Elements Of Banking Question Paper

Elements Of Banking

Course:Diploma In Management (Management)

Exam Year:2007

KENYA NATIONAL EXAMINATIONS COUNCIL
DIPLOMA IN MANAGEMENT PART 1
ELEMENTS OF BANKING
INSTRUCTIONS TO CANDIDATES
Answer any FIVE of the SEVEN questions.
All questions carry equal marks.
Show all your working.
This paper consists of 3 printed pages.
Candidates should check the question paper to ascertain that all the pages are printed as indicated and no questions are missing.
1. (a) Highlight the advantages of electronic banking to:
(i) the bank; (5 marks)
(ii) the customer.(5 marks)
(b) Explain the ways in which high interest rates affect the ability of money to perform its functions.(10 marks)

2.(a) State five ways in which the Bills of Exchange Act Cap 27 permits a holder of a cheque to alter the crossing thereof.(10 marks)
(b) Explain five methods that the Central Bank of Kenya may use to restrict commercial bank lending.(10 marks)

3.(a) A week ago you received instructions from your customer, Christhopher Chege, stopping one of his cheques. He claimed that he had misplaced the cheque and that he intended to issue a replacement to the payee.

Eventually, the cheque was presented through clearing. The cheque bore no crossing but at the back it carried a signature unknown to you. You followed your customer's instructions and returned the cheque with remarks "cheque countermanded by drawer".

This morning, by appointment, Christhopher Chege calls into your office with a letter he has received from Wakili & Wakili Advocates stating that they intend to take legal action to recover money that their client had given to the payee against the cheque. This is on the basis that client is a holder in due course. Mr Chege does not understand all these and he requests for your advice.
Giving reasons, explain whether or not Mr Chege could have a right to the funds.(12 marks)
(b) Explain the relationship between the role of the goldsmiths and that of the present day commercial banks.(8 marks)

4.(a) Highlight five tasks performed by the Central Bank of Kenya as a banker to commercial banks.(8 marks)
(b) Your customer, Mr Nathaniel Mjomba, wishes to make the following payments:
(i) regular monthly payments of inconsistent amount;
(ii) motor car fuel expenses.
In each case, recommend to Mr Mjomba the most convenient method of payment that your bank can offer stating the benefits of each to the customer.(12 marks)

5.(a) Highlight five services that may be offered by a trustee department of a commercial bank.(8 marks)
(b) Describe the ethical standards that bank employees should observe in discharging their professional duties.(12 marks)

6.(a) Highlight the risks faced by a lending bank in an open-ended bridging loan.(12 marks)
(b) Explain four methods of settlement in international trade through the banking system.(8 marks)

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