Level 2 Award in Business Banking Understanding the principles of business banking

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1 Oxford Cambridge and RSA SAMPLE ASSESSMENT MATERIAL Level 2 Award in Business Banking Understanding the principles of business banking Date Morning/Afternoon Time Allowed: 1 hour INSTRUCTIONS Use black ink. Complete the boxes above with your name, centre number and candidate number. Answer all the questions. Do not write in the bar codes. INFORMATION The total mark for this paper is 50. The marks for each question are shown in brackets [ ]. This document consists of 20 pages. OCR 2014 [ / / ] Turn over

2 2 Answer all questions. 1 The practice of offering banking, insurance and assurance services through a single provider is known as Investment banking Merchant banking Bancassurance Bancinsurance 2 Customers who deposit money are the bank's creditors debtors assets liabilities 3 Customers to whom the bank lends money are the bank's creditors debtors assets liabilities OCR 2014 SPECIMEN

3 4 A bank s primary duty is to administer customers accounts 3 effectively, efficiently and quickly reliably, securely and confidentially profitably at the lowest possible cost sensitively, confidentially and positively 5 The main advantage to banks of segmenting their business customers is the lowest cost delivery channels for products and services the ability to cross-sell and up-sell more profitable bank products the tailoring of products and services to customers demonstrating similar attributes the concentration of specialist knowledge allowing more experienced staff members to deal with more complex cases 6 Small Medium Enterprise (SME) status is determined by using three criteria: annual turnover, annual balance sheet value and employee headcount levels of profitability the bank s own segmentation policy industry and ownership structure OCR 2014 SPECIMEN Turn over

4 4 7 A banking relationship manager is an industry specialist with financial expertise of the bank s product range knowledgeable and experienced having worked in banking for many years a dedicated generalist who understands the importance of service quality able to generate the most profitable business for the bank 8 Which of the following is the main disadvantage of trading as a sole trader? A sole trader must produce annual audited accounts promptly A sole trader has to pay corporation tax on the profits they earn A sole trader is not covered by The Lending Code A sole trader is liable for the debts of the business 9 A business trading as Goulding, Abley & Co is a sole trader partnership limited liability partnership private limited company OCR 2014 SPECIMEN

5 10 A limited company must file its statutory accounts with the Registrar of Companies 5 quarterly annually on 5 April nine months and one day after the business' year end 11 Which type of business can be quoted on the stock exchange? A limited liability partnership A public limited company A private limited company Any enterprise that has limited liability 12 Overdraft facilities are subject to lending covenants always credit scored repayable on demand committed facilities reviewed annually OCR 2014 SPECIMEN Turn over

6 6 13 Factoring companies provide funds against stocks of finished goods a confidential sales receivable financing facility protection against bad debts a debt collection and a sales ledger management service 14 Finance leasing means that the business always owns the asset outright does not own the asset does not have to show the asset on its statement of financial position does have to show the asset on its statement of comprehensive income 15 The drawee of a cheque is the person who signs the cheque the person to whom the cheque is made out the person to whom the cheque has been endorsed the bank OCR 2014 SPECIMEN

7 16 The Faster Payments Service is used to make automated payments that reach the beneficiary's account 7 within two hours within three hours within 24 hours within 48 hours 17 Large employers (250 or more employees) must make National Insurance Contribution (NIC) payments to Her Majesty s Revenue and Customs (HMRC) electronically no later than the 19th of the month electronically no later than the 22nd of the month by post no later than the 19th of the month by post no later than the 22nd of the month 18 The deadline for filing a self-assessment income tax return online is 31 January 31 March 31 July 31 October OCR 2014 SPECIMEN Turn over

8 19 Which one of the following is not paid by a business? 8 Corporation Tax Capital Gains Tax National Insurance contributions Inheritance Tax 20 Customer contact centres are always based overseas to take advantage of lower labour costs the most cost-effective way of dealing with customers centralised service units that deal with customers mainly by telephone specialist departments designed to reduce the numbers of branches banks need to have 21 What is the greatest risk with Internet banking for banks and their customers? Not everyone has access to the Internet Banks can lose touch with the customer Security problems and the possibility of fraud and theft It can circumvent a bank s money laundering procedures OCR 2014 SPECIMEN

9 22 What is the current maximum limit for agreements regulated under the Consumer Credit Act 2006 for consumers? 9 25, , ,000 Unlimited 23 Compliance with The Lending Code is independently monitored and enforced by the Basel Accords the Lending Standards Board the Financial Conduct Authority (FCA) the British Bankers Association (BBA) 24 Which regulatory body identifies, monitors and acts to remove or reduce any systemic risks which threaten the banking system in the UK? Financial Policy Committee (FPC) Financial Conduct Authority (FCA) Prudential Regulation Authority (PRA) Bank of England OCR 2014 SPECIMEN Turn over

10 25 Under the Data Protection Act 1998, all data controllers and computer bureaux must register with 10 the Financial Conduct Authority (FCA) the Data Protection Principal the Information Commissioner the Data Collection Reporting Officer 26 Under the Banking Conduct of Business Standards (BCOBS), customers must be given prior notice of any disadvantageous interest rate changes in respect of current and instant access accounts of at least seven days of at least one month of at least two months of at least three months 27 The Markets in Financial Instruments Directive (MiFID) sets out the detailed capital requirements of banks and financial institutions the consumer licensing requirements of insurance firms the governance and conduct of investment firms the governance and conduct of insurance and assurance firms OCR 2014 SPECIMEN

11 11 28 Cross-firing occurs when cheques are drawn on one account and presented for payment on an associated account where proceeds are paid away against uncleared effects the original source of laundered money is concealed from the authorities there is a legal impediment preventing the bank from honouring a cheque unless it is correctly made out and endorsed by the drawee cheques are made out for round amounts for payment by the bank which are subsequently dishonoured 29 Overtrading happens when a business sells more than it can produce a business expands its operations to new foreign geographical territories a business makes a loss a business expands too rapidly in relation to the capital resources it has available. 30 Cash-flow problems can be identified by the statement of cash flows the statement of financial position the statement of comprehensive income reviewing bank account conduct and monthly range balances. OCR 2014 SPECIMEN Turn over

12 31 When a bankruptcy order has been made, all of the assets that the bankrupt owns are automatically vested to 12 the court the Official Receiver the Trustee in Bankruptcy the licensed insolvency practitioner 32 The primary objective of administration as an insolvency procedure is to rescue the company to preserve the rights of unsecured charge holders to enforce the security held by a secured lender to make a voluntary arrangement between the company and its creditors 33 Upon appointment, the administrator in an insolvency procedure must call a meeting of creditors within two weeks of the administration order take all the company's assets into their custody or control make a winding-up petition and appoint a Receiver to handle the company s affairs investigate the directors for wrongful trading OCR 2014 SPECIMEN

13 13 34 Specialist lending support teams are lending analysts specialising in certain industry sectors debt consolidation experts risk support teams which develop and manage rehabilitation, recovery or exit strategies corporate turnaround specialists such as forensic accountants 35 Which type of business can grant a debenture to a bank? A limited company A partnership A sole trader Any business 36 The Chartered Banker Professional Standards Board (CB:PSB) was established to develop a framework to analyse ethical dilemmas respond to complaints about the un-ethical behaviour of participants in the banking industry help build greater public confidence and trust in individuals, institutions and the banking industry develop and promote professional standards for bankers by providing continued professional development for its members OCR 2014 SPECIMEN Turn over

14 14 37 Corporate Social Responsibility (CSR) is how a business can have a positive impact on society can reduce its costs can build profitability into its activities can build sustainability into its activities 38 Codes of conduct prompting awareness of professional standards and ethics guarantee that bankers will act professionally and ethically guarantee that bankers will act ethically guarantee that bankers will act professionally cannot guarantee that bankers will act ethically 39 If an organisation has not been able to resolve a complaint by close of business the next business day after receipt of the complaint, it should send the complainant a prompt written acknowledgement setting out the timescale for the bank s final response providing details of how to refer the complaint to the Financial Services Ombudsman (FSO) providing details of the complaint and the compensation that will be paid if the complaint is upheld giving the name or the job title of the individual who is handling the complaint for the organisation, together with details of the organisation s internal complaint handling procedures OCR 2014 SPECIMEN

15 40 Financial services organisations must issue a final response to a complainant within hours 48 hours six weeks eight weeks 41 Any complaint sent to the Financial Ombudsman Service (FOS) must be made within one week of receiving a financial services organisation s final response six weeks of receiving a financial services organisation s final response eight weeks of receiving a financial services organisation s final response six months of receiving a financial services organisation s final response 42 If a consumer does not accept a decision made by the Financial Ombudsman Service (FOS), what option does the consumer have? Final arbitration by the Financial Conduct Authority (FCA) Take the case to court Seek compensation from the Financial Services Compensation Scheme (FSCS) The FOS judgment is final, the customer has no further recourse OCR 2014 SPECIMEN Turn over

16 16 43 When responding to a customer complaint, empathy is the ability to agree with the other person s feelings or interests to build rapport the ability to be self-assured and confident in a non-threatening manner the ability to be aware of, understand and appreciate the other person s thoughts and feelings the ability to act efficiently to achieve a resolution 44 What is the difference between customer satisfaction and customer loyalty? Customer satisfaction and customer loyalty are the same Customer satisfaction is a passive state; customer loyalty is the positive intention to remain as a customer Loyal customers buy more products and services from a bank than satisfied customers Loyal customers are more likely to be profitable for a bank than satisfied customers 45 Corporate governance is the term used to describe the ways in which organisations are directed and controlled and how their affairs are handled by the board of directors and the employees the shareholders and stakeholders the shareholders and board of directors the board of directors and the auditors OCR 2014 SPECIMEN

17 17 46 The Lending Code is a self-regulatory code that sets out the requirements to pay due regard to the interests of customers and to treat them fairly the financial and reporting requirements when dealing with customers who are in financial difficulties minimum standards of good practice that all subscribers must adhere to when dealing with personal customers and micro-enterprises Financial Conduct Authority s (FCA) requirements that subscribers comply with all current and regulatory rules and obligations when lending to customers 47 Which of the following is covered by The Lending Code? Card merchant services Hire purchase Invoice discounting Charge cards 48 An example of risk transfer is an insurance policy a joint venture buying the risk out-sourcing OCR 2014 SPECIMEN Turn over

18 49 Credit risk is when a bank becomes over reliant on the short-term money markets a bank fails to abide by The Lending Code a bank has insufficient capital adequacy a borrower defaults on a loan 50 Risk indicators are intelligent computer-based systems designed to eradicate risk metrics used to monitor identified risk exposures over time based upon the probability of default and the amount of security available when lending measures used to assess credit risk when adopting behavioural credit scoring systems END OF QUESTION PAPER OCR 2014 SPECIMEN

19 19 PLEASE DO NOT WRITE ON THIS PAGE OCR 2014 SPECIMEN

20 Oxford Cambridge and RSA Copyright Information: Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (OCR) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. OCR is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. OCR 2014 SPECIMEN

21 Oxford Cambridge and RSA SPECIMEN Sample Assessment Material OCR LEVEL 2 AWARD IN BUSINESS BANKING Understanding the principles of business banking MARK SCHEME Duration: 1 hour MAXIMUM MARK 50 This document consists of 5 pages

22 OCR Level 2 Award in Business Banking Mark Scheme SPECIMEN Question Answer Marks 1 Bancassurance 1 2 creditors 1 3 debtors 1 4 reliably, securely and confidentially 1 5 the concentration of specialist knowledge allowing more experienced staff members to deal with more complex cases 1 6 employee headcount 1 7 a dedicated generalist who understands the importance of service quality 1 8 A sole trader is liable for the debts of the business 1 9 a partnership 1 10 annually 1 11 a public limited company 1 12 repayable on demand 1 13 a debt collection and sale ledger management service 1 14 does not own the asset 1 15 the bank 1 OCR

23 OCR Level 2 Award in Business Banking Mark Scheme SPECIMEN Question Answer Marks 16 within two hours 1 17 electronically no later than the 22 nd of the month January 1 19 Inheritance tax 1 20 centralised service units that deal with customers mainly by telephone 1 21 security problems and the possibility of fraud and theft 1 22 Unlimited 1 23 the Lending Standards Board 1 24 the Financial Policy Committee (FPC) 1 25 Information Commissioner 1 26 of at least two months 1 27 the governance and conduct of investment firms cheques are drawn on one account and presented for payment on an associated account where proceeds are paid away against uncleared effects. a business expands too rapidly in relation to the capital resources it has available. 1 1 OCR

24 OCR Level 2 Award in Business Banking Mark Scheme SPECIMEN Question Answer Marks 30 reviewing bank account conduct and monthly range balances 1 31 the Trustee in Bankruptcy 1 32 to rescue the company 1 33 take all the company's assets into their custody or control 1 34 risk support teams who will develop and manage rehabilitation, recovery or exit strategies 1 35 A limited company 1 36 help build greater public confidence and trust in individuals, institutions and the banking industry 1 37 can have a positive impact on society 1 38 cannot guarantee that bankers will act ethically 1 39 giving the name or the job title of the individual who is handling the complaint for the organisation, together with details of the organisation s internal complaint handling procedures 1 40 eight weeks 1 41 six months of receiving a financial services organisation s final response 1 42 Take the case to court 1 OCR

25 OCR Level 2 Award in Business Banking Mark Scheme SPECIMEN Question Answer Marks the ability to be aware of, understanding and appreciate the other person s thoughts and feelings Customer satisfaction is a passive state; customer loyalty is the positive intention to remain as a customer the board of directors and the employees 1 46 minimum standards of good practice that all subscribers must adhere to when dealing with personal customers and micro-enterprises 1 47 Charge cards 1 48 an insurance policy 1 49 a borrower defaults on a loan 1 50 metrics used to monitor identified risk exposures over time 1 OCR