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Banking Skills Test: Check Your Core Banking Knowledge

Quick, free banking quiz to test your knowledge. Instant results.

Editorial: Review CompletedCreated By: Anisah AmidUpdated Aug 24, 2025
Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art displaying various banking icons for a Banking Knowledge Assessment Quiz

This banking skills test helps you check your understanding of deposits, lending, payments, and basic risk in 15 multiple-choice questions. See your score instantly, then build confidence with the bank teller quiz and explore banking trivia questions and answers for a quick refresh before a class, exam, or interview.

Which institution is primarily responsible for conducting monetary policy in the United States?
International Monetary Fund
Federal Deposit Insurance Corporation
World Bank
Federal Reserve System
The Federal Reserve System sets interest rates and uses policy tools to influence the money supply in the U.S. economy. Other institutions listed do not have the authority to conduct U.S. monetary policy.
A savings account is best described as which type of bank product?
Deposit account
Insurance product
Loan product
Investment security
A savings account is a deposit account where customers store funds and earn interest. It is not a loan, investment security, or insurance product.
What does KYC stand for in banking compliance?
Know Your Credit
Know Your Customer
Keep Your Card
Keep Your Cash
KYC stands for Know Your Customer, a compliance process banks use to verify the identity of clients. The other options do not reflect the standard regulatory term.
Which product is a typical digital banking service?
Safety deposit box
Physical checkbook
In-branch teller service
Mobile banking app
A mobile banking app is a core digital banking service allowing customers to manage accounts online. The other options are traditional, in-person or physical services.
Which indicator measures the general rise in price levels over time?
Unemployment rate
Exchange rate
Inflation rate
GDP growth
The inflation rate tracks changes in the general price level of goods and services over time. Unemployment rate, GDP growth, and exchange rates measure different economic metrics.
Which tool involves adjusting the rate at which banks borrow from the central bank?
Quantitative easing
Open market operations
Reserve requirement
Discount rate
The discount rate is the interest rate charged by central banks when lending to commercial banks. Open market operations and reserve requirements are different policy tools, and quantitative easing is large-scale asset purchases.
What type of loan has a variable interest rate tied to an index such as the prime rate?
Adjustable rate mortgage
Personal line of credit
Fixed rate mortgage
Auto loan
An adjustable rate mortgage (ARM) has interest rates that change based on a reference index like the prime rate. Fixed mortgages maintain a constant rate, while other loans may not directly tie to such an index.
In credit risk assessment, what ratio measures a borrower's debt relative to income?
Debt-to-income ratio
Loan-to-value ratio
Capital adequacy ratio
Current ratio
The debt-to-income ratio compares a borrower's monthly debt payments to their gross income. Loan-to-value measures loan size against collateral, and capital adequacy and current ratios apply to banks.
What technology uses a distributed ledger to record transactions in fintech?
Cloud computing
Biometrics
Blockchain
Artificial intelligence
Blockchain is a decentralized ledger technology recording transactions across multiple nodes. Cloud computing, AI, and biometrics are other technologies used in fintech but do not provide a distributed ledger by design.
Open market operations refer to buying and selling which securities?
Government Treasury securities
Municipal bonds
Foreign currency
Corporate bonds
Open market operations involve central banks buying and selling government Treasury securities to influence money supply. Corporate and municipal bonds or foreign currencies are not used for standard OMOs.
Which regulation requires banks to monitor and report suspicious activity?
Bank Secrecy Act
Dodd-Frank Act
Sarbanes-Oxley Act
Gramm-Leach-Bliley Act
The Bank Secrecy Act mandates financial institutions to file Suspicious Activity Reports (SARs). Sarbanes-Oxley targets corporate governance, Dodd-Frank addresses financial stability, and Gramm-Leach-Bliley covers data privacy.
In a loan portfolio scenario, which primary risk arises from borrowers failing to meet payment obligations?
Liquidity risk
Operational risk
Credit risk
Market risk
Credit risk is the danger that borrowers will default on their obligations. Operational, market, and liquidity risks pertain to operations, price movements, and cash flow mismatches respectively.
Which of the following is an example of peer-to-peer lending?
LendingClub platform
Checking account
Mortgage
Credit card
LendingClub is an online peer-to-peer lending platform connecting borrowers with investors. Checking accounts, credit cards, and mortgages are traditional bank products.
Which monetary policy stance is characterized by low interest rates to stimulate growth?
Neutral
Defensive
Contractionary
Expansionary
Expansionary policy lowers interest rates and increases money supply to boost economic activity. Contractionary policy raises rates, while neutral and defensive are less common descriptors.
Which service allows immediate electronic fund transfer between banks?
Wire transfer
Deposit slip
Cashier's check
Bank draft
Wire transfers enable real-time electronic movement of funds between banks. Deposit slips, bank drafts, and cashier's checks involve paper-based processes.
Which Basel Accord primarily introduced risk-weighted assets for capital requirements?
Basel I
Basel 0
Basel II
Basel III
Basel I, established in 1988, first implemented the concept of risk-weighted assets to determine bank capital requirements. Later accords built on and refined these standards.
In stress testing, what scenario assesses the impact of a sudden increase in interest rates on a bank's portfolio?
Interest rate shock
Operational shock
Credit shock
Liquidity shock
An interest rate shock scenario simulates the effects of rapid rate changes on assets and liabilities. Credit, liquidity, and operational shocks test other risk dimensions.
What effect does an increase in the reserve requirement ratio have on the banking system's money multiplier?
Makes the multiplier unpredictable
Increases the money multiplier
Decreases the money multiplier
No effect on the money multiplier
Raising reserve requirements forces banks to hold more reserves and reduces the funds available for lending, which lowers the money multiplier. Other options misstate this direct relationship.
Which fintech innovation uses AI-driven alternative data analytics to assess creditworthiness beyond traditional credit scores?
Robo-advisors
Alternative data analytics
Mobile wallets
Peer-to-peer lending
Alternative data analytics use nontraditional data and AI algorithms to evaluate borrowers' credit risk. Robo-advisors, P2P lending, and mobile wallets serve different fintech functions.
Quantitative easing involves which of the following central bank actions?
Increasing the discount rate
Buying government bonds
Selling government bonds
Raising reserve requirements
Quantitative easing is the large-scale purchase of government bonds to inject liquidity and lower long-term interest rates. Selling bonds or raising requirements are contractionary measures.
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Learning Outcomes

  1. Analyse central banking roles and functions
  2. Identify core bank products and services
  3. Evaluate risk management and compliance scenarios
  4. Apply digital banking and fintech concepts
  5. Demonstrate understanding of monetary policy impacts

Cheat Sheet

  1. Core functions of central banks - Think of central banks as the conductors of a financial orchestra, guiding monetary policy, ensuring the banking system stays on beat, and issuing the currency we all use. They tweak interest rates, supervise the money supply, and step in during crises to keep everything in tune.
  2. Primary banking products & services - From stashing cash in savings accounts to swiping a debit card, banks offer a menu of services that fuel daily life and big ambitions. Understanding checking accounts, loans, and payment services helps you see the full picture of how banks make money and support customers.
  3. Risk management strategies - Banks navigate a maze of credit risks, market risks, and operational hiccups, using models and policies to dodge financial potholes. Learning about credit assessments, stress tests, and internal controls shows how banks protect themselves and depositors.
  4. Fintech's impact on banking - From mobile wallets to blockchain breakthroughs, fintech innovations are remixing how banks operate and how central banks regulate. Dive into case studies on digital lending, peer-to-peer transactions, and regulatory tech to see tomorrow's finance today.
  5. Monetary policy tools - Central banks pull levers like interest rates and open market operations to accelerate or cool down economic activity, much like a thermostat in a heating system. Discover how bond purchases, reserve requirements, and discount windows shape inflation, employment, and growth.
  6. Role of bank regulation - Regulations are the guardrails that keep banks from veering off the road into crisis territory, protecting depositors and the broader economy. Learn about capital requirements, liquidity rules, and supervisory frameworks that ensure financial stability.
  7. Digital currencies & payment systems - Welcome to the era of digital cash, where CBDCs, stablecoins, and instant payment rails are rewriting the rules of money movement. Explore how new payment technologies and digital fiat reshape cross-border transfers and financial inclusion.
  8. The Federal Reserve System - The Fed runs on a regional network of banks, a Board of Governors in D.C., and the Federal Open Market Committee, all working together to steer the U.S. economy. Unpack its structure, policy tools, and dual mandate of price stability and maximum employment.
  9. Compliance & financial ethics - Anti-money laundering rules, know-your-customer checks, and ethics standards keep banking honest and transparent. Studying compliance frameworks shows how banks combat fraud, finance terrorism, and uphold trust.
  10. Foreign exchange & reserve management - Central banks juggle foreign currencies and gold reserves to defend exchange rates and cushion economic shocks. Discover how reserve composition, interventions, and swap lines help countries weather global storms.
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