<<1234567891011121314151617181920>> 1. What is an essential requirement for Integrated Risk Management Policy?Approval by the highest level of authority in the bankCompliance with international regulations onlyFiling a copy of the policy with FEDAIAnnual review by the ALCOQuestion 1 of 20 2. What is the primary function of the Treasury department in a bank's Asset-Liability Management (ALM) framework?Accepting depositsExtending credit to borrowersFund managementProviding payment servicesQuestion 2 of 20 3. How does the Treasury department help in managing market risk in a bank?By physically moving assets and liabilities across time bandsBy engaging in financial market operationsBy eliminating all mismatches from the balance sheetBy focusing solely on credit risk managementQuestion 3 of 20 4. What is meant by "residual risk" in the context of Treasury operations?Risks that are fully hedged or offsetRisks associated with compensatory risksRisks inherent in trading positionsRisks that cannot be fully mitigated or offsetQuestion 4 of 20 5. How do derivatives help in managing liquidity and interest rate risks in ALM?By physically moving assets and liabilitiesBy increasing the maturity of depositsBy replicating market movements and providing hedgesBy eliminating all mismatches from the balance sheetQuestion 5 of 20 6. What is the primary advantage of using derivatives in managing ALM risks?Derivatives require a large capital deploymentDerivatives are not subject to market fluctuationsDerivatives have a high cost of implementationDerivatives require a small capital requirement and involve no deployment of fundsQuestion 6 of 20 7. How does a bank use derivatives to manage the interest rate risk associated with a loan funded by short-term deposits?By engaging in currency arbitrageBy swapping the floating interest rate into a fixed rateBy purchasing index-linked bondsBy issuing call options on corporate debt paperQuestion 7 of 20 8. What does Asset Liability Management (ALM) primarily involve in modern banking?Maximizing deposit interest ratesMinimizing credit riskManaging maturity and risk intermediationAvoiding long-term depositsQuestion 8 of 20 9. How does ALM help address the risks associated with interest rate fluctuations in banking operations?By fixing interest rates on all loans and depositsBy discouraging long-term depositsBy managing the mismatch between asset and liability maturitiesBy increasing credit supervisionQuestion 9 of 20 10. What is one example of a liquidity risk faced by a bank due to asset-liability mismatch?Accepting short-term deposits and providing long-term mortgage loansAccepting long-term deposits and providing short-term loansInvesting in government securities with fixed interest ratesBorrowing from the inter-bank market at variable ratesQuestion 10 of 20 11. How is ALM defined in the context of protecting a bank's net worth?Maximizing credit risk exposureMinimizing market riskManaging balance sheet risksEnsuring profitability through higher interest ratesQuestion 11 of 20 12. Why are banks particularly sensitive to liquidity risks?Because liquidity risks are closely tied to credit risksBecause they cannot afford to default or delay meeting obligationsBecause liquidity risks are not significant for banksBecause they can easily manage liquidity mismatchesQuestion 12 of 20 13. What is the primary focus of liquidity management in banks?Ensuring long-term profitabilityManaging credit risksAddressing short-term liquidity needsMinimizing market risksQuestion 13 of 20 14. How does ALM help banks manage liquidity risks?By ensuring a positive cash flow at all timesBy effectively matching assets and liabilities in terms of maturity and cash flowBy investing in long-term securities onlyBy increasing credit lines from other banksQuestion 14 of 20 15. What is net interest income (NII)?The total income earned by the bankThe difference between interest earnings and interest paymentsThe amount of interest paid by the bankThe total expenses incurred by the bankQuestion 15 of 20 16. What is repricing risk in the context of interest rate risk?The risk of fluctuations in market prices of assetsThe risk of changes in interest rates affecting NIIThe risk of non-repayment of loans by borrowersThe risk of changes in exchange rates affecting foreign assetsQuestion 16 of 20 17. How does the mismatch in repricing dates between assets and liabilities affect interest rate risk?It reduces interest rate riskIt increases interest rate riskIt has no effect on interest rate riskIt stabilizes interest rate riskQuestion 17 of 20 18. What is one way to mitigate the mismatch in repricing dates between assets and liabilities?Swapping floating rate to fixed rate or vice versa using derivative instrumentsIncreasing the maturity of liabilitiesDecreasing the maturity of assetsAllowing assets and liabilities to reprice naturallyQuestion 18 of 20 19. What does ALM stand for?Asset Liability ManagementAverage Liability ManagementAccount Liability ManagementAsset Level ManagementQuestion 19 of 20 20. What is the main purpose of a Credit Default Swap (CDS)?Transferring liquidity riskDiversifying market riskTransferring credit riskHedging operational riskQuestion 20 of 20 Loading...
