Module: | MODULE A: INTERNATIONAL BANKING
Q236: Consider the following statements regarding the operational constraints of a registered Finance Company operating in the centre:
Statement 1: A registered Finance Company is fully authorized to undertake specialized lending activities such as equipment leasing, factoring, and external commercial borrowing provisions.
Statement 2: To protect the general public, a registered Finance Company is strictly prohibited from accepting any form of public retail deposits from individuals.
Statement 2: To protect the general public, a registered Finance Company is strictly prohibited from accepting any form of public retail deposits from individuals.
✅ Correct Answer: C
The regulatory framework strictly differentiates between full-service Banking Units and non-banking Finance Companies.
Statement 1 is correct.
A Finance Company in the offshore centre functions similarly to a non-banking financial company in the domestic market.
It is legally authorized to engage in core wholesale credit activities, including equipment leasing, corporate lending, and providing trade finance through factoring.
Statement 2 is also correct.
Unlike a fully licensed Banking Unit that meets rigorous liquidity and reserve ratios, a Finance Company is exposed to different risk metrics.
Therefore, it is legally barred from accepting any form of public retail deposits, ensuring that retail depositors are not exposed to the higher risk profiles of non-banking wholesale lenders.
Statement 1 is correct.
A Finance Company in the offshore centre functions similarly to a non-banking financial company in the domestic market.
It is legally authorized to engage in core wholesale credit activities, including equipment leasing, corporate lending, and providing trade finance through factoring.
Statement 2 is also correct.
Unlike a fully licensed Banking Unit that meets rigorous liquidity and reserve ratios, a Finance Company is exposed to different risk metrics.
Therefore, it is legally barred from accepting any form of public retail deposits, ensuring that retail depositors are not exposed to the higher risk profiles of non-banking wholesale lenders.