CORES Basel Framework & Capital Requirements 3

Question 1

Under the Basel Internal Ratings-Based (IRB) approach for credit risk, which parameter does the bank estimate while regulators supply the others under the Foundation IRB (F-IRB)?

Accepted Answer

Probability of Default (PD)

Answer

Under F-IRB, banks estimate only the Probability of Default (PD); LGD, EAD, and M are set by supervisors.

Question 2

The Basel III Liquidity Coverage Ratio (LCR) requires banks to hold sufficient High-Quality Liquid Assets (HQLA) to cover net cash outflows over what time period?

Accepted Answer

30 days

Answer

The LCR requires HQLA to cover projected net cash outflows over a 30-day stress scenario.

Question 3

Which Basel framework introduced the concept of 'Pillar 2' supervisory review, allowing regulators to impose capital requirements above Pillar 1 minimums?

Accepted Answer

Basel II (2004)

Answer

Basel II (2004) established the three-pillar framework, introducing Pillar 2 supervisory review as a formal mechanism.

Question 4

In the context of Basel operational risk, the Advanced Measurement Approach (AMA) allowed banks to use which combination of data sources?

Accepted Answer

Internal loss data, external loss data, scenario analysis, and business environment factors

Answer

The AMA required banks to incorporate internal loss data, external loss data, scenario analysis, and business environment and internal control factors (BEICFs).

Question 5

Under Basel III's revised standardized approach for credit risk, what risk weight is applied to unrated corporate exposures?

Accepted Answer

100%

Answer

Unrated corporate exposures receive a 100% risk weight under the revised Basel III standardized approach.

(CORES) Certified Operational Risk Executive Specialist Practice Test

(CORES) Certified Operational Risk Executive Specialist Practice Test

CORES Basel Framework & Capital Requirements 3