General Securities Representative (Series 7) Practice Exam

Which system is responsible for monitoring foreign currency transactions?

1. Inter-bank system

2. Federal Reserve System

3. World Bank

4. International Monetary Fund

The correct answer is: Inter-bank system

The inter-bank system plays a crucial role in facilitating and monitoring foreign currency transactions. This system consists of a network of banks and financial institutions that trade currencies with each other, executing forex trades, and providing liquidity in the foreign exchange markets. Transactions within this system are monitored to ensure accuracy, compliance with regulations, and to manage risks associated with fluctuations in currency values. While the Federal Reserve System, the World Bank, and the International Monetary Fund are all significant entities in the global financial framework, they serve different purposes. The Federal Reserve primarily regulates the monetary policy of the United States and oversees its banking system. The World Bank focuses on providing financial and technical assistance to developing countries. The International Monetary Fund, on the other hand, seeks to stabilize international exchange rates and facilitate balanced growth of international trade but does not monitor currency transactions in the same operational manner as the inter-bank system does. Therefore, the inter-bank system is specifically tailored to the nuances of monitoring and executing foreign currency transactions among banks.