WEDNESDAY: 7 December 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 the banking regulatory process, explain the role of the following:
Licensing. (2 marks)
Regulatory supervision. (2 marks)
2. Analyse FOUR roles of the risk management function. (8 marks)
3. Summarise FOUR benefits of credit policies and procedures. (8 marks)
(Total: 20 marks)
QUESTION TWO
1. Explain the term “ethical dilemma”. (2 marks)
Enumerate FOUR requirements for ethics and compliance programs. (4 marks)
2. Enumerate SIX duties of a secretary to the SACCO’s board of directors. (6 marks)
3. Describe FOUR requirements of know your customer (KYC) for microfinance institutions. (8 marks)
(Total: 20 marks)
QUESTION THREE
1. Explain the following terms:
Collateral haircut. (2 marks)
On-balance sheet netting. (2 marks)
Maturity mismatches. (2 marks)
2. Examine THREE criticisms of musharakah financing model. (6 marks)
3. With reference to the second pillar of Basel III, describe TWO principles for supervisory review. (4 marks)
4. Enumerate FOUR fiduciary responsibilities of an Agent within the context of “Principal Agent Relationships”. (4 marks)
(Total: 20 marks)
QUESTION FOUR
1. Outline THREE circumstances when a bank may disclose consumer information to a third party. (3 marks)
2. List FIVE forms of breaches to consumer protection by unregulated lending institutions. (5 marks)
3. State FOUR types of reckless and fraudulent lending in microfinance institutions. (4 marks)
Summarise FOUR risk mitigation strategies used by micro finance institutions. (8 marks)
(Total: 20 marks)
QUESTION FIVE
1. Examine THREE implications of credit portfolio at risk to an organisation. (6 marks)
2. Discuss THREE applications of Value at Risk (VaR) model. (6 marks)
3. Explain FOUR responsibilities of a shareholder. (8 marks)
(Total: 20 marks)
