Chartered Banker Institute Qualifications Strategy, Leadership and Bank Management Syllabus

Strategy, Leadership and Bank Management syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Strategy, Leadership and Bank Management in Chartered Banker Institute Qualifications, not a summary of it.

1. 1

   Strategic Management in Banking

   4 topics

   • Strategic analysis tools
     • PESTLE and Porter's Five Forces applied to banking
     • SWOT and competitive positioning
   • Business models and value propositions
   • Mergers, acquisitions and restructuring
   • Innovation and digital transformation strategy
2. 2

   Financial Management of a Bank

   4 topics

   • The bank balance sheet and income statement
     • Net interest income and net interest margin
     • Fee, commission and trading income
   • Asset and liability management
     • Interest rate risk in the banking book
     • Funding and liquidity management
   • Capital planning and allocation
   • Performance measurement
     • Return on equity and return on assets
     • Cost-to-income ratio and RAROC
3. 3

   Leadership and People

   4 topics

   • Leadership styles and effectiveness
   • Building and leading high-performing teams
   • Change management and stakeholder engagement
   • Diversity, equity and inclusion in banking
4. 4

   Governance and Corporate Responsibility

   4 topics

   • The role and structure of the board
   • Risk governance and board committees
   • Remuneration governance and clawback
   • Corporate social responsibility and purpose
5. 5

   Technology, Data and the Future of Banking

   4 topics

   • Digital banking and platform models
     • Open Banking and Banking-as-a-Service
     • APIs and ecosystem partnerships
   • Data analytics and artificial intelligence in banking
   • Cyber security and operational resilience
   • Emerging trends
     • Digital currencies and CBDCs
     • Distributed ledger technology in finance

Strategy, Leadership and Bank Management flashcards for Chartered Banker Institute Qualifications

25 of 51 cards from the Strategy, Leadership and Bank Management deck — real questions with worked answers.

1. What does a PESTEL analysis examine, and what are its six factors?

   PESTEL scans the external macro-environment of an organisation. The six factors are: Political, Economic, Social, Technological, Environmental and Legal.

2. In Porter's Five Forces, what are the five competitive forces that determine an industry's profitability?

   (1) Threat of new entrants, (2) Bargaining power of suppliers, (3) Bargaining power of buyers, (4) Threat of substitutes, and (5) Rivalry among existing competitors.

3. What do the four quadrants of a SWOT analysis represent, and which are internal vs external?

   Strengths and Weaknesses are internal to the organisation; Opportunities and Threats are external. SWOT links internal capabilities to the external environment to inform strategy.

4. In the Boston Consulting Group (BCG) growth-share matrix, what are the four categories and the two axes?

   Axes: market growth rate (vertical) and relative market share (horizontal). Categories: Stars (high growth, high share), Cash Cows (low growth, high share), Question Marks/Problem Children (high growth, low share) and Dogs (low growth, low share).

5. What are the nine building blocks of the Business Model Canvas?

   Customer Segments, Value Propositions, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships, and Cost Structure.

6. What is a 'value proposition' in strategic terms?

   The bundle of products and services, and the specific benefits and value, that a firm offers to satisfy a particular customer segment's needs better than alternatives — the reason a customer chooses one provider over another.

7. Distinguish a merger from an acquisition.

   In a merger two firms of broadly comparable size combine to form a new single entity, usually by mutual agreement. In an acquisition one firm (the acquirer) takes over and absorbs another (the target), which ceases to exist as an independent company.

8. What is the difference between horizontal, vertical and conglomerate integration in M&A?

   Horizontal: combining firms at the same stage/industry (competitors). Vertical: combining firms at different stages of the same supply chain (e.g. supplier and customer). Conglomerate: combining firms in unrelated businesses to diversify.

9. In corporate restructuring, what is the difference between a divestiture and a demerger (spin-off)?

   A divestiture is the sale or disposal of a business unit or asset to a third party for cash/consideration. A demerger (spin-off) separates a division into an independent company, typically distributing its shares to existing shareholders rather than selling to an outsider.

10. What are the three 'horizons' in McKinsey's Three Horizons model of innovation?

    Horizon 1: defend and extend the core business (current profit). Horizon 2: build emerging high-growth opportunities. Horizon 3: create genuinely new options/ventures for the future.

11. What is the difference between sustaining and disruptive innovation (Christensen)?

    Sustaining innovation improves existing products for existing demanding customers. Disruptive innovation starts simpler/cheaper, often serving overlooked or new customers, then moves upmarket and displaces established incumbents.

12. What are the three layers of the bank balance sheet's main components?

    Assets (loans, securities, cash and reserves), Liabilities (customer deposits, wholesale funding, debt) and Equity (shareholders' capital and reserves). The fundamental identity is Assets = Liabilities + Equity.

13. What is Net Interest Income (NII) and how is Net Interest Margin (NIM) calculated?

    NII is interest earned on assets minus interest paid on liabilities. NIM expresses this relative to earning assets: $$\text{NIM} = \frac{\text{Net Interest Income}}{\text{Average Earning Assets}}$$

14. Define the cost-to-income ratio and state whether higher or lower is better.

    $$\text{Cost-to-Income Ratio} = \frac{\text{Operating Expenses}}{\text{Operating Income}}$$ It measures efficiency; a lower ratio is better, indicating costs consume a smaller share of income.

15. What is the primary purpose of Asset and Liability Management (ALM) in a bank?

    To manage the risks arising from mismatches between assets and liabilities — principally interest rate risk, liquidity risk and funding risk — so as to protect net interest income and economic value while maintaining adequate liquidity.

16. In ALM, what is a 'maturity (repricing) gap' and what does a positive gap imply?

    The repricing gap is rate-sensitive assets minus rate-sensitive liabilities in a time bucket. A positive gap (more rate-sensitive assets) means rising interest rates increase net interest income, while falling rates reduce it.

17. What is the role of a bank's Asset and Liability Committee (ALCO)?

    ALCO is the senior management committee responsible for overseeing balance-sheet management — setting and monitoring policies on interest rate risk, liquidity, funding, and capital allocation to balance risk and return.

18. Under Basel III, what is the minimum total regulatory capital ratio and the minimum Common Equity Tier 1 (CET1) ratio (before buffers)?

    Minimum total capital is $8\%$ of risk-weighted assets; minimum CET1 is $4.5\%$ of RWAs. A capital conservation buffer of $2.5\%$ CET1 is added on top.

19. How is a regulatory capital ratio calculated in general form?

    $$\text{Capital Ratio} = \frac{\text{Eligible Capital}}{\text{Risk-Weighted Assets (RWA)}}$$ where RWA weights each asset by its assessed riskiness.

20. What is the difference between Tier 1 and Tier 2 capital?

    Tier 1 is going-concern capital that absorbs losses while the bank operates (CET1 — common equity and retained earnings — plus Additional Tier 1 instruments). Tier 2 is gone-concern capital (e.g. subordinated debt) that absorbs losses in insolvency/wind-down.

21. What is the purpose of a bank's ICAAP (Internal Capital Adequacy Assessment Process)?

    ICAAP is the firm's own forward-looking assessment of the capital it needs to cover all material risks (including those not fully captured by Pillar 1), incorporating stress testing, to ensure capital adequacy is maintained over the business plan horizon.

22. What is Return on Equity (ROE) and how does it relate to Return on Assets (ROA)?

    $$\text{ROE} = \frac{\text{Net Income}}{\text{Shareholders' Equity}}, \quad \text{ROA} = \frac{\text{Net Income}}{\text{Total Assets}}$$ They are linked by the equity multiplier (leverage): $\text{ROE} = \text{ROA} \times \frac{\text{Assets}}{\text{Equity}}$.

23. What is RAROC and why do banks use it for performance measurement?

    RAROC (Risk-Adjusted Return on Capital) relates risk-adjusted return to the economic capital at risk: $$\text{RAROC} = \frac{\text{Risk-Adjusted Net Income}}{\text{Economic Capital}}$$ It allows comparison of business lines on a like-for-like risk basis and supports capital allocation.

24. What is Economic Value Added (EVA) and when is value created?

    $$\text{EVA} = \text{NOPAT} - (\text{Capital} \times \text{Cost of Capital})$$ Value is created when EVA is positive, i.e. when returns exceed the cost of the capital employed.

25. Contrast transformational and transactional leadership.

    Transactional leadership motivates through exchanges — rewards, targets and corrective action for performance. Transformational leadership inspires followers to exceed expectations through vision, idealised influence, intellectual stimulation and individualised consideration, driving change and commitment.

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