This quiz works best with JavaScript enabled. Home > Finance > Risk Management > Credit Risk Management – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Credit Risk Management Quiz 1 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Regulating the percentage of borrowers who must have assets to secure the loan is to minimize which of the following types of risks: A) Internal risks. B) Choice risk. C) Professional risks. D) Guaranteed risk. Show Answer Correct Answer: B) Choice risk. 2. Credit risk provisions are: A) Value of credit balance that is overdue within the past year. B) Similar to equity capital. C) The value banks record to prevent possible losses from potentially risky loans that cannot be repaid. D) The bank's debt item because this is one of the sources of mobilized capital. Show Answer Correct Answer: C) The value banks record to prevent possible losses from potentially risky loans that cannot be repaid. 3. Which of the following IS NOT a Principle of Financial Management? A) Security. B) Accountability. C) Stewardship. D) Transparency. Show Answer Correct Answer: A) Security. 4. The bank implements a credit risk management strategy through distributing loans into many different industries to minimize which of the following risks? A) Concentration risk. B) Internal risks. C) Loan product risks. D) Professional risks. Show Answer Correct Answer: A) Concentration risk. 5. Which of the following statements most accurately reflects the goal of credit analysis before making a loan decision? A) Find and point out situations that can lead to risks for the bank, predict the ability to control those types of risks and anticipate measures to prevent and limit possible damage. B) Check the authenticity of the loan documents provided by the customer, thereby knowing the customer's repayment attitude as a basis for lending decisions. C) Ensure the ability to collect debt and interest after lending. D) To determine whether customers are eligible for loans or not. Show Answer Correct Answer: A) Find and point out situations that can lead to risks for the bank, predict the ability to control those types of risks and anticipate measures to prevent and limit possible damage. 6. Bro. Irwansyah has a P & D trading business and is currently waiting for the credit approval process from the Tapan Branch with a ceiling of IDR 850, 000, 000 (eight hundred and fifty million rupiah). The productive NPL condition of the Tapan Branch in December 2020 was 10.08% and the trade sector NPL was 6.86%. The limit of authority to decide on the Tapan Branch Office is IDR 1, 000, 000, 000 (one billion rupiah). Regarding Mr. Irwansyah's credit approval, is it necessary to request a Risk Assessment from the Risk Management Division? A) Does not require a risk study from the MR Division. B) Requires a risk assessment from the MR Division. Show Answer Correct Answer: A) Does not require a risk study from the MR Division. 7. Rules of Delegation in a Bank's Credit Policy represents one among the following. Identify? A) Powers to sanction Loans by various functionaries. B) Loan Monitoring Mechanism. C) Exposure Levels. D) Risk Rating Architecture. Show Answer Correct Answer: A) Powers to sanction Loans by various functionaries. 8. Which among the following is a Credit Risk Mitigant? A) Pricing of Loan assets. B) Legal Action. C) Insurance of assets. D) None of the above. Show Answer Correct Answer: C) Insurance of assets. 9. Net Working Capital represents A) Short Term Funds arranged by the unit from market. B) Total Working Capital less Bank Finance. C) Promoters' Margin. D) Long Term Funds, available to support the short term requirement of the unit. Show Answer Correct Answer: D) Long Term Funds, available to support the short term requirement of the unit. 10. What are the data challenges when building a credit early warning system? A) Quality of data. B) Update level of data. C) Structure of the data. D) All the answers above. Show Answer Correct Answer: D) All the answers above. 11. The measurement model.....will determine the likelihood of non-repayment or decline in creditworthiness. A) Quantitative. B) Credit risk. C) Market risks. D) Qualitative. Show Answer Correct Answer: B) Credit risk. 12. Which is not Availability of Effective Management Information System A) Track quality and account performance. B) Maintain limits. C) Monitor and control risk. D) Report exposures. Show Answer Correct Answer: C) Monitor and control risk. 13. Which among the following is part of the building blocks of an effective Credit Risk Management in a Bank? A) Organisational Structure. B) Operations & Systems. C) Policy and Strategy. D) All of these. Show Answer Correct Answer: D) All of these. 14. As per the Nayak Committee recommendations, the minimum working capital limits to be sanctioned by Bank is ..... A) 20% of the Projected Annual Gross Sales. B) 25% of the Projected annual sales. C) 20% of the Last years actual sales. D) 10% of the Projected annual sales. Show Answer Correct Answer: A) 20% of the Projected Annual Gross Sales. 15. According to the Basel Committee's point of view, risks in banking business include the following types: A) Credit risk. B) Market risks. C) Operational risks. D) All types of risks mentioned above. Show Answer Correct Answer: D) All types of risks mentioned above. 16. Which typical credit process would involve under Credit controls, review and analysis A) Documentation and security. B) Portfolio review and trend analysis. C) Credit approval. D) External controls and audit. Show Answer Correct Answer: B) Portfolio review and trend analysis. 17. Credit risk contains components of probability of default, exposure to default and recovery rate, but banks pay attention to other risks, including, except A) Risk Supplier. B) Competition Risk. C) Risk of uncertainty. D) Inflation Risk. E) Political Risk. Show Answer Correct Answer: A) Risk Supplier. 18. Which among the following is NOT a Credit Risk Rating Agency in India? A) ICRA Ltd. B) Equifax. C) CRISIL Ltd. D) DIRECTION. Show Answer Correct Answer: B) Equifax. 19. Portfolio risk in credit activities refers to what situation? A) Mistakes in the credit appraisal and decision process. B) Real estate business loans account for 60% of outstanding loans. C) Medium and long-term loans with fixed interest rates in inflationary situations. D) A group of customers who deposited large amounts of money withdrew money before maturity. Show Answer Correct Answer: B) Real estate business loans account for 60% of outstanding loans. 20. The credit scoring methods used have developed from traditional statistical techniques to innovative methods such as the use of Artificial Intelligence (AI). There are 5 assessment categories in credit scoring for individual debtors with respective weightings, except A) Marketing Mix & Business Mapping. B) Length of Credit history. C) Amount Owned. D) Payment history. E) New credit. Show Answer Correct Answer: A) Marketing Mix & Business Mapping. 21. When applying the basic internal credit rating (FIRB) method to measure risk in credit activities, banks need to estimate which of the following parameters? A) Probability of default (PD). B) Validity rollover period (M). C) Amount at risk at time of default (EAD). D) Loss on default (LGD). Show Answer Correct Answer: A) Probability of default (PD). 22. What is the net working capital ( margin) requirement under second method of lending prescribed by Tandon Committee? A) 20% of Projected Annual Turnover. B) 25% of total current assets. C) 25% of working capital gap. D) 25% of total assets. Show Answer Correct Answer: B) 25% of total current assets. 23. Which of the following affects transaction risk in credit activities? A) Analyze customers to decide whether to lend/not lend. B) Determine the maximum loan balance ratio for each industry. C) Analyze customers to decide on secured loans/unsecured loans. D) All the answers above. Show Answer Correct Answer: D) All the answers above. 24. Reputation and Standing of a Promoter is assessed as part of which Parameter under Credit Risk Rating? A) Financial Risk. B) Management Risk. C) Industry Risk. D) Business Risk. Show Answer Correct Answer: B) Management Risk. 25. WHAT ARE THE 3 MAIN FUNCTIONS OF THE BOARD OF DIRECTORS? A) 1. Structure2. Continuity3. Accountability. B) 1. System2. Ideals3. Relationship. C) 1. Strategic Planning2. Direction Setting3. Policy Formulation. D) 1. Organizing2. Staffing3. Controlling. Show Answer Correct Answer: C) 1. Strategic Planning2. Direction Setting3. Policy Formulation. 26. What is not included in credit risk is A) Concentration of credit distribution in certain sectors. B) Interest rate hike. C) Risk course. D) Determination of fixed flat interest. E) The end of fixing fixed interest rates and switching to floating interest rates specifically for mortgage loans. Show Answer Correct Answer: D) Determination of fixed flat interest. 27. The Pasar Raya Branch Office is processing credit with a total ceiling of IDR 1, 500, 000, 000, -(one billion five hundred million rupiah) with a KPR-MG scheme of IDR 1, 000, 000, 000, -(one billion rupiah) and KRK of IDR 500, 000, 000, -(five hundred million rupiah) with the productive NPL condition of the Pasar Raya Branch above 10%, regarding this condition, is it necessary for the Pasar Raya Branch to request a study from the Risk Management Division? A) No need for risk assessment. B) Request a risk assessment from the MR Division. Show Answer Correct Answer: A) No need for risk assessment. 28. One of your Borrower Customer failed to service monthly interest in his working capital account. Which among the following is correct about the type of risk the Bank is facing in this context? A) Market Risk. B) Interest Rate Risk. C) Fraud Risk. D) Credit Risk. Show Answer Correct Answer: D) Credit Risk. 29. Which among the following is not a Credit Information Company in India? A) Equifax. B) CIBIL. C) Experian. D) Moodys. Show Answer Correct Answer: D) Moodys. 30. Cash Budget Method of assessment of WC Limits is used in: A) Sugar Industry Tea Industry, Cement Industry. B) Oil industry Tea industry, construction industry. C) Sugar Industry Coffee Industry, Construction Industry. D) Sugar Industry Tea Industry, Construction Industry. Show Answer Correct Answer: D) Sugar Industry Tea Industry, Construction Industry. 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