This quiz works best with JavaScript enabled. Home > Risk Management > Credit Risk Management – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Credit Risk Management Quiz 1 (20 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) Guaranteed risk. B) Choice risk. C) Professional risks. D) Internal risks. 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) Stewardship. B) Accountability. C) Transparency. D) Security. Show Answer Correct Answer: D) 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) Internal risks. B) Concentration risk. C) Loan product risks. D) Professional risks. Show Answer Correct Answer: B) 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) Long Term Funds, available to support the short term requirement of the unit. B) Promoters' Margin. C) Short Term Funds arranged by the unit from market. D) Total Working Capital less Bank Finance. Show Answer Correct Answer: A) 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) Credit risk. B) Market risks. C) Quantitative. D) Qualitative. Show Answer Correct Answer: A) 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) 10% of the Projected annual sales. B) 20% of the Projected Annual Gross Sales. C) 25% of the Projected annual sales. D) 20% of the Last years actual sales. Show Answer Correct Answer: B) 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) Inflation Risk. B) Risk Supplier. C) Political Risk. D) Competition Risk. E) Risk of uncertainty. Show Answer Correct Answer: B) Risk Supplier. 18. Which among the following is NOT a Credit Risk Rating Agency in India? A) CRISIL Ltd. B) ICRA Ltd. C) Equifax. D) DIRECTION. Show Answer Correct Answer: C) 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) Payment history. B) Amount Owned. C) Length of Credit history. D) Marketing Mix & Business Mapping. E) New credit. Show Answer Correct Answer: D) Marketing Mix & Business Mapping. Next →Related QuizzesCredit Risk Management Quiz 2Credit Risk Management Quiz 3Credit Risk Management Quiz 4Credit Risk Management Quiz 5Enterprise Risk Management QuizOperational Risk Management Quiz 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books