BFM B - Unit 13 - Motivational Banker

1. Systemic risk is the risk of............?

Failure of a bank, which is not adhering to regulations

Failure of two banks simultaneously due to bankruptcy of one bank

Where a group of banks fail due to contagion effect

Failure of entire banking system

Question 1 of 32

2. Central Bank Governors of G-10 countries participate in the Basel Committee on Banking Supervision. Total number of members:

Question 2 of 32

3. 1988 Capital Accord framework accounted for 1. Credit risk 2. Market Risk 3. Operational risk 4. Defined capital component. Which of the following is true?

All of them

1, 2 and 4

1, 3 and 4

1, 2 and 3

Question 3 of 32

4. Back testing is done to............?

Test a model

Compare model results and actual performance

Record performance

None of the above

Question 4 of 32

5. Under Basel II, capital requirement under the accord is..........?

The maximum capital that is required to be maintained

The capital that is required to be maintained with a cap and floor level

The capital as specified by the regulatory authority is required to be maintained

None of the above

Question 5 of 32

6. Capital charge for credit risk requires input for PD, LGD, EAD and M. Under advanced IRB approach, who provide the input for LGD?

Bank

Supervisor

Function provided by BCBS

None of the above

Question 6 of 32

7. Under the Standardised Approach, the rating assigned by the eligible external credit rating agencies will largely support the measure of

Market Risk

Credit Risk

Liquidity Risk

Operational Risk

Question 7 of 32

8. Under the RBI- Basel III norms, the D-SIFI banks will be plotted into_________different buckets and would be required to have additional Common Equity Tier 1 capital requirement.

Question 8 of 32

9. Why are banking and financial services typically regulated by the Monetary Authority of a country?

To ensure banks remain profitable

To protect the interests of depositors

To encourage excessive risk-taking

To increase competition in the industry

Question 9 of 32

10. What is the primary purpose of imposing capital requirements on banks?

To limit their profitability

To encourage excessive risk-taking

To improve the safety of the banking industry

To reduce competition among banks

Question 10 of 32

11. What is the primary goal of controlling and monitoring systemic risk?

To encourage banks to take on more risk

To ensure the failure of individual banks does not impact the entire banking system

To promote instability in the banking industry

To protect shareholders' interests

Question 11 of 32

12. What is systemic risk in the context of the banking industry?

The risk of individual bank failures

The risk of failure of the entire banking system

The risk of regulatory non-compliance

The risk of interest rate fluctuations

Question 12 of 32

13. When was the Bank for International Settlements (BIS) established?

1945

1930

1974

1918

Question 13 of 32

14. What is the primary role of the BIS?

To provide loans to member central banks

To foster international monetary and financial stability

To regulate global stock markets

To facilitate currency exchange for tourists

Question 14 of 32

15. Where is the headquarters of the BIS located?

New York City, USA

London, United Kingdom

Basel, Switzerland

Tokyo, Japan

Question 15 of 32

16. How often does the Board of BIS typically meet?

Monthly

Annually

Semi-annually

At least six times a year

Question 16 of 32

17. What was the initial purpose of establishing the Basel Committee?

To provide loans to troubled banks

To supervise the operations of the BIS

To establish banking regulations and supervisory practices

To manage international currency exchange rates

Question 17 of 32

18. What incident led to the formation of the Basel Committee on Banking Supervision (BCBS)?

Collapse of Lehman Brothers

Failure of Bank Herstatt

Subprime mortgage crisis

Long-Term Capital Management (LTCM) bailout

Question 18 of 32

19. What is the primary goal of the BCBS?

Promoting international trade agreements

Coordinating global response to health crises

Standardizing bank regulations across jurisdictions

Providing financial assistance to developing countries

Question 19 of 32

20. How often does the Basel Committee on Banking Supervision (BCBS) typically meet?

Twice a year

Three or four times a year

Monthly

Annually

Question 20 of 32

21. What is the benchmark ratio prescribed for international banks under the Basel-I accord?

10% CRAR

9% CRAR

8% CRAR

7% CRAR

Question 21 of 32

22. What is the minimum CRAR required for banks in India?

10%

Question 22 of 32

23. Which accord introduced the requirement of capital adequacy and the Cooke Ratio?

Basel-I

Basel-II

Basel-III

Basel-IV

Question 23 of 32

24. What does CRAR stand for?

Capital Return and Adequacy Ratio

Capital Risk and Asset Ratio

Capital to Risk-Weighted Assets Ratio

Credit Risk Assessment Ratio

Question 24 of 32

25. What is the primary purpose of the Cooke Ratio?

To measure liquidity risk

To assess operational risk

To determine capital adequacy

To calculate leverage ratio

Question 25 of 32

26. Which pillar of the Basel II Accord focuses on minimum capital requirement?

Pillar 1

Pillar 2

Pillar 3

All pillars equally emphasize minimum capital requirement

Question 26 of 32

27. What are the three approaches for determining capital for credit risk under Pillar 1?

Basic Indicator Approach, Internal Ratings Based (IRB) Foundation Approach, Advanced Measurement Approach

Standardised Approach, Internal Models Method, Advanced Measurement Approach

Standardised Approach, Internal Ratings Based (IRB) Foundation Approach, Internal Ratings Based (IRB) Advanced Approach

Basic Indicator Approach, Standardised Approach, Advanced Measurement Approach

Question 27 of 32

28. Which approach for determining capital for operational risk under Pillar 1 uses internally developed models?

Basic Indicator Approach

Standardised Approach

Advanced Measurement Approach

Internal Ratings Based (IRB) Advanced Approach

Question 28 of 32

29. What is the focus of Pillar 2 of the Basel II Accord?

Enhancing disclosure

Minimum capital requirement

Supervisory review process

Market discipline

Question 29 of 32

30. What does CRAR stand for in the context of Indian banking norms?

Capital Reserve and Asset Ratio

Capital to Risk-Weighted Assets Ratio

Credit Risk Assessment Ratio

Capitalization and Risk Assessment Ratio

Question 30 of 32

31. What are the additional innovations introduced by Basel III to strengthen the Basel framework?

Capital conservation buffer, countercyclical capital buffer, and liquidity requirements

Capital adequacy buffer, leverage ratio, and liquidity coverage ratio

Operational risk management, market discipline, and supervisory review process

Risk-weighted assets, off-balance sheet exposures, and trading book exposures

Question 31 of 32

32. What does the Liquidity Coverage Ratio (LCR) require banks to hold?

A buffer of high-quality liquid assets sufficient to deal with cash outflows in a short-term stress scenario

A buffer of low-quality liquid assets sufficient to deal with cash outflows in a long-term stress scenario

A buffer of high-risk assets sufficient to deal with cash inflows in a short-term stress scenario

A buffer of high-quality liquid assets sufficient to deal with cash inflows in a long-term stress scenario

Question 32 of 32

BFM B – Unit 13

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