial institutions have policy implementation powers. Discuss four categories of such powers. (8 marks)

2. Explain three benefits of having the Central Bank serve as the supervisory agency of banks. (6 marks)

3. Describe six roles and responsibilities of a bank’s board credit committee (BCC). (6 marks)

(Total: 20 marks)

QUESTION FIVE

1. In respect to board independence, identify five categories of individuals whose presence on a financial institution board may be viewed as detrimental to the interest of shareholders. (5 marks)

2. Examine three types of credit portfolio concentration. (6 marks)

3. Enumerate five requirements for SACCO’s external borrowing and limits on loans. (5 marks)

4. Discuss four characteristics of corporate governance. (4 marks)

(Total: 20 marks)

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