CHAPTER 6

Question 1

The clearing system

Answer 1

The mechanism for obtaining payment for cheques

Question 2

What does the bank settle using the clearing system?

Answer 2

Cheques & Credit

Question 3

Bank settle debs with other bank and the balances are called…

Answer 3

Operational balances

Question 4

How long does it take for cheques to be cleared at Banker Clearing House

Answer 4

3 working days

Question 5

3 banking services

Answer 5

• Retail services
• Commercial services
• Investment services

Question 6

What happen when bank dishonours a cheque?

Answer 6

When paying bank has insufficient funds, it marks on the cheque the reason for the refusal to pay and post direct the cheque back to the receiving bank

Question 7

Retail banking services

Answer 7

• Credit card
• Investments
• Share dealing
• Loans
• Foreign currency
• Wealth management
• Travel/Pet insurance meow meoww

Question 8

Investment banking services

Answer 8

• Foreign currencies
• Commodities
• Derivatives

Question 9

Banker

Answer 9

• Put money & cheques received on a customer’s behalf into their account
• Take out all cheques and orders paid from the account by the customer
• Keep account (current a/c)

Question 10

Customer

Answer 10

You become a customer as soon as the bank opens an account for you in your name

OR

As soon as bank accepts their instructions and undertakes to provide a service

Question 11

4 Contractual Relationships

Answer 11

• Receivable/payable
• Bailor/bailee
• Principal/agent
• Mortgagor/mortgagee

Question 12

Receivable/Payable

Answer 12

• Deposit money
• Have overdraft

Question 13

Bailor (C) /Bailee (B)

Answer 13

• Bank offer a safe deposit service
• Must take reasonable care
• Redeliver to customer/other person (bailment)

Question 13

Principle (C) /Agent (B)

Answer 13

When principal doesn’t have sufficient specialist knowledge , agent acts for principle

Question 14

Mortgagor (C) /Mortgagee (B)

Answer 14

Customer ask bank to give a loan secured by charge/mortgage (sell-able if customer doesn’t pay the loan)

Question 15

The fiduciary relationship

Answer 15

Fiduciary relationships are formed when a beneficiary relies on the expertise of a fiduciary and is at the mercy of their control or discretion.

Question 16

The rights of a banker

Answer 16

• Making charges/commissions
• Using customers’ money
• Demanding repayment of overdrawn balance
• Processing a lien over securities

Question 17

Lien

Answer 17

A legal right to retain possession of another’s property to discharge a debt (sita)

Question 18

The duties of customer

Answer 18

• Ensuring fraud is not facilitated when drawing cheques (sign a blank cheque/send through post)
• Tell bank for any known forgeries
  -Indemnifying the bank when it acts on a customer’s behalf
• Indemnifying - secure against possible loss/damagei

Question 19

The duties of banker = The rights of customer

Answer 19

• Honour a customer’s cheque
• Receipt of customer’s funds
• Repayment on demand
• Comply with customer’s instructions
  -Provide a statement
• Confidentialitiy
• Advise of forgery
• Closure of accounts
• Care & skill

Question 20

4 recognised reasons to disclose a customer’s account

Answer 20

1) Required by law
- dealing with drug trafficking
2) Public duty to disclose
- customer trades with enemy
during war
3) Interest of the bank
- bank sues the customer to
recover what it is owed
4) Customer given
express/implied consent
- customer asks a 3rd party to
obtain a bankers reference

Question 21

What is NOT a customer duty?

Answer 21

• Keep records of the account
• Check the statements they get from the bank
• it is just a good business practise to monitor all bank accounts & bank reconcile

Question 22

Paying -in slip

Answer 22

• Business/individual wants to pay money into the bank
• Acts as a summary documents (total up the cash)

Question 23

Float

Answer 23

Money kept in the till at the end of the day so next day still got cash available to give change to customer

Question 24

Security procedure when banking cash

Answer 24

• Vary the time of the visit
• Vary the members of the staff who takes the money
• Send more than one person
• Employ a security firm
• Fill in the part of the paying-in slip which is retained by customer (LHS) so you have a record

Question 25

Procedures for banking cheques

Answer 25

Use front AND back of paying-in slip

Question 26

Details required on paying-in slip when banking cheques

Answer 26

1) Name of drawer/endorser
2) Amount of cheque
3) Total values of cheques banked
4) Number of cheques banked

Question 27

How can a cheque be dishonoured/returned ?

Answer 27

• Insufficient funds
• Stolen cheques & cheque guarantee cards
• Amount shown in words & figures do not match
• Cheques MORE than 6 months

Question 28

Procedures for banking debit & credit card transactions

Answer 28

When processed manually - list on a summary voucher

• Processing copies → sent to the bank
• Two copies of each voucher (inc. summary voucher) → kept with retailer

Question 29

Does card voucher processed through the banking system

Answer 29

Yes, the retailer pay the voucher into their bank a/c and the bank will present the voucher to card issuers for payment

Question 30

Does banking card transactions also use the paying-in slip

Answer 30

Yes, but also other documents ; summary voucher

Question 31

Summary voucher ??

Answer 31

• Consists of an original/top copy and 2 copies with carbon paper in between
• Processing copy : bottom copy (front) & bottom copy (back) - list the voucher

Question 32

Bank Mandate Form

Answer 32

Names & specimen signatures of individuals authorised to sign cheques supplied to a bank

Question 33

Pro Forma invoices

Answer 33

Provided by supplier where payment with order is required

• Also used for ‘sale/return’ transaction

Question 34

Retention of receipts

Answer 34

Minimum period of 6 months