Credit Analysis & Risk Management
Shared & solved by Mehreen Humayun
Question # 1 of 15
What will be the credit conversion factor for commitments with original maturity over one year as proposed in the June 1999 Consultative Paper?
Continue to be 60%
Continue to be 50%
Continue to be 40%
Continue to be 30%
LECTURE – 22
The credit conversion factor for commitments with original maturity over one year will continue to be 50%.
Question # 2 of 15
All of the following are the examples of personal collateral, EXCEPT:
Guarantee and letter of support
LECTURE – 18
Examples of personal collateral are the following:
a. surety ship
b. guarantee and letter of support
c. collateral promise
Question # 3 of 15
How many process components are there in the credit review?
LECTURE – 17
The credit review basically consists of two process components:
1. Standardized models of data evaluation
2. Documentation and evaluation of other credit assessment factors
Question # 4 of 15
Which of the following, for groups of companies, should be designed in a manner, specific to the risk involved, efficient and should aim to focus the review on actual risk-bearer?
LECTURE – 14
Credit approval for groups of companies should be designed in a manner which is specific to the risk involved and efficient and should aim to focus the review on the actual risk-bearer, that (natural or legal) person whose legal and economic situation ultimately determines the ability to fulfill the obligations under the credit agreement.
Question # 5 of 15
Which of the following policies reward unacceptable behavior such as generating short-term profits while deviating from credit policies or exceeding established limits, weaken the bank's credit processes?
LECTURE – 06
Remuneration policies that reward unacceptable behavior such as generating short-term profits while deviating from credit policies or exceeding established limits, weaken the bank's credit processes.
Question # 6 of 15
How many approaches do Basel II provide to determine the capital requirement?
LECTURE – 14
Basel II provides two approaches to determine the capital requirement:
1. A standardized approach and
2. An internal ratings-based approach (IRB approach).
Question # 7 of 15
Which of the following is the one way for a bank to deal with credit risk?
Charge all borrowers from the same industry an average rate or interest for that industry
Avoid making loans to borrowers from a broad spectrum and to specialize geographically and in specific industries
Add a mark-up to the cost of funds for a specific borrower based on the borrower's credit history
All loans within the conforming loan limit at the time of origination will continue to be deemed
All loans that were within the conforming loan limit at the time of origination will continue to be deemed within the conforming loan limit during the remaining lives of such loans, regardless of whether the loan limit for any subsequent year declines to a level below the limit at the time of origination.
Question # 8 of 15
Which of the following is a critical element in maintaining the safety and soundness of a bank?
LECTURE – 09
Credit administration is a critical element in maintaining the safety and soundness of a bank.
Question # 9 of 15
Claims on individuals belong to which of the following portfolios?
Select correct option:
LECTURE – 14
Claims on individuals belong to the retail portfolio.
Question # 10 of 15
All of the following are the activities covered in a credit history or credit report, EXCEPT:
Consumer’s payment patterns
Consumer’s lending patterns
Consumer’s credit balances
Consumer’s credit inquiries by debtors
The activities covered in a credit history or credit report include, but are not limited to, a consumer’s payment patterns, borrowing patterns, and credit balances, as well as credit inquiries by potential creditors.
Question # 11 of 15
The strong legal position resulting from which of the following collateral, may warrant special treatment of the relevant forms of finance?
Equity and leasing finance
Mortgage and equity finance
Mortgage and leasing finance
Venture capital and equity finance
LECTURE – 13
Mortgage finance and leasing are those forms of finance which often give the lender a substantial degree of control over the asset being financed. The strong legal position resulting from such collateral may warrant special treatment of the relevant forms of finance.
Question # 12 of 15
All of the following are synonyms for adverse credit history, EXCEPT:
Poor credit history
Non-status credit history
Impaired credit history
First-rate credit history
LECTURE – 03
Adverse credit history also called sub-prime credit history, non-status credit history, impaired credit history, poor credit history, and bad credit history, is a negative credit rating.
Question # 13 of 15 ( Start time: 02:08:23 PM ) Total M - 1
Which of the following terms is also called credit history or credit score?
LECTURE – 03
The term "credit reputation" can either be used synonymous to credit history or to credit score.
Question # 14 of 15
Which of the following is referred to as knockout criteria?
LECTURE – 16
Red criteria, which, if fulfilled, lead to an outright rejection of the exposure (also referred to as knock-out criteria).
Question # 15 of 15
The organizational structure of risk analysis is usually based on a five-level organizational model. Which of the following is NOT a level in this model?
The organizational structure of risk analysis is usually based on a five-level organizational model 60
Level 1 executive (chief risk officer)
Level 2 division manager
Level 3 head of department (HD)
Level 4 group leader (GL)
Level 5 specialists Risk.