Retail & Business Banking
Current accounts, savings, cards, mortgages and small business credit. The part of finance almost everybody uses and almost nobody on a trading floor can describe.
Banking: Takes the deposit, makes the loan, moves the money. the whole map
The seats
four of them, each answering the same six questions so that they can be read against each other.
Next to it
The other group on the same side of the price.
Corporate & Transaction Banking
What an interview asks here
Retail banking questions are almost always checking one thing: do you know that a deposit is a loan to the bank, repayable on demand, lent out for years.
Try each one out loud before you open it. What is underneath is the shape of a complete answer, not a script — somebody who can produce those parts in their own words can also answer the four variations that follow, and somebody who has memorised a paragraph can answer one.
Q1What does a bank actually do with the money in a current account?
What it is checking. The first question, and it separates people who think a bank stores money from people who know it lends it.
A complete answer contains:
- It lends it. A deposit is not stored; it is a liability of the bank, repayable on demand, and the asset side is loans and securities with much longer lives.
- That mismatch is the business: the bank earns the difference between what it pays for the deposit and what it earns on the loan.
- It is also the risk: every depositor can ask at once and the loans cannot be called in at once.
- Which is why deposit guarantee schemes, liquidity rules and a central bank willing to lend all exist around this one arrangement.
Read it properly: Deposits and payments · Liquidity
Q2Two deposits, same balance, same rate. Why is one worth more to the bank?
What it is checking. Testing whether you know that behaviour, not size, is what prices a deposit.
A complete answer contains:
- Because the value of a deposit is how long it stays and what it costs, not what it is on the day.
- A current account left alone for years is cheap, stable funding; the same balance bought with a headline rate on a comparison site leaves when the rate does.
- Regulators score them differently too: the modelled behaviour feeds the liquidity ratios directly.
- So the honest answer names stickiness, and the honest follow-up is that stickiness is a model rather than a measurement.
Read it properly: Treasury and ALM · 2023, when the model was wrong
Q3A customer wants a loan the credit policy declines. What actually happens?
What it is checking. Checking whether you know how much of a retail credit decision is already made before anybody meets the customer.
A complete answer contains:
- Most of it is decided by policy and by a model: affordability, existing commitments, and the record.
- The seat gathers what the model needs, explains the outcome, and works inside a narrow band where judgement is permitted.
- A declined file is not automatically a lost customer, and saying so is part of the job.
- What is not permitted is re-presenting the same case until it passes, which is how portfolios quietly loosen.
Read it properly: Branch and relationship banking · Mortgage and consumer credit
Q4Explain loan-to-value and affordability to somebody who has confused them.
What it is checking. Two numbers everybody in this business quotes and many people treat as one.
A complete answer contains:
- Loan-to-value asks what is recovered if it defaults: the loan against the value of the security.
- Affordability asks how likely default is: the payment against the income that has to meet it.
- They fail together, which is the point — house prices fall for the same reasons incomes do.
- A book can be conservative on one and reckless on the other, and only one of them is visible in a headline statistic.
Read it properly: Mortgage and consumer credit · 2008
Q5What happens to a fixed-rate mortgage book when rates rise?
What it is checking. Whether you can apply bond arithmetic to a loan book, which is the same arithmetic with a different name.
A complete answer contains:
- The bank is receiving a fixed rate and funding at a floating one, so the margin compresses unless it was hedged.
- The economic value of the book falls exactly as a bond's price does.
- And prepayment works against the bank in both directions: borrowers repay early when rates fall and stay put when they rise.
- Which is why a fixed-rate book is hedged with swaps rather than simply offered.
Read it properly: Why a bond falls when rates rise · Interest rate swaps
Q6How would you tell whether a promotional savings rate was worth running?
What it is checking. A product question dressed as a marketing one.
A complete answer contains:
- Compare what the money costs against what the bank would pay to fund itself in the market for the same maturity.
- Then ask what it re-prices: a rate offered to new customers that existing ones can also claim costs the whole book.
- Then ask what stays. Money bought on price leaves on price, so the cost is paid now and the benefit may not arrive.
- The measure is the cohort a year later, not the balances on the day the campaign closed.
Read it properly: Digital and product banking · Costs and fees
Q7Why is a run on a bank different from a fall in the value of its assets?
What it is checking. The liquidity-against-solvency distinction, which is easy in a classroom and hard at two in the morning.
A complete answer contains:
- A solvency problem means the assets are worth less than the liabilities: the bank is short of capital.
- A liquidity problem means the assets are worth enough and cannot be turned into cash today: the bank is short of time.
- From outside they look identical, and a liquidity problem can create a solvency one by forcing sales.
- That is why a central bank lends against collateral to institutions it believes are solvent — and why the judgement is difficult.
Read it properly: 2007 · Central banking
Do these against a clock — one at a time, ninety seconds each, answer before you look.
Whose questions these are. Every question on this page was written for this publication. None is taken from anybody else’s question bank, and none is a claim about what any named firm asks — that is neither verifiable from here nor ours to assert. They are our own reading of which mechanism a question of this kind is testing. Information and education only.
Test yourself: five questions
Five quick questions on this part of the industry — checked entirely on your device, nothing stored or sent. Wrong answers come with explanations, and the seat pages above hold every answer. For education only.