Directions (1-10): Read the following passage carefully and answer the questions. Certain words/phrases are given in bold to help you locate them while answering some of the questions.
Banks in Australia have a certain upside-down quality to them. Their share prices broke free from the put that dragged down their international rivals during the 2008 financial crisis. In recent years, they have soared as others have sagged. now that big banks in other rich countries are regaining their pose, as in most of the global economy, it is the turn of Australia's to slide. This topsy-turvy behaviour may yet continue given its worsening outlook. Serving a buoyant domestic economy with none to fierce competition, Australia's big four lenders are commonwealth Banks, National Australia Bank (NAB), ANZ and Westpac, used to delight shareholders with bumper dividends. But concerns over their balance-sheets and exposure to Australia's housing market have caused their shares to dip. Investors fear that the exceptional circumstances underpinning the vibrant returns of recent years are coming to an end. The commodity "super-cycle" that boosted both Australia and its banks has fizzled. Unemployment is creeping up. The biggest concern is the health of bank's mortgage books. Home loans have been fabulously lucrative for Australian banks but this is changing. According to analysts, return on the top 50%, which would make an even precrisis wall. Street bankers happy. No wonder, then that domestic home loans now represent 40% to 60% of Australian banks assets, up from 15% to 30% in the early 90s. Mortgages in New Zealand account for another 5-10%. A growing number of loans are going to property speculators or to a homeowner paying back only the interest on their loan. Recent stress test suggested that a property downturn would ravage banks. Regulators trot about the lack of diversification in banks, especially given their dependence on foreign money for funding. They want banks to curb growth in the riskiest mortgages and to finance them with more equity and less debt. A government inquiry into the Australian financial system called for banks to be better capitalised. Collectively, Australian banks may need as much as a $40 billion in fresh capital to meet regulatory demands. The big four are still highly profitable and their returns will remain better than most despite all the new equity they will have to raise. After all, banks around the world are being forced to fund themselves with more equity. Aussie-borrowers are less likely to default on mortgages than American ones, as lenders have a claim on all their assets. not just the property in question. but there are other concerns as well. Credit growth in Australia is slowing. Expansion into crowded Asian market seems difficult which leaves little scope for diversification. If they can not make banks less dependent on mortgages, regulators will have to find other ways to make them safer.
Choose the word which is most nearly the same in meaning to the word Ravage given in bold as used in the passage?
Answer: (e) devastateSolution: Ravage means badly damage and the meaning of devastate is also the same.
Which of the following is true in the context of the passage?
Unemployment in Australia is on rise.
Regulators are unwilling to enforce strict reforms on the banking sector.
Australian banks have a surplus of capital according to regulators.
Australia's banks are still struggling to recover from the 2008 crisis.
None of the given options is true in the context of the passage.
Answer: (a) Unemployment in Australia is on rise.Solution: No description.
Choose the word which is most nearly the same in meaning to the word Bumper given in bold as used in the passage?
Answer: (e) hugeSolution: Bumper means something very large and the meaning of huge also the same.
Choose the word which is most nearly the opposite in meaning to the word Dip given in bold as used in the passage?
Answer: (a) riseSolution: Dip means to go down whereas rise means go up.
Choose the word which is most nearly the opposite in meaning to the word Fabulously given in bold as used in the passage?
Answer: (a) terrificallySolution: Fabulously means very good whereas terrifically means very bad.
According to the passage, which of the following factors was/were responsible for the Australian economy's performance during the 2008 global crisis?(A). Australian banks invested in American hedge funds.(B). Australia inexperienced a comodity base.(C). Lack of investment in emerging markets.
Only (A) and (C)
All (A), (B) and (C)
Answer: (d) Only (B)Solution: No description.
What do the assets regarding assets of Australia cited in the passage convey?
Bank assets are heavily concentrated in the housing sector.
Australian banks have a huge number of defaulters.
Australian banks are safe and are growing from strength to strength.
Australian banks have invested to heavily in property markets of other countries.
The four banks are in imminent danger of collapse.
Answer: (a) Bank assets are heavily concentrated in the housing sector.Solution: No description.
What is the author's view of the global economy at present?
The global economy is unlikely to recover as economic reforms are not stringent.
Many European countries are in debt and likely to default on their loans.
Rich economies have yet to recover while emerging markets are thriving.
The economy is in turmoil as large Asian economies are experiencing a crisis.
Other than those given as options.
Answer: (e) Other than those given as options.Solution: No description.
Which of the following best describes the regulator's view of Australia's economy?
Its economy is soaring and recapitalisation and diversification reforms may be withdrawn.
Australian banks should adopt American system of mortgage to safeguard the economy.
Australia has insulated itself from foreign markets, and this has hampered growth.
Australia should withdraw from risky emerging markets.
There is a need for some corrections and reforms to be implemented.
Answer: (d) Australia should withdraw from risky emerging markets.Solution: No description.
Which of the following is the central idea of the passage?
Australia as the best forming of all advanced economies at present.
Australia's banking sector is vulnerable and headed for difficulty.
Restructuring of Australia's banks has been very successful.
Australia's housing sector is enjoying the boom.
The powers of Australia's banking regulator should be curtailed.
Answer: (b) Australia's banking sector is vulnerable and headed for difficulty.Solution: No description.