General Awareness Quiz on Risks in Banking Sector- 12th December 2020

Q1.Which of the following is Not a type of risk in Banking Sector?
(a)Credit Risk
(b)Operational Risk
(c)Market Risk
(d)Liquidity Risk
(e)Account Risk

Q2.Operational Risk is the risk of-
(a)When borrowers or counterparties fail to meet contractual obligations.
(b)The unpredictability of equity markets, commodity prices, interest rates, and credit spreads.
(c)Loss due to errors, interruptions, or damages caused by people, systems, or processes.
(d)The ability of a bank to access cash to meet funding obligations
(e)All of the above

Q3.When the risk of losses in on- or off-balance sheet positions arise from movement in market prices, it is called as-
(a)Credit Risk
(b)Operational Risk
(c)Market Risk
(d)Liquidity Risk
(e)Account Risk

Q4.”Payments credited to the wrong account” is an example of which Risk?
(a)Credit Risk
(b)Operational Risk
(c)Market Risk
(d)Liquidity Risk
(e)Account Risk

Q5.The risk that arises from the possibility of non-payment of loans by the borrowers is known as-
(a)Credit Risks
(b)Market Risks
(c)Moral Hazard
(d)Business Risk
(e)Liquidity Risk

Q6._________ risk arises because of the fact that the financial system is one intricate and connected network.
(a)Credit
(b)Operational
(c)Market Risk
(d)Systemic
(e)Account

Q7.The major component of Market risk is-
(a)Interest rate risk
(b)Equity risk
(c)Foreign exchange risk
(d)Commodity risk
(e)All of the above

Q8.When bank’s image and public standing is in doubt and leads to public’s loss of confidence in a bank, it is called as-
(a)Reputational risk
(b)Moral Hazard
(c)Operational risk
(d)Market risk
(e)None of the above

Q9.Legal Risk is known as-
(a)When the actions can lead to the entire financial system coming to a standstill.
(b)When there is a financial loss to bank arising from legal suits filed against the bank or by a bank for applying a law wrongly.
(c)When a bank chooses the wrong strategy or follow a long-term business strategy which might lead to its failure.
(d)When bank’s image and public standing is in doubt and leads to public’s loss of confidence in a bank.
(e)All of the above

Q10.________ risk is the potential loss due to changes in the value of a bank’s assets or liabilities resulting from exchange rate fluctuations.
(a)Interest rate
(b)Equity
(c)Foreign exchange
(d)Commodity
(e)None of the above

Solutions

S1.Ans.(e)
Sol.Account Risk is Not a type of risk in Banking Sector.

S2.Ans.(c)
Sol.Operational risk is the risk of loss due to errors, interruptions, or damages caused by people, systems, or processes.

S3.Ans.(c)
Sol.Market risk is “the risk of losses in on and off-balance-sheet positions arising from movements in market prices”.

S4.Ans.(b)
Sol.Examples of operational risk would include payments credited to the wrong account or executing an incorrect order while dealing in the markets.

S5.Ans.(a)
Sol.Credit risk is the risk that arises from the possibility of non-payment of loans by the borrowers.

S6.Ans.(d)
Sol.Systemic risk arises because of the fact that the financial system is one intricate and connected network.

S7.Ans.(e)
Sol.The major components of Market risk are::
Interest rate risk
Equity risk
Foreign exchange risk
Commodity risk

S8.Ans.(a)
Sol.When bank’s image and public standing is in doubt and leads to public’s loss of confidence in a bank, it is called as Reputational risk.

S9.Ans.(b)
Sol.When there is a financial loss to bank arising from legal suits filed against the bank or by a bank for applying a law wrongly, it is called as Legal Risk.

S10.Ans.(c)
Sol.Foreign exchange risk is the potential loss due to changes in the value of a bank’s assets or liabilities resulting from exchange rate fluctuations

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