Accounting and Finance Marking Guide For Set 2

ACCOUNTING AND FINANCE MARKING GUIDE FOR SET 2
SECTION A: 25 MARKS
ANSWERS TO SUBSECTION 1: FINANCIAL MARKETS
1. C 2.A 3.A 4.B 5.C 6.B 7.C 8.B 9. C 10. A
ANSWERS TO SUBSECTION 2: DECENTRALISED FINANCIAL

SYSTEM
1=D,2=D,3=B,4=C,5=D,6=D,7=D,8=A,9=D,10=A
ANSWERS TO SUBSECTION 3: ISLAMIC FINANCE

1. C 2.B 3.D 4.A 5. D
SECTION C
STRATEGIC MARKETING MANAGEMENT IN BANKING MARKING
GUIDE 25 marks
Marking guide STRATEGIC MARKETING MANAGEMENT IN BANKING
1.
- Marketing participates in solving fundamental economic problems of the banking
business.
- Marketing managers can provide better resolution determining types of products

and services that banks provide to the market’s needs through activities such as
gathering information, researching customers’ demand s, learning products’
competitors, researching products’ using of individuals and enterprise
customers.....
- Marketing contributes greatly to improve the quality of products and services,

create prestigious image, and increase the competitiveness of banks.
- Marketing managers help banks to dissolve the harmonious relationship between
customer benefits, employees and banks.
2. Explain in relation to:

- Characteristics of products: Products and services of banks are invisible, the
production and consumption occur simultaneously, Products and services of
banks are also made in different spaces, forming the heterogeneity of time,
and implementation of conditional executions, products of banks are
increasingly diversified, range of new products and services are launched
drastically.
- Characteristics of clients
: Client component is extremely important in the existence and development
of banks.
- Characteristics of competition: Competition in banking sector becomes
drastic when the number of market participants increases and banking
product portfolio expand continously.
3. Basically, an effective SWOT analysis should include a succinct, interesting

and readable summary of the business’s internal and external factor s as well
as the trends affecting upon it. Therefore, the information included in the
SWOT analysis should be comprehensive, relevant and specific. Moreover,
the concentration level of the SWOT analysis must be as much as possible.
Companies may focus on the analysis at the customer segment level so that it
gives the whole picture for what companies needs to achieve with its
customers. In additions, strengths and weaknesses evaluation have to reflect
the position of companies in relation to competitors. In additons, a strong
point should be mentioned if it is really better than the compared aspects from
competitor
4. Service marketing plan
A marketing plan is a written document derived from the analysis of the
market environment in which it sets out major strategic objectives with s
hort-term and medium-term for companies, or for a specific product groups.
After that, they determine necessary means to carry out these objectives and
actions to perform, finally calculate income and expenses to help establishing
funding policies.
A marketing plan should also contain market environment analysis,
marketing objective and strategies, marketing implementation, evaluation and
control.
 It is also made up of situation analysis marketing objective
segmentation,targeting and positioning marketing strategies
Pricing strategies: penetration pricing ,Optional pricing, Premium pricing,

Competition Pricing, Value pricing, Bundle pricing, Skimming pricing
SECTION D: BANKING ENVIRONMENT MARKING GUIDE 25 MARKS
MARKING GUIDE banking environment set2

1. Technology, political stability, social factors, economic situation ,legislation,
processes, product etc
2. Internal environment is a component of the business environment, which is

composed of various elements present inside the organization, that can affect
or can be affected with, the choices, activities and decisions of the
organization. It encompasses the climate, culture, machines/equipment, work
and work processes, members, management and management practices. In
other words, the internal environment refers to the culture, members, events
and factors within an organization that has the ability to influence the
decisions of the organization, especially the behaviour of its human
resource. Here, members refer to all those people which are directly or
indirectly related to the organization such as owner, shareholders, managing
director, board of directors, employees, and so forth.On the other hand
external environment is a component of the business environment, which is
composed of various elements present outsideside the organization, that can
affect or can be affected with, the choices, activities and decisions of the
organization.
SECTION E : LOAN PORTFOLIO MANAGEMENT MARKING GUIDE 20

MARKS
MARKING GUIDE
1. Lending Control Functions

Besides the loan policy, the primary controls over a bank’s lending activities
are its credit administration, loan review, and audit functions. Independent
credit administration, loan review, and audit functions are necessary to
ensure that the bank’s risk management process, MIS, and internal and
accounting controls are reliable and effective. The bank’s control functions
can also provide senior management and the board with a periodic
assessment of how the bank’s employees understand its credit culture and
whether their behaviors conform to the bank’s standards and values.
2. Credit Management Information Systems

The effectiveness of the bank’s LPM process heavily depends on the quality of
management information systems (MIS). Indeed, many of the advancements
of contemporary portfolio management are the direct result of the more
robust MIS that is available today. At the same time, many banks are
frustrated in their efforts to expand portfolio risk management by the
limitations of their MIS. Loan portfolio managers and examiners should be
active proponents of the continued improvement of credit-related MIS.
While a bank’s systems or technology often impedes MIS improvement,
lack of understanding or poor communications between credit management
and systems personnel can also do so. Credit-related MIS helps management
and the board to fulfill their respective oversight roles. Therefore, when
assessing MIS-produced credit reports, the examiner should determine
whether the users are receiving the right kind of information at the right
time. Reports to senior management and the board must be more than a
presentation of numbers; they must be analytical in nature and allow the
users to draw independent conclusions. For example, a report presenting the
level of classified assets has limited value; however, if the report contains
historical information and shows the classified asset position relative to
capital, it becomes more useful. Similarly, reports on numbers of exceptions
to policy are not very useful, but reports on aggregate exceptions as a
percentage of industry or specialized lending portfolios may signal a change
in risk assumption. Summary data presented in a concise format generally
satisfies management’s needs. A report should not give management or the
board more information than it can understand in the time it has to devote to
the topic.
3.
i. Loan portfolio management (LPM) is the process by which risks that are
inherent in the credit process are managed and controlled. Because
review of the LPM process is so important, it is a primary supervisory
activity.
ii. Portfolio risk is the risk involve in granting a loan
4. Lending Control Functions

Besides the loan policy, the primary controls over a bank’s lending activities are its
credit administration, loan review, and audit functions. Independent credit
administration, loan review, and audit functions are necessary to ensure that the
bank’s risk management process, MIS, and internal and accounting controls are
reliable and effective. The bank’s control functions can also provide senior
management and the board with a periodic assessment of how the bank’s
employees understand its credit culture and whether their behaviors conform to the
bank’s standards and values.
5. Risk diversification is a basic tenet of portfolio management. Concentrations of

credit risk occur within a portfolio when otherwise unrelated loans are linked by a
common characteristic. If this common characteristic becomes a common source of
weakness for the loans in concentration, the loans could pose considerable risk to
earnings and capital.

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ACCOUNTING AND FINANCE MARKING GUIDE FOR SET 2

1. C 2.A 3.A 4.B 5.C 6.B 7.C 8.B 9. C 10. A

ANSWERS TO SUBSECTION 2: DECENTRALISED FINANCIAL

ANSWERS TO SUBSECTION 3: ISLAMIC FINANCE

Marking guide STRATEGIC MARKETING MANAGEMENT IN BANKING

- Marketing managers can provide better resolution determining types of products

- Marketing contributes greatly to improve the quality of products and services,

2. Explain in relation to:

3. Basically, an effective SWOT analysis should include a succinct, interesting

Pricing strategies: penetration pricing ,Optional pricing, Premium pricing,

SECTION D: BANKING ENVIRONMENT MARKING GUIDE 25 MARKS

MARKING GUIDE banking environment set2

2. Internal environment is a component of the business environment, which is

SECTION E : LOAN PORTFOLIO MANAGEMENT MARKING GUIDE 20

1. Lending Control Functions

2. Credit Management Information Systems

ii. Portfolio risk is the risk involve in granting a loan

4. Lending Control Functions

5. Risk diversification is a basic tenet of portfolio management. Concentrations of

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