Level: Level 3

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  • 20 Marks

PBL – OCT 2022 – L3 – Q7 – Legal Mortgage over Leasehold Interest

Outline key considerations for taking a legal mortgage over leasehold property and steps to perfect it for a sole proprietorship loan.

Amoasi Enterprise is a sole proprietorship owned and controlled by John Amoasi. The business is engaged in the supply of chips and stones for building projects. John Amoasi has applied for a loan of GHC 500,000 for the purchase of a used tipper truck. He shows you an Indenture covering his Leasehold interest in a property located a Winneba valued GHC 1,000,000.00.

(a) What key consideration would you have in mind in taking a legal mortgage over a leasehold interest? [8 Marks]

(b) Outline the steps which you would take to acquire a legal mortgage over the property in such a manner that the bank’s interest is absolutely protected. [12 Marks]

[Total marks:20]

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  • 20 Marks

PBL – OCT 2022 – L3 – Q6 – Alternative Securities for Construction Loans and Lender Remedies

Identify alternative security for a construction loan where traditional assets are unsuitable, and outline steps to perfect it; list key remedies under the Borrowers and Lenders Act 2020 for borrower default.

(a) Your key customer BBA Construction Ltd. is engaged in a contract for the construction of a 200 kilometer road in the Central Region. He has completed over 60 % of the project and has certified works of GHC 800,000 to be paid. He is applying for working capital loan of GHC 500,000 to purchase materials for the project.

He has no security to offer save the assets of the company which comprise a one storey office building and the road construction equipment. Your managing director is not enthused about taking a fixed and floating charge over the assets of the company as they are subject to rapid wear and tear. The key person Mr. Aras also does not have any personal landed property to offer.

From the above, identify what alternative security may be available in the circumstances and how you would proceed to take the security to ensure that the bank’s interest is protected. [16 Marks]

(b) You have been asked to deliver a lecture on the remedies of a lender in the event of a borrower defaulting in the servicing of a facility. Mention the four key remedies provided under the Borrowers and Lenders Act (2020) Act 1052. [4 Marks]

[Total marks:20]

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  • 20 Marks

POB – LP OCT 2022 – L3 – Q4 – Collecting Bank Duties and Protections in Cheque Collection

A bank collects a stolen cheque for a fraudulent customer, opens an account after clearance, allows withdrawal, and faces a lawsuit from the drawer; questions cover definition of collecting bank, duties, statutory protections, common law defences, and applicability of protection.

As a new Manager at the Edubiase branch of your bank, in the course of your work, your branch has collected a cheque for the account of a customer who turned out not to be the true owner of the cheque. Your Operations Manager did not open the account straightaway but for reasons unknown to you, he told the customer Timothy Ankrah that the bank would not open the account immediately but would only open the account if the cheque of GHC 500,000 the prospective account holder presented was cleared. After the cheque had cleared, your Operations Manager proceeded to open the account and the very next day, Timothy withdrew an amount of GHC 400,000.00 which he claimed was for the purchase of a car.

It transpires that the cheque had been stolen and Timothy was only an impersonator. Timothy is nowhere to be found.

The drawer of the cheque Mr. Banson has sued the bank for refund of the monies he has lost.

(a) What is a collecting bank? [2 Marks]

(b) Mention three duties of a collecting bank. [3 Marks]

(c) Mention and explain the statutory protection available to a collecting bank that collects a cheque for a party who is not the true owner of the cheque? [9 Marks] (d) What are the common law defences available to a collecting bank? [4 Marks]

(e) Will the bank be able to avail itself of the statutory protection? [2 Marks]

[Total marks:20]

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  • 20 Marks

PBL – OCT 2022 – L3 – Q3 – Company Objects Amendment and Cheque Handling Policies

Legal principles for advising on amending company objects for new business ventures and handling a cheque payable to a related company for crediting to a personal account.

State the legal principles you would take into consideration in resolving the following legal matters that have come to your attention.

(a) Mr. Nkumsah is majority shareholder and Chairman of the Board of Directors of Nkumsah Trading Ltd, which has an account with you for the past twenty years. The company issued debentures secured by a floating charge over the company’s assets three years ago. Mr. Nkumsah has 60% shares in the company and is also the sole signatory of the account. Nkumsah Trading Ltd. was established with a registered constitution with the objects of importing medical equipment and ancillary materials. He has applied for a loan of GHC 400,000 for the importation of baby pampers as he claims baby pampers move faster than medical equipment. In appraising the facility, your attention is drawn to the fact that since the company has incorporated with registered objects the company must amend the constitution to enable the company to undertake the new venture. In your discussion with him he asks you of advice of how he could amend the objects of the company’s constitution to enable him to enter into the new venture. He also asks you

what legal difficulties may arise if he engaged in business outside the established objects of the company. [10 Marks]

(b) Secondly Mr. Nkumsah has a cheque payable to a sister company Jamsah Ltd., in which he has shareholding of 50%. His lifelong friend owns the remaining 50%. You advise him that it is a company policy not to credit a cheque payable to a company into a personal account of a director or employee of that company. He argues with you and tells you that since he is the one of the key shareholders he has the right to do so as it is an internal arrangement for him to undertake a specified transaction for the company. [10 Marks]

[Total marks: 20]

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  • 20 Marks

PBL – OCT 2022 – L3 – Q2 – Banker-Customer Confidentiality and Law Enforcement Demands

Scenario involving police demanding customer account information; identify duty of confidentiality, its exceptions, and how to handle the situation.

You enter your office as Retail Manager this morning to find commotion at the front desk of your branch. As you enter you see three persons in police uniforms claiming to be from the National Investigations Bureau (NIB). They claim they have got wind that one Mr. Mahama Obeng who is under investigation for drug trafficking has an account with your branch where he has lodged his ill-gotten gains. They are demanding that your Operations Manager produce the information immediately or he would be hauled to the NIB for impeding an investigation.

(a) What rule of law do you require to resolve this problem? [2 Marks]

(b) Discuss the four (4) exceptions to the duty a bank owes its customers identified in (a) [8 Marks]
(c) How would you deal with the situation that is before you?[10 Marks]

[Total marks: 20]

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  • 20 Marks

ITF – OCT 2022 – L3 – Q8 – Remedies to Fraud in International Contracts

State five remedies to fraud in international contracts based on a copper blister fraud case.

During the summer of 2020, Geneva-based Mercuria Energy Group said it had been the victim of cargo fraud following its purchase of 10,000 tons of copper blister. When the cargoes started arriving in China, it found containers full of painted stones instead. The bizarre case happened despite security and inspection controls. About 6,000 tons were loaded for shipment in more than 300 containers on eight vessels. But before its journey from a port near Istanbul, the copper was switched with paving stones, spray-painted to resemble the semi-refined metal. Once the vessels were at sea, Mercuria paid $36m over five installments. The fraud wasn’t discovered until the ships began arriving in the Chinese port of Lianyungang. Mercuria, one of the five-biggest energy traders in the world, is seeking redress in Turkish and UK courts against the copper supplier, Bietsan Bakir. Turkish police have taken a number of people into custody in relation to the fake copper scheme. “Suspects have been taken under custody who are thought to be involved in the various parts of this organised crime against Mercuria,” the company said in a statement while thanking the Istanbul Financial Crimes Department.

Note: All parties in all commercial transactions should be aware of the potential for fraud. In some cases, those parties you negotiate with may not even be aware of the liability they pose. The above fraud case gained global attention through social media on March 9, 2021.

REQUIRED

State five (5) remedies to fraud in international contracts.

[Total Marks 20]

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  • 20 Marks

ITF – OCT 2022 – L3 – Q7 – Role of Banks in International Trade

List the roles of banks in international trade in bullet points for SMEs under AfCFTA.

The African Continental Free Trade Area (AfCFTA) is organizing training programs to grow the Small and Medium-sized Enterprises (SMEs) and most importantly to deepen their understanding on international trade and how they can take advantage of the banking system for efficient operation and expansion of their businesses. As Head of Trade Finance of your bank, you have been engaged as a resource person by (AfCFTA) to take Chief Operating Officers of these SMEs on the following topic: “The Role of Banks in International Trade”

REQUIRED:

List these roles (in bullet points only) under the various roles for one mark each.

Note: Long and detailed descriptions are not required.

[Total marks 20]

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  • 20 Marks

ITF – OCT 2022 – L3 – Q6 – Issuing Bank’s Undertaking under UCP 600 Article 7

State the issuing bank's undertaking as per UCP 600 Article 7 a (i-v), b, and c.

State the “Issuing Bank’s Undertaking” as enshrined in Article 7 a (i – v), b and c when it issues a credit on behalf of its customer under the current International Chamber of Commerce (ICC) Publication in respect of Uniform Customs and Practice for Documentary Credit – UCP 600.

[Total Marks 20]

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  • 20 Marks

ITF – OCT 2022 – L3 – Q5 – D/A Collections and Buyer Protection

Explain D/A terms, expected instructions on collection order, address suggestion on refusing non-spec goods, and ways for drawee protection in D/A collections.

Mr. Bob Ferguson, senior director of your customer, Adelaide Ltd is negotiating for the first time with suppliers abroad to purchase some outwear garments, which are at present unobtainable in the UK. The terms of payment which the sellers have suggested are a 90 days’ sight draft D/A with presentation through a UK bank. You understand that the presentation will be subject to Uniform Rules for Collections (and the shipping terms are to be CFR UK port). Your customer believes that he will have the opportunity of examining the goods when they are received in the UK and that, if they are not in accordance with specification, he can refuse the goods and will not be liable to pay the sellers, since all charges will be against the goods.

Required

a) Write brief notes on the terms of payment mentioned above; [4 marks]

b) Indicate the instructions you would expect to see on the collection order; [8 marks]

c) What would say to the suggestion by Mr. Bob Ferguson that, if goods were not in accordance with specification, the company could refuse to take up and pay for them? [6 marks]

d) How can the drawee obtain a measure of protection with D/A collections? [2 marks] [Total Marks 20]

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  • 20 Marks

ITF – OCT 2022 – L3 – Q4 – Back-to-Back Credits for Import Financing and Cash Flow

Describe back-to-back credits to protect the customer and assist cash flow, assess appropriateness for German supplier in Euros, and suggest a compromise for compliance.

Builders Merchants Ltd, customers of your bank, supply the building construction industry with a wide range of building materials and products. Their Financial Director, Mr. Kwame Annoh, calls to see you to discuss a CIF contract, which has been signed, to supply a range of fittings and building materials to an overseas buyer. During the conversation you discover that all the goods will be bought from overseas and that all the suppliers are insisting upon secured methods of payment. The Financial Director asks you to suggest a method by which his company can be fully protected, since cash flow considerations are causing some concerns at the present time. The overseas CIF contract is expressed in sterling but one supplier based in Germany, is insisting upon being paid in Euros.

Required

a) A brief description of basic instrument which would be appropriate in answering the needs of the Builders Merchants Ltd. Indicate why your suggestion will cater for your customer by assisting them to overcome their cash flow difficulties and why it will also give some comfort to their potential suppliers. [12 marks]

b) State briefly whether the method described by you in (a) is or is not, appropriate to the contract with the German supplier. Give reasons for your answer. [2 marks]

c) A compromise that you would consider arranging for Builders Merchants Ltd. which would assist them in complying with the request of the German supplier, bearing in mind that the German company requires security of payment.

[6 marks] [Total Marks 20]

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  • 20 Marks

ITF – APR 2024 – L3 – Q6 – Assistance for Clearing Imported Equipment without Bill of Lading

Explain how the bank can assist in clearing imported equipment from the port when bills of lading are missing and the precautions to take.

  • Sam Cheff Mining Ltd is your customer dealing in Mineral Prospecting in the Northern Region of Ghana. The company’s team of engineers has identified a particular site along the TamaleBolgatanga Highway which they believe could have huge deposit of Gold. When the feasibility and sample details of Analysis Reports were submitted to the Board of Directors, they quickly took a decision to allow the company to import a state-of-the-art equipment to enable full scale drilling start as soon as possible.

The Managing Director called on you today to discuss issues affecting the company’s business. He tells you that the equipment imported has arrived but is still at the Tema Harbour, unable to be cleared because the Bills of Lading involved have gone missing. As a result, the equipment has started incurring demurrage charges at the port, while at the same time, the company is incurring unnecessary labour cost due to idle time, as the workers are waiting for these machines to work with.

The Managing Director is visibly worried as he sits at the oval desk in your office, wondering what could be done to protect the company from these costs.

REQUIRED

Explain how the bank can help Sam Cheff Mining Ltd to clear the equipment from the port and the precautions the bank should take. [20 Marks]

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  • 20 Marks

ITF – APR 2024 – L3 – Q5 – Implications of Documentary Credit for Importer

Define documentary credit under UCP 600, its implication for the importer, risks to parties, required documents, and precautions for receiving correct goods

  • Your customers, Roofing Technologies (RT), located at Tema Industrial Area, are specialist manufacturers of roofing sheets. The company is finding it difficult to obtain supply of raw materials as their main Ukraine Suppliers have completely shut down due to the war with Russia.

The company has now identified a South African supplier, who can meet the raw material needs of RT, but only against Secure Methods of Payment. Goods will be shipped under CIF Terms. Tema Port. In a meeting with the Chief Operating Officer today, you have been asked to establish an Irrevocable Letter of Credit in favour of the South African suppliers. Your customers advised you during the meeting that they do not understand the implications of this Secure Method of Payment to the new suppliers as they were used to Documents Against Acceptance with their Ukraine Suppliers.

In order to give them proper understanding, you are required to provide answers to the following:

a) Define Documentary Credit under UCP 600. What implication does the definition have on Roofing Technologies? [2 marks each] [4 Marks]

b) Mention two (2) risks each to RT and the beneficiary. [1 mark each] [4 Marks]

c) Mention three (3) documents (excluding Bill of Exchange) which RT should call for. Mention one (1) detail on each document which RT would expect to find if the bank agreed to establish the Letter of Credit. [2 marks each] [6 Marks]

d) Mention three (3) precautions that RT can take to ensure that they receive the right goods, while at the same time satisfying the seller’s needs. [2 marks each] [6 Marks]

[Total Marks 20]

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  • 20 Marks

ITF – APR 2024 – L3 – Q4 – Foreign Bank Accounts in Local Currency

Describe why foreign banks maintain local currency accounts abroad, how they are funded and operated, list risks, and suggest management steps.

(a) Briefly describe why Foreign Banks maintain Bank Accounts in local currency abroad and how these accounts are funded and operated. [5 Marks]

(b) List the risks to a bank of Assets held in this manner. [5 Marks]

(c) What practical steps should banks employ to manage such Assets effectively? [ 10 Marks

[Total Marks 20]

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  • 20 Marks

ITF – APR 2024 – L3 – Q3 – Cost Comparison of Steel Quotations from Different Countries

Calculate the cost of 100 tons of steel for three quotations from Norway, Denmark, and Turkey, including exchange, charges, and interest, to determine the cheapest option.

Question: QUESTION 3 Held and Sons are Stockholders in London whose account is operated on Overdraft basis. Hitherto, they have obtained their Stocks in the UK, but they are now forced to look elsewhere for supplies of specialised steel. They have received the following quotations:

Country Price Per Ton Payment Terms
a. Norway NOK 2,125 FOB, Oslo Open Account: Settlement one month after shipment.
b. Denmark DKK 1,560 CFR, London Draft drawn payable two months after shipment (Collection Charges for buyer).
c. Turkey TRY 2112 CIF, London Irrevocable Documentary Credit payable three months after shipment.

Using additional information set out below, show by calculating the cost of 100 tons of the steel, which of quotations (a), (b) and (c) would be the cheapest for your customer. Freight charges from any European Port £5 per ton Insurance (to be effected on 110% of CIF value) 1% payable in £ Collection Charges (total for both banks) ¼ % Documentary Credit Charges (including Acceptance Commission) ¾ % Overdraft Interest for one month (considered as 1/12 of a year) 15% pa. Ignore all other possible charges. It is to be assumed that your customers would have covered any Exchange Risk on the day of shipment, in accordance with rates quoted below, and that all payments and charges relative to any particular quotation are debited on the same day.

Spot One Month Two Months Three Months Norway 12.20 – 12.50 10 – 12c disc 15 – 18c disc 20 – 23c disc Denmark 8.90 – 9.10 8 – 5c pm 10 – 8c pm 14 – 11c pm Turkey 11.80 – 12.05 12 – 9c pm 14 – 11c pm 16 – 12c pm

[Total Marks 20]

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  • 20 Marks

ITF – APR 2024 – L3 – Q2 – Option Forward Contracts and Rate Calculations

Define option forward contract and calculate appropriate rates for three scenarios involving option contracts for buying/selling foreign currencies.

(a) What do you understand by Option Forward Contract? [4 marks]

(b) From the following scenarios, calculate the appropriate rate for your customer, by specifically choosing the correct Option Rate applicable in each circumstance:

i. Your customer wishes to take out an Option Contract on 1 March for the period 1 March to 1 April, to buy US $30,000 to pay for goods imported from the USA. Your bank’s rates are as follows: 1 March Spot USD/GHS 11.3450 11.3540 One month forward 0.0520 0.0545 cedis dis. [4 marks]

ii. To manage the risk of its Foreign Exchange, your customer came to arrange for Forward Exchange Contract for export proceeds of NGN 7.8 million due within the next two months. Your customer wishes to take out an Option Contract on 1 March for the period 1 April to 1 May to sell the Foreign Currency to your bank. Your quoted rates are as follows: 1 March Spot GHC/NGN 68.0110 68.0125 One month forward 0.0120 0.0145 naira dis Two months’ forward 0.0165 0.0195 naira dis. [6 marks]

iii. The Import Bill of your customer falls due within the next three months. The customer wishes to take out an Option Contract on 1 March to pay the Swiss Franc 25,000 anytime between 1 May and 1 June. Rates are as follows: 1 March Spot CHF/GHS 12.8215 12.8265 Two months’ forward 0.0865 0.0899 cedis dis Three months’ forward 0.0910 0.0945 cedis dis [6 marks]

[Total Marks 20]

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  • 20 Marks

ITF – APR 2024 – L3 – Q1 – Funding Options for Advance Payment in Construction Contract

Calculate the costs of two financing options—borrowing in USD or equivalent GHS—for a construction company's advance payment and determine the most favorable from the customer's perspective.

Zakaria Construction Plc. (ZCP) are your customers specialised in the construction of highways. Sometime in February, your customer approached you to discuss their intention to apply for a Bid Bond to participate in an International Competitive Tender by the Ministry of Roads and Highways. The Tender is for the award of a contract to construct the Eastern Corridor Road. After discussions with your bank, the Bid Bond was issued in favour of Ministry of Roads and Highways. On March 1, Mr. Adamu, the Chief Finance Officer of ZCP, called to inform you that the company has successfully won the Tender and had been awarded a contract to construct a portion of the main project. At the meeting, Mr. Adamu showed other documents confirming the award of the contract – which also showed the contract value as USD1.2million. The meeting discussed at length, how the bank could assist ZCP to obtain an Advance Payment Bond in favour of Ministry of Roads and Highways to enable the company access 11.25% initial Mobilization Funding of the contract value.

The following events took place: a. On April 1, the Advance Payment Guarantee was issued and submitted to the Ministry of Roads and Highways. b. The 11.25% Advance Payment Funding is confirmed by Ministry of Roads and Highways and will be received by your bank exactly in three months’ time, on July 1, for customer’s account. c. Also on April 1, the company entered into three months’ Forward Contract to sell the US Dollar proceeds of the 11.25% Advance Payment to your bank on arrival of funds.

ZCP has to acquire materials before main construction works begin in July and so, have requested your bank for immediate funding and have proposed two options as follows: i) To borrow the US Dollar amount of the 11.25% Advance Payment for three months and repay when it is received on July 1 . ii) To borrow Ghana Cedi equivalent of the US Dollar amount for three months and repay from proceeds of the three months Forward Contract.

Rates available for the day are as follows:

Bid Offer
April 1, Spot 10.2570 10.2640
One month forward 0.0085 cedis discount 0.0095 cedis discount
Two months’ forward 0.0115 cedis discount 0.0125 cedis discount
Three months’ forward 0.0135 cedis discount 0.0145 cedis discount

You are also given the following additional information: a. Term SOFR (Secured Overnight Financing Rate) which has replaced the LIBOR, is quoted this morning for 3 months US Dollar at 5.1% with your bank’s margin at 4.5%. b. Commitment and Arrangement Fees are charged separately on Dollar borrowing at 1.50% and 0.50% respectively. c. Interest and other charges on US Dollar borrowing should be translated at middle-rate. d. For ZCP, your bank will lend local currency at 2% above its Base Rate of 21.75% p.a. e. Processing Fees for Cedi Facility is 1.0%. f. Cedi Facility also attracts Group Insurance Commission of 1.50%.

REQUIRED Calculate each of the two options and choose the most favorable one from your customer’s point of view, stating your reason.

[Total Marks 20]

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q6 – External Auditors and Corporate Governance

Discuss six responsibilities of external auditors in promoting good corporate governance in banks, and explain four mechanisms for maintaining financial reporting integrity and enhancing shareholder confidence.

a) Discuss the responsibilities of External Auditors in promoting Good Corporate Governance of banks. (You are required to state and discuss six (6) key responsibilities.) (12 marks)

b) Explain how External Auditors contribute to maintaining the Integrity of Financial Reporting and enhancing Shareholder confidence. (You are required to list and explain four (4) mechanisms.) (8 marks)

(Total: 20 marks)

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q5 – Budgetary Control and IFRS 10 Consolidation

Explain budgetary control system and three ways it ensures operational efficiency; explain consolidated financial statements and four circumstances where control exists but consolidation not required.

a) Budgetary Control is a crucial aspect of managing businesses finances. By implementing a robust Budgetary Control System, businesses can use their financial resources effectively and efficiently to achieve their goals and objectives.

You are required to:

i) Explain what is meant by Budgetary Control System. (3 marks) ii) Recommend three (3) ways by which Budgetary Control System can help to provide information to ensure operational efficiency. (6 marks) b) IFRS 10: Consolidated Financial Statements outlines the requirements for the preparation and presentation of Consolidated Financial Statements, requiring entities to consolidate other entities it controls. The Control Principle in IFRS 10 sets out the following three (3) elements of control: power over the investee; exposure to, or rights to, variable returns from its investment with the investee; and the ability to use power over the investee to affect the amount of those returns.

You are required to: i) Explain what Consolidated Financial Statements are (3 marks) ii) Identify four (4) circumstances under which a company may gain control over another company but would not be required to prepare Consolidated Financial Statements. (8 marks) (Total: 20 marks)

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q4 – Potco PLC Ratios and Performance Report

Compute six ratios for Potco PLC and write a report assessing its financial performance and position relative to the industry.

Potco PLC is a listed Ghanaian company that produces textile prints for both local and African markets. As at the year ended 31 March 2023, the company made a Gross Profit of GH$12,150. Cost of Sales for the year was GH$77,850 and Operating Profit Before Interest and Tax was GH$47,130. Finance Cost for the year was GH$920 and Tax Charged to Profit or Loss was GH$1,400.

The Inventory Turnover was 3.6 times. Dividend Paid Per Share was GH$0. 36 resulting in a Dividend Yield of 6 %. Current Assets consist of Inventory, Cash and Trade Receivables.

Extracts from the Statement of Financial Position as at 31 March 2023 were as follows: GH$

| Non-Current Assets | 63,320 | | Current Asset (excluding Inventory and Cash) | 18,605 | | Current Liabilities | 27,600 | | Shareholder’s Fund | 58,480 | | Cash | 6,000 | | 10% Debenture | 23,500 | | Share Capital (@ GH63) | 18,000 |

The following ratios relate to the industry in which Potco Plc belongs to:

| Profit (after Tax) Margin | 4.1% | | Current Ratio | 1.12 | | Return on Capital Employed (ROCE) | 10.0% | | Inventory Turnover | 3.47 | | Receivables Period | 87 days | | Dividend Yield | 5.8% | | EPS Ratio | 12.0 | | Debt/Equity Ratio | 32.6% |

You are required to: a) As far as the above information permits, compute the following ratios for Potco PLC. i. Profit (after Tax) Margin ii. Current Ratio iii. Return on Capital Employed (ROCE) iv. Receivables Period v. Price/Earnings Ratio vi. Debt/Equity Ratio (12 marks) b) Using the ratios above, write a report to the Board of Potco PLC to assess the Financial Performance and Financial Position of the entity, relative to its industry. (8 marks) [Total: 20 marks]

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