Credit Risk Management Basel Regulatory Framework 2

Question 1

What is the capital conservation buffer (CCB) requirement under Basel III?

Accepted Answer

2.5%

Answer

1%

Answer

1.5%

Answer

3.5%

Question 2

Under CECL (Current Expected Credit Loss) accounting in the US, when must lifetime expected losses be recognized?

Accepted Answer

At loan origination, for the full expected life

Answer

Only when a loan is 90+ days past due

Answer

Only when a loan is classified as substandard

Answer

When a loan is placed on non-accrual status

Question 3

What is the risk weight for unrated corporate exposures under the Basel II Standardized Approach?

Accepted Answer

100%

Answer

20%

Answer

50%

Answer

150%

Question 4

Which Basel III requirement specifically targets short-term liquidity resilience?

Accepted Answer

Liquidity Coverage Ratio (LCR)

Answer

Net Stable Funding Ratio (NSFR)

Answer

Leverage Ratio

Answer

Capital Conservation Buffer

Question 5

Under the Basel IRB approach, Unexpected Loss (UL) is covered by what?

Accepted Answer

Regulatory capital

Answer

Loan loss provisions

Answer

Retained earnings

Answer

Tier 2 instruments

Question 6

What is the primary purpose of Basel III's Net Stable Funding Ratio (NSFR)?

Accepted Answer

Ensure long-term funding stability over a one-year horizon

Answer

Limit short-term borrowing in money markets

Answer

Require banks to hold more government bonds

Answer

Cap the size of trading books