This quiz works best with JavaScript enabled. Home > Finance > Risk Management > Credit Risk Management – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Credit Risk Management Quiz 3 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Pre sanction credit process can be classified into how many stages? A) 2. B) 4. C) 1. D) 3. Show Answer Correct Answer: D) 3. 2. The function of Credit Risk Management is: A) Carrying out the check and balance function in the form of providing credit risk studies on proposals for granting credit/financing with certain specified criteria. B) Carry out an initial assessment of the feasibility of a transaction/exposure/claim that contains credit risk. C) Carry out administrative management of transactions/exposures/bills that contain credit risk. D) B and C Correct. Show Answer Correct Answer: A) Carrying out the check and balance function in the form of providing credit risk studies on proposals for granting credit/financing with certain specified criteria. 3. Which statement is correct about the credit portfolio risk measurement model? A) This model helps build an appropriate organizational model for the entire banking system. B) This model helps banks increase the number of customers using credit cards. C) This model brings together many calculation techniques, mainly using statistical probability. D) All of the above ideas are correct. Show Answer Correct Answer: C) This model brings together many calculation techniques, mainly using statistical probability. 4. Credit risk provision costs: A) Is an item on the Balance Sheet that indicates the total available resources that can reverse bad debts. B) Is a non-cash expense on the Income Statement that reflects the value of provision in the reporting period for bad debts. C) An item in the Income Statement that indicates the profit or loss value of securities trading activities. D) All is incorrect. Show Answer Correct Answer: B) Is a non-cash expense on the Income Statement that reflects the value of provision in the reporting period for bad debts. 5. What types of mistakes often occur during the decision and signing stage of credit contracts? A) Loan approval without analysis and appraisal. B) Approve loans to bad customers. C) Refuse to lend to good customers. D) Answers B and C. Show Answer Correct Answer: D) Answers B and C. 6. The function of Credit Risk Management in providing credit risk analysis does not apply to: A) Extension of credit/financing. B) Credit/Financing guaranteed by Insurance/Guarantee Companies. C) Credit/Financing with cash collateral. D) A, B and C are correct. Show Answer Correct Answer: D) A, B and C are correct. 7. Lending policy setting the basic standards and procedures to A) Standards for individual credit assessment. B) Composition of the loan portfolio. C) Procedures governing compliance with loan related policies deregulations. D) Identify and administer problem credits. Show Answer Correct Answer: B) Composition of the loan portfolio. 8. Which is not framework under Maintenance of adequate policies and procedures A) Problem credits. B) Guide banking's credit granting activities. C) Asset quality. D) Sets risk tolerance levels. Show Answer Correct Answer: A) Problem credits. 9. Adjustments to the Credit Risk Management Implementation Guidelines include additional provisions related to A) Implementation of Credit Risk Management. B) Implementation of Credit Review. C) Establishment of a Risk Policy Group. D) A and B are correct. Show Answer Correct Answer: A) Implementation of Credit Risk Management. 10. Under Nayak committee's Turnover method for working capital, the current ratio is A) 0.9:1. B) 1:1. C) 1.33:1. D) 1.25:1. Show Answer Correct Answer: D) 1.25:1. 11. Which of the following are the 3 Types of Risk Management? A) NO ANSWER. B) 1. Systematic Risk2. Unsystematic Risk3. Regulatory Risk. C) 1. Cluster Risk2. Groupings Risk3. Family Risk. D) 1. Basic Risk2. Moderate Risk3. Hard Risk. Show Answer Correct Answer: B) 1. Systematic Risk2. Unsystematic Risk3. Regulatory Risk. 12. Which of the following IS A Principle of LENDING? A) Revenue. B) Money. C) Security. D) Funds. Show Answer Correct Answer: C) Security. 13. Competent Personnel have a complete understanding of the risks associated with the banking institution credit activities A) True. B) False. Show Answer Correct Answer: A) True. 14. Which of the following factors directly affects the effective interest rate of the loan? A) Clearing deposit balance. B) How customers pay interest to the bank. C) Commitment fee. D) All answers printed above. Show Answer Correct Answer: D) All answers printed above. 15. Which among the following is a tool to measure the Credit Risk embedded in a loan asset? A) Invocation of Insurance. B) Credit Risk Rating. C) Loan Pricing. D) None of the above. Show Answer Correct Answer: B) Credit Risk Rating. 16. Which of the following is not a basic condition for implementing diversification in credit portfolio structure? A) The portfolio must include a large number of credits of relatively small value. B) The credits on the portfolio must be independent, less dependent on each other. C) The credits on the portfolio must generate high returns. D) Both A and B. Show Answer Correct Answer: C) The credits on the portfolio must generate high returns. 17. Multiple borrowing without Bank's consent is viewed as ..... A) Financial Indiscipline. B) Ne need to obtain consent. C) It is permitted by RBI. D) None of the above. Show Answer Correct Answer: A) Financial Indiscipline. 18. Which one is the typical credit process would involve under Business Origination A) Disbursement and receipts. B) Internal control and audit. C) Credit policy and process review. D) Credit appraisal and review. Show Answer Correct Answer: D) Credit appraisal and review. 19. Which is not an example of typical credit process A) Credit administration and monitoring. B) Credit recovery. C) Credit organization. D) Credit origination. Show Answer Correct Answer: C) Credit organization. 20. Lessons Learned from Silicon Valley Bank (SVB), financing problems in the Start Up Industry in the business cycle fall into the category A) Development. B) Declining Operation. C) Concept Creation. D) Young Operation. E) Middle Aged Operation. Show Answer Correct Answer: A) Development. 21. In credit risk measurement models, which of the following parameters reflects the level of credit risk related to borrowers? A) Amount at risk at time of default (EAD). B) Validity rollover period (M). C) Loss on default (LGD). D) Probability of default (PD). Show Answer Correct Answer: D) Probability of default (PD). 22. As per Regulatory Guidelines, upto which level in a Rating Scale, the rating shall represent an acceptable level of Credit Risk? A) Levels 1 to 3. B) Levels 1 to 4. C) Levels 1 to 5. D) Levels 1 to 7. Show Answer Correct Answer: C) Levels 1 to 5. 23. In working capital accounts which among the given ratios is used to assess Financial Risk? A) Debt Equity Ratio. B) Debt Service Coverage Ratio. C) Current Ratio. D) All of the Above. Show Answer Correct Answer: C) Current Ratio. 24. Bro. Syukra, a customer of the Ujung Gading Branch Office, applied for a working capital credit for a TBS trading business with a ceiling of IDR 4, 000, 000, 000 (four billion rupiah). The NPL for productive credit at the Ujung Gading Branch was 13.32% and the NPL for the trade sector was 17.84%. The limit of authority to decide on the Ujung Gading Branch Office is IDR 1, 000, 000, 000 (one billion rupiah). Regarding the customer credit approval process, is it necessary for the Ujung Gading Branch Office to request a risk assessment from the Risk Management Division? A) KC requested a risk study from the Risk Management Division. B) KC did not request a risk review from the Risk Management Division. Show Answer Correct Answer: B) KC did not request a risk review from the Risk Management Division. 25. What banking institutions should take into consideration when in assessing the acceptability of collateral? A) Composition of the loan portfolio. B) Aggregate size of the general collateral that the banking institution holds. C) Governing compliance with loan related policies. D) Ease of disposal of the collateral. Show Answer Correct Answer: D) Ease of disposal of the collateral. 26. Credit/financing criteria that require a credit risk study are, among others, except: A) Credit/Financing which is the authority of the Division and Directors. B) Productive credit/financing (new and/or additional) which is the authority of the branch with the condition that the Branch Productive NPL (NPF) percentage is 10% or more and the Economic Sector NPL (NPF) percentage is 10% or more with a predetermined total ceiling. C) All credit/financing submitted by the Customer. D) A and B are correct. Show Answer Correct Answer: C) All credit/financing submitted by the Customer. 27. Leson Learned from Signature Bank and Silvergate Bank problems in credit financing concentrated on A) Property. B) Startup Industry. C) Wholesale Banking. D) Construction Lending. E) Crypto Industry. Show Answer Correct Answer: E) Crypto Industry. 28. Which of the following departments does not directly participate in the 3 lines/circles of control in the bank's credit granting activities: A) Internal audit. B) Accounting transaction. C) Risk management. D) Credit. Show Answer Correct Answer: B) Accounting transaction. 29. KYC guidelines are applicable to A) Only for some borrowal accounts. B) To all borrowal accounts. C) Only to deposit accounts. D) None of the above. Show Answer Correct Answer: B) To all borrowal accounts. 30. Branch Offices (risk Owners) are responsible for the management and control of risks inherent in daily activities in carrying out their business or functions, including credit activities. Branch offices in the bank defense system model are included in the A) Secondline of Defence. B) Fifthline of Defence. C) Firstline of Defence. D) Fourthline of Defence. E) Thirdline of Defence. Show Answer Correct Answer: C) Firstline of Defence. ← PreviousNext →Related QuizzesFinance QuizzesCredit Risk Management Quiz 1Credit Risk Management Quiz 2Credit Risk Management Quiz 4Enterprise Risk Management QuizOperational Risk Management Quiz 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books