<<12345678910111213141516171819202122232425>> 1. The overall responsibility for management of liquidity risk lies withThe Board of DirectorsThe Risk Management CommitteeThe Asset-Liability Management CommitteeThe Asset Liability Management Support GroupQuestion 1 of 25 2. The role of deciding the transfer pricing policy of the bank and making liquidity costs and benefits an integral part of bank's strategic planning is performed byThe Chief Risk OfficerThe Board of DirectorsThe Asset-Liability Management CommitteeThe Asset Liability Management Support GroupQuestion 2 of 25 3. Temporary assets do not includeCashBills purchased/discounted up to 1 yearInvestments up to one yearIntangible assetsQuestion 3 of 25 4. In the risk management framework of the banks, which risk is called as 'Fatal Risk??Interest Rate RiskLiquidity RiskForex RiskLegal RiskQuestion 4 of 25 5. What is liquidity risk?The inability of a bank to meet its long-term obligationsThe inability of a bank to meet its obligations as they become dueThe risk of market fluctuations affecting the value of assetsThe risk of default by borrowersQuestion 5 of 25 6. Why is effective liquidity risk management important for banks?To maximize profitsTo reduce regulatory requirementsTo ensure the ability to meet obligations without adverse effectsTo minimize the need for treasury managementQuestion 6 of 25 7. What is the primary cause of liquidity problems in banks?Asset mismatchesLiability mismatchesExcessive regulatory requirementsMarket fluctuationsQuestion 7 of 25 8. Why are banks called "Maturity Transformation Agents"?Because they match the maturity of assets and liabilities perfectlyBecause they transform short-term liabilities into long-term assetsBecause they manage mismatches between the maturity of assets and liabilitiesBecause they minimize the need for liquidity managementQuestion 8 of 25 9. What is the primary goal of liquidity management in banks?Maximizing profitsEnsuring both short-term liquidity and long-term solvencyMinimizing operational costsAchieving regulatory complianceQuestion 9 of 25 10. What potential risk does a bank face if it cannot meet depositors' withdrawal demands promptly?Credit riskMarket riskReputational riskOperational riskQuestion 10 of 25 11. Why is liquidity risk management considered crucial for both individual banks and regulators?It ensures higher profitability for banksIt helps maintain stability in the financial systemIt reduces regulatory oversightIt increases operational efficiencyQuestion 11 of 25 12. What is funding liquidity risk?The risk of not meeting regulatory capital requirementsThe risk of being unable to efficiently meet expected and unexpected cash flows and collateral needsThe risk of fluctuations in interest ratesThe risk of losses due to changes in market pricesQuestion 12 of 25 13. What is market liquidity risk?The risk of insufficient demand for a bank's products and servicesThe risk of changes in exchange rates affecting the bank's assets and liabilitiesThe risk of being unable to offset or eliminate a position at the prevailing market priceThe risk of loss due to changes in credit ratings of the bank's counterpartiesQuestion 13 of 25 14. Who should be responsible for sound management of liquidity risk in a bank?ShareholdersBoard of DirectorsSenior managementRegulatory authoritiesQuestion 14 of 25 15. What should a bank's liquidity management process cover?Only expected deviations from normal operationsBoth expected and unexpected deviations from normal operationsOnly unexpected deviations from normal operationsMarket risks onlyQuestion 15 of 25 16. What should a bank's funding strategy aim to achieve?Dependence on a single source of fundingDiversification in the source and tenor of fundingLimited presence in chosen funding marketsNo presence in funding marketsQuestion 16 of 25 17. What should a bank's contingency funding plan (CFP) include?Clear lines of responsibilityNo implementation proceduresNo escalation proceduresNo strategies for addressing liquidity shortfallsQuestion 17 of 25 18. What is the purpose of stress testing in banks?To identify sources of potential liquidity strainTo evaluate profitability and solvencyTo build up a liquidity cushionAll of the aboveQuestion 18 of 25 19. Who should discuss the results of stress tests thoroughly?ShareholdersBoard of DirectorsAsset Liability Management Committee (ALCO)Regulatory authoritiesQuestion 19 of 25 20. What should banks do if stress test results indicate vulnerabilities?Keep the information confidentialReport to the Board and take immediate actionIgnore the resultsConduct more stress testsQuestion 20 of 25 21. What is the recommended maximum period for banks to assume voluntary risk exposures?5 years10 years15 years20 yearsQuestion 21 of 25 22. According to the broad norms, what percentage of long-term assets should long-term resources not fall below?50%60%70%80%Question 22 of 25 23. How are short-term, medium-term, and long-term resources defined in the context of liquidity management?Short-term: maturing within 1 year, Medium-term: maturing within 3 years, Long-term: maturing beyond 3 yearsShort-term: maturing within 6 months, Medium-term: maturing within 1 year, Long-term: maturing beyond 1 yearShort-term: those maturing within 6 months. Medium-term: those maturing in 6 months and longer but within 3 years. Long-term: those maturing in 3 years and longer.Short-term: maturing within 1 year, Medium-term: maturing within 5 years, Long-term: maturing beyond 5 yearsQuestion 23 of 25 24. What is the purpose of a Management Information System (MIS) in a bank's liquidity management?To provide historical data on liquidity positionsTo facilitate regulatory reportingTo provide timely and forward-looking information on liquidity positionTo track customer transactionsQuestion 24 of 25 25. What does the MIS in a bank cover regarding liquidity risk?Only historical liquidity positionsOnly liquidity positions in the bank's home currencyAll sources of liquidity risk, including contingent risks and those arising from new activitiesOnly cash flow projectionsQuestion 25 of 25 Loading...
