Practice Test Geeks(CBA) Certified Bank Auditor Practice Test
← All CBA Flashcard Decks

Risk Management Flashcards

7 cards from real CBA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Risk Management flashcards as text

  1. Under the Dodd-Frank Act, systemically important financial institutions (SIFIs) are subject to enhanced prudential standards primarily to:

    Answer: Reduce the risk that their failure could destabilize the broader financial system

    Enhanced prudential standards for SIFIs are designed to reduce systemic risk and prevent the spillover of a large institution's failure.

  2. A bank auditor reviewing the ALCO process would PRIMARILY focus on whether:

    Answer: Interest rate risk, liquidity risk, and capital adequacy are actively monitored and managed

    The Asset-Liability Committee (ALCO) is responsible for managing interest rate risk, liquidity, and capital—the auditor assesses whether that governance is effective.

  3. In credit risk management, Loss Given Default (LGD) measures:

    Answer: The proportion of exposure the bank loses if the borrower defaults

    LGD represents the fraction of the exposure that is not recovered after a default, net of collateral and recoveries.

  4. A bank's contingency funding plan (CFP) should be tested:

    Answer: Periodically and updated to reflect changes in the bank's business and market conditions

    CFPs must be regularly tested and updated to remain effective; stale plans may fail when actually needed.

  5. Which risk category encompasses losses resulting from inadequate internal processes, people, systems, or external events?

    Answer: Operational risk

    Operational risk, as defined by Basel II/III, covers losses from internal failures or external events including fraud, system outages, and natural disasters.

  6. A bank implements a policy requiring dual authorization for wire transfers above $50,000. This control PRIMARILY addresses:

    Answer: Fraud and unauthorized transaction risk

    Dual authorization (maker-checker) is a key internal control to prevent unauthorized or fraudulent large-dollar transactions.

  7. The Net Stable Funding Ratio (NSFR) was introduced under Basel III to address which specific concern?

    Answer: Over-reliance on short-term, unstable funding sources to finance long-term assets

    The NSFR requires banks to fund long-term assets with stable, longer-term liabilities, reducing structural liquidity risk over a one-year horizon.