International Banking Practices Flashcards
7 cards from real CBP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 International Banking Practices flashcards as text
Which of the following BEST describes a Nostro account?
Answer: An account a US bank holds at a foreign bank in the foreign currency
A Nostro account ('our account with you') is the account a domestic bank maintains at a foreign correspondent bank, denominated in the foreign currency.
Under Basel III's Liquidity Coverage Ratio (LCR), banks must hold sufficient High-Quality Liquid Assets (HQLA) to survive a stress scenario of at least:
Answer: 30 days
The LCR requires banks to maintain an HQLA buffer adequate to cover net cash outflows over a 30-day stressed period.
An American bank makes a loan to a Brazilian company denominated in US dollars. The company's revenues are in Brazilian reais. This exposes the bank PRIMARILY to:
Answer: Credit risk amplified by currency mismatch
When a borrower earns in local currency but owes in foreign currency, depreciation of the local currency increases the effective debt burden, amplifying the bank's credit risk.
Which agreement framework governs most bilateral over-the-counter (OTC) derivatives transactions between banks internationally?
Answer: ISDA Master Agreement
The ISDA Master Agreement, published by the International Swaps and Derivatives Association, is the standard legal framework for OTC derivatives, including close-out netting provisions.
A bank discovers that a long-standing corporate customer is routing funds through shell companies in multiple jurisdictions with no apparent business purpose. Under the Bank Secrecy Act, the bank MUST:
Answer: File a Suspicious Activity Report (SAR) within 30 days of detection
Under FinCEN rules implementing the BSA, banks must file a SAR within 30 calendar days of detecting suspicious activity, without tipping off the subject.
The Net Stable Funding Ratio (NSFR), introduced under Basel III, is designed to address:
Answer: Structural long-term funding mismatches over a one-year horizon
The NSFR requires banks to fund long-term, illiquid assets with stable funding sources over a one-year horizon, complementing the LCR's 30-day focus.
A standby letter of credit (SBLC) differs from a commercial letter of credit in that an SBLC:
Answer: Is drawn upon only when the applicant fails to perform an underlying obligation
An SBLC functions as a guarantee of last resort — it is drawn only if the applicant defaults, whereas a commercial LC is the primary payment mechanism in a trade transaction.