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Examination Guide

THE CHARTERED INSURANCE INSTITUTE

RB1

Award in Retail Banking

RB1 – Retail banking services and conduct

Based on the 2015/2016 syllabus examined until 30 April 2016

Examination Guide

RB1 Examination Guide 2015/2016

RB1 – Retail banking services and conduct Based on the 2015/2016 syllabus examined until 30 April 2016 Contents Introduction to Examination Guide 3

RB1 Syllabus 7

Specimen Examination 11

Specimen Examination Answers and Learning Outcomes Covered 26

Published in January 2016 by: The Chartered Insurance Institute 42-48 High Road, South Woodford, London E18 2JP Telephone: 020 8989 8464 Fax: 020 8530 3052 Email: [email protected] © The Chartered Insurance Institute 2016

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mailto:[email protected]

Examination Guide


RB1 – Retail banking services and conduct Based on the 2015/2016 syllabus examined until 30 April 2016

Introduction

This examination guide has been produced by the Examinations Department at the Chartered Insurance Institute to assist students in their preparation for the RB1 examination. It contains a specimen examination with answer key. Ideally, students should have completed the majority of their studies before attempting the specimen examination. Students should allow themselves two hours to complete the examination. They should then review their performance to identify areas of weakness on which to concentrate the remainder of their study time. Although the specimen examination in this guide is typical of an RB1 examination, it should be noted that it is not possible to test every single aspect of the syllabus in any one particular examination. To prepare properly for the examination, candidates should make full use of the tuition options available and read as widely as possible to ensure that the whole syllabus has been covered. They should also endeavour to keep as up-to-date as possible with developments in the industry by reading the periodicals listed in the RB1 reading list, which is located on the syllabus in this examination guide and on the CII website at www.cii.co.uk.

Background Information

CII examination questions undergo a rigorous writing and editing process before reaching an examination. The questions are written to strict guidelines by practitioners with relevant technical knowledge and experience. Questions are very carefully worded to ensure that all the information required to answer the question is provided in a clear and concise manner. They are then edited by an independent panel of experienced practitioners who have been specifically trained to ensure that questions are technically correct, clear and unambiguous. As a final check, each examination is scrutinised by the Senior Examiner and a CII assessment expert. Occasionally a question will require amendment after the examination guide is first published. In such an event, the revised question will be published on the CII website: 1) Visit www.cii.co.uk/qualifications 2) Select the appropriate qualification 3) Select your unit on the right hand side of the page Candidates should also refer here for the latest information on changes to law and practice and when they will be examined.

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http://www.cii.co.uk/qualifications

Examination Guide


Syllabus

The RB1 syllabus is published on the CII website at www.cii.co.uk. Candidates should note that the examination is based on the syllabus, rather than on any particular tuition material. Of course, the CII tuition material will provide the vast majority of the information required to perform well in the examination, but the CII recommends that students consult other reference materials to supplement their studies.

Skill Specification

The skill level tested in each examination question is determined by the syllabus. Each learning outcome specifies the level of skill required of candidates and thus the level at which candidates may be tested. Learning outcomes for RB1 encompass the skill level of understand. Different skill levels lead to different types of question, examples of which follow. Understand - To answer questions based on understanding, the candidate must be able to link

pieces of information together in cause-and-effect relationships. Typically questions may ask ‘Why’. Questions set on an understand learning outcome can test either knowledge or understanding or both.

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Examination Guide


Examination Information

The method of assessment for the RB1 examination is 65 multiple choice questions (MCQs) and 2 case studies, each comprising 5 MCQs. 2 hours are allowed for this examination. The RB1 syllabus provided in this examination guide will be examined from 1 May 2015 to 30 April 2016. Candidates will be examined on the basis of English law and practice in the tax year 2014/2015 unless otherwise stated until 31 August 2015. The tax year 2015/2016 will be examined from 1 September 2015. The general rule is that the new tax year and changes arising from the Finance Act will be examined from 1 September each year. Other changes, not related to the Finance Act, will not be examined earlier than 3 months after they come into effect. RB1 examinations test the Financial Conduct Authority and Prudential Regulation Authority rules and regulations. When preparing for the examination, candidates should ensure that they are aware of what typically constitutes each type of product listed in the syllabus and ascertain whether the products with which they come into contact during the normal course of their work deviate from the norm, since questions in the examination test generic product knowledge. Section A consists of 65 multiple choice questions. A multiple choice question consists of a problem followed by four options, labelled A, B, C and D, from which the candidate is asked to choose the correct response. Each question will contain only one correct or best response to the problem posed. One mark is awarded for each correct response identified by the candidate. No mark is awarded if the candidate either chooses an incorrect response, chooses more than one response or fails to choose any response. No marks are deducted for candidates choosing an incorrect response. Section B contains two case studies each followed by five questions. Four options follow each question. The options are labelled A, B, C and D. Only one of these options will be correct or best. One mark is awarded for each correct response identified by the candidate. No mark is awarded if the candidate either chooses an incorrect response, chooses more than one response or fails to choose any response. No marks are deducted for candidates choosing an incorrect response. If you bring a calculator into the examination room, it must be a silent battery or solar-powered non-programmable calculator. The use of electronic equipment capable of being programmed to hold alphabetic or numerical data and/or formulae is prohibited. You may use a financial or scientific calculator, provided it meets these requirements. Candidates are permitted to make rough notes. Candidates are not permitted, under any circumstances, to remove any papers relating to the examination from the examination room.

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Examination Guide


Examination Technique: Multiple Choice Questions

The best approach to multiple choice examinations is to work methodically through the questions. The questions are worded very carefully to ensure that all the information required is presented in a concise and clear manner. It cannot be emphasised too strongly that understanding the precise meaning of the question is vital. If candidates miss a crucial point when reading the question it could result in choosing the wrong option. Candidates should read carefully through the question and all the options before attempting to answer. Candidates should pay particular attention to any words in the question which are emphasised in bold type, for example, maximum, minimum, main, most, normally and usually. Negative wording is further emphasised by the use of capital letters, for example NOT, CANNOT. Candidates should not spend too much time on any one question. If they cannot make up their mind, they should leave the question and come back to it later. When all of the questions have been answered, it is prudent to use any remaining time to go through each question again, carefully, to double-check that nothing has been missed. Altering just one incorrect response to a correct response could make the difference between passing and failing.

After the Examination

Rigorous checks are made to ensure the correctness of the results issued. A pre-defined quota of passes to be awarded does not exist. If all candidates achieve a score of at least the pass mark, then all candidates will be awarded a pass grade. Individual feedback on the candidate’s examination performance is automatically provided and will indicate the result achieved and, for each syllabus learning outcome, the percentage of questions in the examination that were answered correctly.

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Retail banking services and conductPurposeAt the end of this unit, candidates should understand the:

• the main types of retail banking customers;• key legislation and standards relating to retail banking;• main retail financial products and services;• the delivery of effective customer service.

Summary of learning outcomes Number of questionsin the examination*

1. Understand the main types of retail customer and the key differences 5between them.

2. Understand the range of different customer backgrounds, their 5different circumstances, needs and aspirations.

3. Understand relevant consumer sources of guidance and information. 5

4. Understand the financial services environment and its regulation. 9

5. Understand key legislation and standards relating to retail banking. 9

6. Understand the main retail financial products, services and delivery 10methods for retail banking customers.

7. Understand how retail banking accounts and payment systems 11operate.

8. Understand the key principles of lending to retail customers. 9

9. Understand the importance of ethics in retail banking. 2

10. Understand how to deliver effective customer service and treat 10 case study basedcustomers fairly. questions

*The test specification has an in-built element of flexibility. It is designed to be used as a guide for study and is not astatement of actual number of questions that will appear in every exam. However, the number of questions testing eachlearning outcome will generally be within the range plus or minus 2 of the number indicated.

Important notes• Method of assessment: 65 multiple choice questions (MCQs) and 2 case studies, each comprising 5

MCQs. 2 hours are allowed for this examination.• This syllabus will be examined from 1 May 2015 until 30 April 2016.• Candidates should refer to the CII website for the latest information on changes to law and practice

and when they will be examined:1. Visit www.cii.co.uk/qualifications2. Select the appropriate qualification3. Select your unit on the right hand side of the page

RB1Published April 2015© The Chartered Insurance Institute 2015

1. Understand the main types of retail 5. Understand key legislation andcustomer and the key differences standards relating to retail banking.

5.1 State the legal aspects of the customerbetween them.relationship.1.1 Describe the main elements of personal banking.

5.2 Describe the key elements of equality legislation.1.2 Describe the main elements of business banking.5.3 Describe the key elements of the Consumer Credit1.3 Describe the banking service for other non-

Acts.personal customers.5.4 Describe the key elements governing unfair

contract terms.2. Understand the range of different5.5 State the principles and rules of the Datacustomer backgrounds, their different

Protection Act.circumstances, needs and aspirations.5.6 State the principles and rules of the E and2.1 Explain the importance of customers’ financial Distance Selling Directive.capability.5.7 State the key elements of personal insolvency –2.2 Explain the customers’ typical life cycle. debt relief orders, individual voluntary

2.3 Explain the importance of customers’ different arrangements, bankruptcy.financial circumstances, financial objectives and 5.8 State the key elements of the advertisingattitudes to risk. standards authority code of practice, UK

2.4 Explain the importance of cultural, ethnic and payments administration guidelines, finance andreligious differences. leasing association code.

3. Understand relevant consumer 6. Understand the main retail financialsources of guidance and information. products, services and delivery

3.1 Explain the importance of and main sources of methods for retail banking customers.consumer protection. 6.1 State the main features of current, deposit and

3.2 Identify key sources of education and advice. savings accounts.6.2 State the features of term and structured4. Understand the financial services deposits.

environment and its regulation. 6.3 State the main features and uses of credit, debit,4.1 Explain the role and function of banks and other prepaid, and charge cards, and overdrafts.

lending institutions in society. 6.4 Explain the main features and uses of unsecured/4.2 Describe in outline the main tiers of regulation in personal loans.

UK financial services. 6.5 State the main features and uses of different4.3 Describe the role of the Bank of England, HM types of mortgage.

Treasury. 6.6 State the main forms of personal insurances or4.4 Describe the role of the Financial Conduct life assurance.

Authority. 6.7 State the features and benefits of pensions or4.5 Describe the role of the Competition and Markets investments.

Authority (CMA). 6.8 Describe telephone and internet payment4.6 Describe the fundamental aspects of regulation – services.

authorisation of firms, activities and individuals 6.9 Describe the main methods of delivering productswho are regulated. and services to retail banking customers.

4.7 Describe the scope and application of the FCAretail banking conduct of business (BCOBS). 7. Understand how retail banking

4.8 Describe the scope and application of the accounts and payment systemsPayment Services Regulations and Electronic operate.Money Regulations.

7.1 Describe the process of account opening andaccount transfers.

7.2 Describe the process for cancelling an account.7.3 Explain the different types of interest and perform

calculations of interest.7.4 Explain the fundamental concepts concerned with

negotiable instruments.7.5 Explain the main features and systems of cheque

payments.7.6 Explain the operation of clearing systems.7.7 Explain the operation of standing orders, direct

debits and customer credits.

2 of 4Published April 2015© The Chartered Insurance Institute 2015

8. Understand the key principles of Reading listlending to retail customers.

The following list provides details of various8.1 Describe the main short term and long term creditpublications which may assist you with your studies.products and their associated risks.Note: The examination will test the syllabus alone.8.2 Describe the main aspects of secured borrowing.

8.3 Describe the process of credit assessment and The reading list is provided for guidance only and iscredit limit management. not in itself the subject of the examination.

8.4 Describe the processes used for gathering The publications will help you keep up-to-date withinformation and assessing clients needs. developments and will provide a wider coverage of

8.5 State the role of credit reference agencies (CRAs). syllabus topics.8.6 State the features and benefits of early CII/PFS members can borrow most of the additional

repayment. study materials below from Knowledge Services.CII study texts can be consulted from within the8.7 Explain arrears and recoveries, including the rolelibrary.of debt collection and recovery firms.New materials are added frequently - for information

9. Understand the importance of ethics about new releases and lending service, please go towww.cii.co.uk/knowledge or emailin retail [email protected].

9.1 Describe in outline the important role retail banksplay in the economic system and in society.

CII study texts9.2 Describe the ethical responsibilities of retailRetail banking services and conduct. London: CII.banks arising from this role.Study text RB1.

10. Understand how to deliver effectiveBooks and ebookscustomer service and treat customers'Banking'. Chapter in The law and regulation of finance.fairly. Alastair Hudson. 2nd ed. London: Sweet & Maxwell,2013.10.1 Describe the main features of delivering customer

service in retail banking and financial services. Data protection for financial firms: a practical guide to10.2 Describe the importance of service quality, managing privacy and information risk. London: Risk

service standards and measurement in retail Books, 2009.banking.

'Financial services regulation'. Chapter in The law and10.3 Identify activities which help to retain customers regulation of finance. Alastair Hudson. 2nd ed. London:

and prevent switching. Sweet & Maxwell, 2013.10.4 Explain the processes of assessing customer Islamic banking and finance. Omar Masood, Mondherneeds, fulfilling customer needs and providing Bellahah. Newcastle upon Tyne: Cambridge Scholars

after sales care. Publishing, 2013.10.5 Describe how to deal with complaints effectively.

Reinventing financial services: what consumers expectfrom future banks and insurers. Roger Perevelli, Reggy deFeniks. Amsterdam: Pearson Edutcation, 2010.

The Oxford handbook on banking. 2nd ed. Allen N.Berger, et al. (eds.). Oxford: Oxford University Press,2012.

Journals and magazinesFinancial adviser. London: FT Business. Weekly. Alsoavailable online at www.ftadviser.com.

Financial solutions. London: CII. Six issues a year. Alsoavailable via www.thepfs.org/knowledge (CII/PFSmembers only).

Money marketing. London: Centaur Communications.Weekly. Also available online atwww.moneymarketing.co.uk.

Reference materialsDictionary of banking and finance. P H Collin. A&C Black,2005.*

Concise encyclopedia of insurance terms. Laurence S.Silver, et al. New York: Routledge, 2010.*


Lamont’s glossary: the definitive plain English moneyand investment dictionary. Barclay W Lamont. 10th ed.London: Taxbriefs, 2009. Also available online viawww.cii.co.uk/lamont (CII/PFS members only).

*Also available as an ebook through Discovery viawww.cii.co.uk/discovery (CII/PFS members only).

WebsitesBank of England – www.bankofengland.co.uk

Financial Conduct Authority – www.fca.org.uk

Money Advice Service – www.moneyadviceservice.org.uk

Money Saving Expert – www.moneysavingexpert.com

Examination guidesAn examination guide, which includes a specimen paper,is available to purchase via www.cii.co.uk.

If you have a current study text enrolment, the currentexamination guide is included and is accessible viaRevisionmate (www.revisionmate.com). Details of how toaccess Revisionmate are on the first page of your studytext.

It is recommended that you only study from the mostrecent versions of the examination guides.

Exam technique/study skillsThere are many modestly priced guides available inbookshops. You should choose one which suits yourrequirements.

The Insurance Institute of London holds a lecture onrevision techniques for CII exams approximately threetimes a year. The slides from their most recent lecturescan be found at www.cii.co.uk/knowledge/iilrevision(CII/PFS members only).


Examination Guide

SECTION A 1. When Jack and Daisy opened a joint bank account, it was agreed with the bank that either one

could sign a cheque. Jack has since declared himself bankrupt. What do the rules regarding the operation of this type of account therefore require?

A. Only Daisy’s signature is now acceptable on cheques drawn against this account. B. Only Daisy is permitted to make withdrawals from this account. C. This account must be frozen and Daisy should open a new account in her sole name. D. The funds in this account must be equally split between Jack and Daisy and placed in new

individual accounts.

2. A group of solicitors, established as a limited liability partnership, wish to open a business account

with a bank. What is the maximum number of partners, if any, that can be included under such a firm?

A. 5 partners. B. 10 partners. C. 20 partners. D. There is no maximum.

3. A firm of solicitors operates as a partnership and is legally obliged to have a second account for its

business purposes. This is likely to be because it A. allows senior staff to sign cheques in specified circumstances. B. has more than five partners. C. regularly holds client funds. D. regularly transfers funds internationally.

4. A netball club is an unincorporated association run by volunteers and has applied to open a

standard club bank account. The club has a committee of five members including a chairman, treasurer and secretary. Who will be held responsible by the bank for the management of this account?

A. The treasurer only. B. The chairman and the treasurer jointly. C. Two or more of the committee including at least one of the named positions. D. Any one or more of the committee as nominated by the club.

5. A small charity requires a bank account for its funds. What type of account is it likely to establish?

A. A business bank account. B. A personal bank account. C. The type of bank account set up by limited liability partnerships. D. The type of bank account set up by unlimited liability partnerships.

RB1 Examination Guide 2015/2016 11

Examination Guide

6. Under the report entitled Financial Capability: the Government’s Long-Term Approach, which group

of people are specifically targeted with the aim of improving their knowledge of personal finance matters?

A. Children and young people. B. Immigrants. C. Pre-retired and retired individuals. D. The unemployed.

7. What type of financial product is most likely to be required by someone falling into the empty

nesters category? A. Family protection. B. Investments. C. Long-term care. D. Pension drawdown.

8. What type of financial product is most likely to be required by a couple who are new parents?

A. A fixed-rate mortgage. B. Long-term care insurance. C. A lump-sum investment. D. A pension-based mortgage.

9. A customer has reduced the investment risk under his equity-related lump-sum plan by splitting his

money between several different funds. This type of approach is known as A. benchmarking. B. diversification. C. pound cost averaging. D. value investing.

10. How is the issue of interest payments for deposit-based investments dealt with under Sharia

banking? A. They are calculated by three independent scholars. B. They are capped at a maximum level. C. They are subject to a minimum level. D. They are not allowed.

11. Paul has £105,000 on deposit, solely in his name, with a high street bank. If the bank defaults, how

much of this will be protected under the Financial Services Compensation Scheme? A. £50,000 B. £85,000 C. £100,000 D. £105,000


Examination Guide

12. Keith and Ed both have complaints about financial products, but only Keith’s can be dealt with by

the Financial Ombudsman Service. This is because A. Keith acquired his from a building society whereas Ed acquired his from a bank. B. Keith is aged 42 whereas Ed is aged 68. C. Keith is complaining about charges whereas Ed is complaining about poor service. D. Keith received an endowment surrender value whereas Ed received company pension scheme

benefits.

13. A firm is unhappy about the investment product it bought from a bank and wishes to complain to

the Financial Ombudsman Service. The firm is only eligible to do this if it A. has an annual profit of less than €1,000,000. B. has an annual turnover of less than €2,000,000. C. operates in the financial services sector. D. was incorporated less than three years ago.

14. Which organisation provides a financial capability starter pack to aid consumers in money

management? A. Citizens Advice. B. Consumer Credit Counselling Service. C. Lending Standards Board. D. Money Advice Trust.

15. Len is visiting a website that takes customers through the various life cycle stages and provides

straightforward guidance on how to manage personal finances. This indicates that the website belongs to the

A. Citizens Advice. B. Financial Ombudsman Service. C. Financial Services Compensation Scheme. D. Money Advice Service.

16. If a building society is classed as a mutual business, this means that it is wholly owned by its

A. directors. B. members. C. reinsurers. D. shareholders.

17. The Financial Policy Committee is a subsidiary of the

A. Bank of England. B. Financial Conduct Authority. C. Money Advice Service. D. Prudential Regulation Authority.


Examination Guide

18. The three operational objectives of the Financial Conduct Authority are to protect consumers,

protect and enhance the integrity of the UK financial systems and to A. educate the public on financial matters. B. encourage the distribution of cost-effective products and services. C. liaise with other international regulators. D. promote competition in the interests of consumers.

19. In order to conceal the criminal origin of his funds, David transferred the proceeds from a bank

account into several unit trust holdings. This action is normally described as which stage in the money laundering process?

A. Integration. B. Layering. C. Phasing. D. Placement.

20. A bank is sending a final response letter to a customer in relation to a formal complaint. This letter

must include reference to which body? A. Citizens Advice. B. Financial Conduct Authority. C. Financial Ombudsman Service. D. Financial Services Compensation Scheme.

21. What type of financial organisation is prevented from charging interest above 3% per month?

A. Credit unions. B. Demutualised building societies. C. High street banks. D. Reinsurers.

22. Which body is currently responsible for ensuring that retail banks are financially sound?

A. Debt Management Office. B. Financial Conduct Authority. C. Financial Services Compensation Scheme. D. Prudential Regulation Authority.

23. What is one of the main objectives of the Consumer Credit Act?

A. Easy access to products. B. Protection of borrowers. C. Restricted interest rates. D. Transparent pricing regime.


Examination Guide


24. An organisation is signed up with the Payments Services Regulations 2009. This would normally protect consumers against the fraudulent use of which payment methods?

A. Banker’s drafts. B. Cheques. C. Credit and debit cards. D. Internet transfers.

25. Where a bank becomes suspicious about a customer’s transactions, it is legally obliged to report

the matter to the A. British Bankers’ Association. B. Financial Conduct Authority. C. National Crime Agency. D. Prudential Regulation Authority.

26. A small local branch of a bank is open five days a week. In accordance with the Equality Act 2010,

the bank only needs to provide wheelchair access if A. the number of active customers exceeds a threshold limit. B. the opening hours exceed a threshold limit. C. such a facility is deemed a reasonable adjustment. D. such a facility would cost a relatively small amount of money.

27. During discussions with a customer, a bank identified her age and the fact that she is both pregnant

and disabled. Which of these factors are classed as protected characteristics under the Equality Act 2010?

A. Age and disability only. B. Age and pregnancy only. C. Age, pregnancy and disability. D. Pregnancy and disability only.

28. A bank issues credit cards to its retail customers. Between what spend thresholds does the

Consumer Credit Act 1974 hold the bank jointly liable with the retailer if the customer experiences problems with the purchase?

A. £50 to £15,000. B. £100 to £25,000. C. £100 to £30,000. D. £250 to £50,000.

29. Under the Consumer Rights Act 2015, any attempt by a supplier to exclude or limit its liability is

deemed to be A. automatically against the interests of the consumer. B. either ineffective or subject to a test of reasonableness. C. either subject to a test of reasonableness or a trigger to render the contract void from outset. D. ineffective in all circumstances.

Examination Guide

30. A bank holds details of a customer’s race, state of health and salary. Under the Data Protection Act

1998, processing of which of these items of data requires the customer’s explicit consent? A. Race only. B. Race and state of health only. C. Race, state of health and salary. D. State of health only.

31. A customer bought a life assurance product from a bank via its website. Under the Distance

Marketing Directive, what cancellation period must be granted? A. 10 days. B. 15 days. C. 20 days. D. 30 days.

32. Ivan has got himself into financial difficulties with his bank overdraft and various credit card bills.

He may be eligible for a Debt Relief Order, but only if his total debts are below what threshold figure?

A. £5,000 B. £10,000 C. £15,000 D. £20,000

33. Which body was responsible for introducing the Chip and PIN initiative for debit cards?

A. British Bankers’ Association. B. Building Societies Association. C. London Clearing House. D. UK Payments Administration.

34. Tom’s two year, fixed rate, savings account with his bank has been closed after 18 months without

any withdrawal penalty. This is common practice because Tom has A. been made redundant. B. died. C. moved abroad. D. reached State pension age.

35. A higher-rate taxpayer placed £10,000 in a taxable notice account paying twice-yearly interest.

What rate of tax will the account provider deduct at source? A. 10% B. 20% C. 30% D. 40%


Examination Guide

36. What type of borrowing arrangement can best be described as revolving?

A. Car loan. B. Credit card. C. Home improvement loan. D. Mortgage advance.

37. Ralph has a current account under which an authorised overdraft facility is available. To satisfy

regulations, the published details of this facility must include reference to the A. alternative borrowing methods. B. Annual Percentage Rate (APR). C. Equivalent Annual Rate (EAR). D. Financial Ombudsman Service.

38. Nick has a three-year personal unsecured loan. What normally happens to the monthly payments

during this period? A. The capital element fluctuates but the interest element stays the same. B. The entire amount fluctuates. C. The entire amount stays the same. D. The interest element fluctuates but the capital element stays the same.

39. A client started a capital repayment mortgage in order to fund the purchase of a home in England.

As a consequence, the type of charge created over the title deeds of this property is normally described as

A. equitable. B. legal. C. statutory. D. variable.

40. John and Paul each have detached three-bedroom properties, correctly insured for the same

amount for buildings and contents cover. Neither property is in a flood zone, yet John’s insurance premium is significantly higher than Paul’s. This is likely to be because

A. John is 10 years older than Paul. B. John’s property is in a higher crime rate area than Paul’s. C. Paul has lived in his property for 5 years longer than John. D. Paul’s property has recently been redecorated.

41. What is the maximum proportion of a stakeholder pension fund that can be taken as a tax-free

lump sum at retirement? A. 10% B. 20% C. 25% D. 33%


Examination Guide

42. Maggie uses both her bank’s telephone banking service and an external ATM at her local branch.

What benefit is the telephone facility most likely to bring to Maggie, compared to using the ATM? A. Depositing substantial cash amounts. B. Obtaining a bank statement. C. Reporting the loss of a debit card on a bank holiday. D. Transferring funds between her current and savings accounts.

43. One of the security advantages of online banking is

A. that authorisation is normally required to conduct larger transactions. B. the requirement to remember complicated passwords. C. that it is only available during branch opening hours. D. less exposure to phishing.

44. In order to start a bank account in her own name, the two typically acceptable documents Amy

provided to the bank were an electricity bill and A. a driving licence. B. an employer’s letter. C. a National Health Service (NHS) card. D. a tax code notice.

45. What does the Banking Conduct of Business Sourcebook state regarding the timing for transferring

current accounts from one bank to another once all necessary documentation is received? A. It must be carried out within a maximum of 7 days. B. It must be carried out within a maximum of 14 days. C. It must complete the process within a reasonable duration. D. It must deliver a prompt and efficient service.

46. Three flatmates set up a bank account on a joint and several basis and after running up debts under

the account of £6,000, two of the flatmates completely disappeared. How much of this, if any, is the remaining flatmate liable for?

A. None. B. £2,000 C. £3,000 D. £6,000

47. Where the holder of a single-named bank account dies intestate, the funds will normally be paid to

the person classed as the A. administrator. B. executor. C. power of attorney. D. trustee.


Examination Guide

48. Where the holder of a bank account is subject to a bankruptcy order, the account balance can only

normally be paid out upon receipt of which document? A. Certificate of appointment. B. Deed of variation. C. Indemnity form. D. Resolution trust.

49. A bank has utilised its set-off rights in connection with a particular customer. This confirms that, in

relation to this customer, there are two or more A. different accounts. B. direct debits. C. signatories to the account. D. standing orders.

50. Tony has £30,000 in a deposit account paying interest at an annual rate of 1.6%, compounded

half-yearly. The amount of interest he will have earned after one year will be A. £480.00 B. £481.92 C. £482.89 D. £484.00

51. A cheque is best described as

A. a documentary credit. B. an exchangeable promise. C. a fiduciary bill. D. a negotiable instrument.

52. If a cheque has a general crossing on it, this means that

A. it must be presented to the drawer’s bank. B. it must be presented within three months of being drawn. C. its negotiability is restricted. D. its transferability is restricted.

53. Under the cheque clearing system, truncation specifically means that the cheque

A. cannot be transferred to a third party. B. is not treated as a bill of exchange. C. provides the drawee with access to funds from day one. D. stays at the collecting bank.


Examination Guide

54. Which type of payment CANNOT normally be accommodated under the Faster Payments Scheme?

A. A direct debit payment. B. A forward-dated one-off payment. C. A single immediate payment made via a phone instruction. D. A standing order payment.

55. Bob has made full use of an authorised overdraft of £600. What minimum period of notice, if any,

is the lender legally obliged to give if requesting repayment of this loan? A. None. B. 7 days. C. 14 days. D. 28 days.

56. Craig has a capital and interest mortgage and Neil has an ISA mortgage. One of the key advantages

that Craig will normally have over Neil relates to A. certainty. B. disability cover. C. maturity surplus. D. taxation.

57. Under Michael’s 25-year mortgage, the capital element of the total monthly payment will normally

be lower in year 3 than in year 10. What type of mortgage does he have? A. Endowment mortgage. B. ISA mortgage. C. Pension mortgage. D. Repayment mortgage.

58. When using the CAMPARI method of assessing a loan application, which CAMPARI element

indicates whether the loan is secured or unsecured? A. Amount. B. Insurance. C. Margin. D. Repayment.

59. One of the advantages of using behavioural scoring as a supplement to credit scoring during the

credit assessment process, is that it can A. bring the data more up to date. B. eliminate the default risk. C. reduce the overall data collection costs. D. remove the mispricing risk.


Examination Guide

60. A lender becomes aware that a loan applicant has several County Court Judgments against him.

This information is likely to have been obtained from A. behavioural scoring activities. B. credit reference agencies. C. debt recovery firms. D. identity checks.

61. A building society used the services of Equifax in connection with a mortgage application. The most

likely purpose of this action is to A. assess the borrower’s creditworthiness. B. check the borrower’s employment history. C. consider the borrower’s state of health. D. verify the borrower’s income details.

62. The likelihood of incurring a penalty when redeeming a mortgage early is significantly increased if

A. the borrower has an adverse credit record. B. the mortgage term is longer than 25 years. C. there is a significant volatility in market interest rates. D. there is an unexpired fixed-rate period.

63. Where a borrower’s case is passed from the lender’s collections team to its recovery team, what

key action normally takes place shortly afterwards? A. Cancellation of the account. B. Issue of a default notice. C. Offer of a refinancing package. D. Reassessment of creditworthiness.

64. A bank’s compliance with corporate social responsibility requirements is normally controlled by

A. industry-wide rules. B. international regulations. C. national laws. D. self-regulation.

65. A bank wishes to implement a new code of ethics. In order to maximise the effectiveness of this

action, the bank should A. obtain buy-in from its senior management. B. produce the code in accordance with the Financial Conduct Authority’s guidelines. C. register the code with an appropriate body. D. seek approval from its shareholders.


Examination Guide

SECTION B Ian works in a branch of a bank. On 1 May he received a complaint, in person, at the branch from Sue regarding the savings account held in the name of the charity for which she keeps the financial records.

The charity’s annual income last year was £550,000.

In addition to Sue, the charity employs four office staff, but has seven additional regular volunteers.

Sue’s complaint is that a £6,000 payment processed by Ian into the charity’s savings account has NOT been credited, causing loss of interest. Sue had to make several telephone calls and two personal visits to the branch over a period of four weeks, before the payment was recorded correctly. In addition, she complains that a particular member of staff, Polly, showed an uncaring and negative attitude.

Ian promises to check the charity’s status as an eligible complainant under regulatory criteria and responds to Sue’s request for information about referring her complaint to the Financial Ombudsman Service (FOS).

However, Ian informs Sue that he cannot investigate her complaint personally due to internal rules, but a full response will be sent to Sue within four weeks, despite his knowledge that the bank denies any liability.

Ian sees that Polly has recorded a comment that Sue became increasingly aggressive during their conversation. Sue has told Ian she is normally a calm person. In a follow up with Polly, Ian recognises that Polly has failed to show interest in Sue’s point of view.

66. With regard to Sue’s eligibility to complain under the regulator’s rules, Ian should inform her that

the A. account meets the standard criteria. B. charity’s annual turnover is too high. C. charity employs too many staff. D. type of account concerned falls outside the rules.

67. Ian’s statement to Sue regarding the investigation of her complaint will be correct if he

A. has only worked at this branch for the past three weeks. B. investigated a previous complaint from Sue regarding this account. C. is Polly’s line manager. D. processed the payment to which Sue refers.


Examination Guide

68. If the circumstances described are correct, when, if at all, should Sue first be able to refer her

situation to the FOS? A. Immediately. B. At the end of May. C. At the end of June. D. This case is unlikely to be suitable for referral to the FOS.

69. If the complaint was subsequently referred to the FOS, what is the maximum award that the FOS

can make? A. £85,000 only. B. £85,000 plus reasonable costs. C. £150,000 only. D. £150,000 plus reasonable costs.

70. In order to rectify the failing Polly demonstrated in her conversation with Sue, she should

A. have more confidence in her own beliefs and values. B. increase her level of focus on what the other person is saying. C. rehearse in advance how to focus on increasing and decreasing the pace of the conversation. D. selectively delete areas of conversations where an aggressive tone is exhibited.


Examination Guide

A bank has suffered from an increase in staff turnover in recent years. The management team have therefore introduced a number of initiatives which they hope will reverse this trend. These are

- Conducting staff satisfaction surveys.

- A transaction analysis programme linked to reward systems.

Part of the bank’s programme has also focused on the reasons for customers switching, in order to retain existing customers and to attract new ones from competitors. The overall aim has been to improve quality of service.

Emma has been working in the back office of the bank. She is presenting a report to her line manager that illustrates the effective separation of production in the back office with purchases handled in the front office by customer facing staff.

71. Emma’s report will particularly illustrate the point that

A. customers will be able to use product and service information in a timeframe that suits them. B. customers will find it easier to purchase complex products tailored to their needs from the

comfort of their homes. C. the bank can ensure that customers receive information about a wider range of products and

services than is available in branches. D. the bank can more easily judge when it is appropriate to release information on new products

and services.

72. The survey results are most likely to demonstrate how

A. back-office functions can best support customer-facing staff in improving service levels. B. customer-facing staff can best be rewarded for improvements in delivering service quality. C. documented service standards can become the basis for a positive quality service culture. D. senior management can obtain buy-in to make customer service improvements within the bank.

73. If successful in reversing the staff turnover trend, it can reasonably be expected that the bank will

observe improved A. competitive focus across all distribution channels and more targeted marketing campaigns. B. effectiveness of barriers to switching and customer brand awareness. C. employee brand awareness leading to more effective cross-selling. D. employee job satisfaction leading to better customer relationships.

74. The analysis programme recently implemented will enable the bank to

A. adapt products and services to better meet customer needs based on employee feedback. B. identify poor-performing services and streamline future provisions. C. identify top-performing customer-focused staff and allocate appropriate bonus payments. D. prioritise sales of high-profit products and incentivise customer-facing staff accordingly.


Examination Guide

75. With regard to customer switching, the bank’s specific focus could reasonably be expected to

A. establish discussions with customers about service issues prior to making a switching decision. B. generate a positive switch trend to the bank. C. minimise involuntary switching. D. reinforce potential new customers’ negative views of the poor service currently received.


Examination Guide

Specimen Examination Answers and Learning Outcomes Covered

Question Answer Learning Outcome Question Answer Learning

Outcome Question Answer Learning Outcome

STANDARD FORMAT SCENARIO FORMAT Learning Outcome 1 Learning Outcome 6 Learning Outcome 10 1 C 1.1 34 B 6.1 66 A 10.5 2 D 1.2 35 B 6.2 67 D 10.5 3 C 1.2 36 B 6.3 68 B 10.5 4 D 1.3 37 C 6.3 69 D 10.5 5 A 1.3 38 C 6.4 70 B 10.2 5 Questions 39 B 6.5 71 A 10.4 40 B 6.6 72 A 10.2 Learning Outcome 2 41 C 6.7 73 D 10.3 6 A 2.1 42 C 6.8 74 C 10.4 7 B 2.2 43 A 6.9 75 B 10.3 8 A 2.2 10 Questions 10 Questions 9 B 2.3

10 D 2.4 Learning Outcome 7 5 Questions 44 A 7.1 45 A 7.1 Learning Outcome 3 46 D 7.1 11 B 3.1 47 A 7.2 12 D 3.1 48 A 7.2 13 B 3.1 49 A 7.2 14 A 3.2 50 B 7.3 15 D 3.2 51 D 7.4 5 Questions 52 C 7.5 53 D 7.6 Learning Outcome 4 54 A 7.7 16 B 4.1 11 Questions 17 A 4.3 18 D 4.4 Learning Outcome 8 19 B 4.6 55 A 8.1 20 C 4.7 56 A 8.2 21 A 4.1 57 D 8.2 22 D 4.2 58 B 8.3 23 B 4.5 59 A 8.4 24 C 4.8 60 B 8.5 9 Questions 61 A 8.5 62 D 8.6 Learning Outcome 5 63 B 8.7 25 C 5.1 9 Questions 26 C 5.2 27 C 5.2 Learning Outcome 9 28 C 5.3 64 D 9.1 29 B 5.4 65 A 9.2 30 B 5.5 2 Questions 31 D 5.6

32 C 5.7 33 D 5.8 9 Questions RB1 Examination Guide 2015/2016 26

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