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 foreign exchange risk exposure arises from translating the financial statements of a foreign subsidiary into the parent company's reporting currency?
Answer: Translation (accounting) exposure
Translation exposure is a balance-sheet risk that results from converting foreign currency-denominated assets and liabilities into the parent's home currency for consolidated reporting.
Under the OECD Model Tax Convention, the primary right to tax business profits of a foreign enterprise generally rests with:
Answer: The country where the enterprise has a permanent establishment
Article 7 of the OECD Model Convention grants the right to tax business profits only to the extent those profits are attributable to a permanent establishment (PE) in that country.
A foreign bank wishing to accept deposits from US retail customers via a US branch is REQUIRED to obtain a charter or license from:
Answer: Either the OCC (federal charter) or a state banking authority
Foreign bank branches accepting retail deposits must be licensed either by the OCC as a federal branch or by a state banking regulator, and must be FDIC-insured.
When a US exporter sells goods to a European buyer on open account terms with 90-day payment, the exporter can mitigate the payment risk most effectively by using:
Answer: Export credit insurance or a bank guarantee
Export credit insurance (e.g., from EXIM Bank or private insurers) or a bank guarantee protects the seller against non-payment risk while preserving the open account payment terms the buyer prefers.
The primary function of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is to:
Answer: Provide a secure, standardized messaging network for financial institutions
SWIFT provides the messaging infrastructure — it transmits payment instructions but does not hold funds, clear, or settle transactions itself.
A bank's country risk assessment would MOST directly consider which of the following factors?
Answer: Political stability, balance of payments, and sovereign debt profile of the borrower's home country
Country risk evaluates the likelihood that political or economic conditions in a borrower's home country will impair the borrower's ability to transfer funds internationally or service foreign currency debt.
In the context of trade finance, 'aval' on a bill of exchange refers to:
Answer: A bank's guarantee of payment co-signed on the instrument itself
An aval is a per aval guarantee written directly on a bill of exchange or promissory note by a bank, making the bank jointly and severally liable for payment.