THE INSTITUTE OF BANKERS, BANGLADESH (IBB)

97th Banking Professional Examination, 2023

JAIBB
Monetary and Financial System (MAFS)
Time-3 hours
Full marks 100
Pass marks-45

[N.B. The figures in the right margin indicate full marks. Answer any five questions.]

Marks
1. (a) Do you think that operational independence of central bank is more important than institutional 5
independence? Give your arguments.
(b) How central bank acts as a "Lender of Last Resort"? Discuss briefly. 4
(c) Distinguish between 'Macroprudential' and 'Microprudential' regulations. 5
(d) What are the components of CAMELS? How does CAMELS rating help to improve overall 2+4=6
performance of a bank? Discuss.
2. (a) What is money supply? Does money supply include interbank deposits? Why? 2+2=4
(b) What are the monetary aggregates? How narrow money (M1) is different from broad money 2+2=4
(M2)?
(c) From the following list of items, indicate if they are in ML, M2 or neither: 1*6=6
Serial Items Amount
No. (BDT)
1. Line of credit with your bank 50,000
2. Money in your pocket 10,000
3. Money in your checking account 20,000
4. An FDR issued from your bank 50,000
5. Value of traveler’s check in you have. 1,500
6. A Sanchay Patra is purchased from Bangladesh bank 1,00,000

(d) Calculate the amount of the time deposits when narrow money of around BDT 450 crore is 30% 3+3=6
of broad money as on 30 June 2023. Calculate the amount of currency outside banks if demand
deposit is almost 60% of M1 on the same date.
3. (a) Does the money allow people to transfer purchasing power from the present to the 5
future? Explain.
(b) Why do people have a demand for money? Which motive of demand for money is influenced by 3+2=5
income and which by rate of interest?
(c) How banks do create money? If central bank sells Government Treasury Bond through auctions, 3+2=5
what will be the impact of this auction on money supply?
(d) Can crypto currency Bitcoin be an alternative to cash currency? Discuss. 5
4. (a) What challenges banks are facing in implementing electronic payments in Bangladesh? Describe 4
briefly.
(b) What is the advantage of Real Time Gross Settlement (RTGS) over the Bangladesh Electronic 4
Fund Transfer Network (BEFTN)? Explain in brief.
(c) Which payment method, i.e., cash, debit/credit cards, MES, EFT, QR, is the most dominating 7
and which one is the fastest growing in Bangladesh? Explain briefly.
(d) Is credit card money? Please give your arguments. 5
5. (a) An investor purchased a 6 months (182days) T-bill at a price of BDT 9500 which face value is 6
BDT 10,000. If the T-bill is HTM, calculate its yield.
(b) What is amortized yield of the bill in part (n) if it is sold after holding for 100 days at a price of 6
BDT 9,800?
(c) If a bank purchase 100 units of 90 days commercial papers with a par value of BDT 8
10,000 at a price of BDT 9,850; what is the yield of this investment? What is the total. amount
of profit in BDT?
6. (a) "All forms of money are financial instruments but all financial instruments are not money". 5
Explain
(b) Distinguish between 'fixed' and 'floating' interest rate. Recently Bangladesh Bank has introduced 5+5=10
a market-based interest rate, SMART rate plus maximum mark-up of 3% replacing maximum
9% interest rate on loans and advances. Give your opinion on this policy change.
(c) Define 'real' and 'nominal' interest rate in brief. Is real interest rate can be negative at the time of 5
stagflation? Explain with example.
7. (a) What are the key principles of Islamic banking? What are the conceptual differences of 'interest' 3+4=7
and 'riba'?
(b) What are the investment products of Islamic banks? Explain the key features of the 4+4=8
investment products of Islamic banks in Bangladesh.
(c) State and explain the fundamental sources of Shariah Law. 5
8. (a) What is Foreign Direct Investment (FDI)? How FDI can help to boost up the economy of 2+6=8
Bangladesh?
(b) What are the compnants of Balance of Payment (BoP)? A country's BoP is always balanced. 3+4=7
Discuss.
(c) From the following information compute the financial account balance: 5
Items Amount in BDT
Net Foreign Direct Investment 66,000
Net Portfolio Investment. (40,000)
Net wage earners remittance 50,000
Asset Funding 30,000
[
Errors and Omissions 10,000
9. (a) An important way in which a central bank decreases the money supply by selling bonds to the 10
public. Using the supply and demand analysis for bonds, show what effect this action has on
interest rates.
(b) On 01 January 2023, company. An issues Tk. 1000 par value with annual coupon payment of 5
Tk. 75 and bond will be matured on 31 December 2025. If after the issuance of the bond the
yield to maturity (YTM) of bond stands 9%, calculate the current market price of the bond:
(c) What is the selling price of a stock if its next year dividends are expected to be Tk. 3.5 while 5
the discount rate is estimated, to be 9% and the dividends are projected to increase at 5% per
year indefinitely (Please use the Gordon growth model)?
10. Please the write short notes on any five of the following topics: 5*4=20
a) Future Market and Forward Market;
b) Sukuk and Takaful;
c) CRR and SLR;
d) Free and Managed Float Exchange Rate System;
e) Repo and Reverse Repo;
f) HTM and HFT Securities;
g) Regulatory forbearance and Moral Suasion;
h) Financial Interrelation Ratio (FIR) and Financial Intermediation Ratio (FIMR).
 TIIE INSTITUT OF BANKERS, BANGLADESH (IBB)
96th anking Professio11al Examination, 2023
JAIBD .
Monetary and Financial System (MAFS)
Subject Code:
Time-3 hours 1 0 1
Full marks-100
Pass marks-45
/N.B. The figures in the right margin indicate full marks. Answer any five questions.]
1.
a) How money supply is measured? Compare and contrast M1 and M2 money 1+4=5
supply.
b) From the following information, measure the monetary aggregates of M1 and M2: 5
Items Value as of December 2022 (billion taka)
Currency in circulation 2923.60
Currency in tills of DMBS 241.80
Demand deposits 1837.40
Other checkable deposits 6.20
Time deposits 13054.30
Money market mutual fund 10.50
c) Clarify two determinants of money supply. Can monetary authority/central 4+6=10
bank directly control money supply? Explain.
2.
a) Do you think the Bangladesh Bank is considered as supreme monetary and 10
banking authority? Discuss with its mandates under Bangladesh Bank Order, 1972.
b) What is financial stability? How central bank acts as Lender Of Last Resort 4+6=10
(LOLR) to maintain financial stability?
3.
a) Distinguish between 'debit card' and 'credit card'. Describe pros and 5+5=10
cons of using a cheque as a payment method.
b) What is QR code? Recently Bangladesh Bank introduced an interoperable 1+4=5
Bangla QR to popularize payments for goods and services using various payment
instruments, including bank accounts, debit, credit or prepaid cards, MFS and e-wallet
accounts. Do you think that we are heading towards a cashless society in the near
future? Give your opinion.
c) If you use a 'credit card' to purchase goods or services on the internet, does 5
this affect the M1 or M2 money supply or both or neither? Explain.
4.
a) What are the constituents of monetary system? Briefly discuss the 2+8=10
commercial banks role in the process of the money supply.
[Hint: T-account or formula and reserve requirement.]
b) What constitutes the monetary base? How does the central bank control 4+6=10
the monetary base?

5.
a) What is a financial system? Which components constitute a financial system? 2+8=10
b) Explain financial development in brief. How you can measure the 4+6=10
financial development of a country? Illustrate with 3 different methods.
6.
a) Using a supply and demand framework for bonds, show why interest 5+5=10
 ates are procyclical (rising when the economy is expanding and falling
during recessions). Show the effect on interest rates when the risk of loss of
bonds rise under the same framework.
b) What is the discount yield for a five year bond that was purchased for 5
Tk. 60 and has a face value of Tk. 100.
c) The average industry PE ratio for hotels similar to Shangri-La hotel Chain is 37. 5
What is the current price of Shangri-La's earnings per share (EPS) are projected to be
Tk. 1.16?
7.
a) Explain how Banking Financial Institutions (BFIs) and Non-bank 10
Financial Institutions (NBFIS) serve as financial intermediaries.
b) Outline the functions and growth of NBFIs in Bangladesh. 10
8.
a) At the current state of globalization, every country is internationally connected. 5
What do you know about global integration of the financial market?
b) What is the role of the foreign exchange market in the global financial market? 5
c) Define 'balance on current account' and ‘basic balance' in international balance 5
of payments.
d) Which of the following transactions would increase a current deficit? 5
I. An increase in foreign travels
II. More long term borrowing by government
III. A decrease in export
IV. A decrease in import
V. An increase in remittance abroad.
9.
a) Briefly explain the basic fundamentals of Shari'ah Law? List major 3+4=7
principles that must be followed while developing Shari'ah complaint products.
b) List Shari'ah complaint Islamic banking products outlining Shari'ah principles. 5
c) What do you know about Shari'ah governance in an Islamic financial 8
institution? Outline the key players and their role in a 'Shari'ah governance framework'.
10. Please write short notes on any five of following topics: 4*5=20
a) Monetary Policy Statement (MPS)
b) Trust-cum-settlement Account
c) Sustainable Finance
d) Manage Float Exchange Rate System
e) OTC market
f) MRA
g) Mobile Financial Service (MFS)
h) E-money.