EXAM: MODULE 1: INTRODUCTION TO RETAIL CREDIT RISK MANAGEMENT

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Question 1 of 27

1. Question
Which of the following is not a common reason for retail credit defaults?
- The lender does not properly study the creditworthiness of the borrower
- An economic downturn affects the welfare of the borrower
- The borrower loses his or her job
- The borrower gets married
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Question 2 of 27

2. Question
Which of the following statements is correct?
- Having a corporate lending portfolio is less risky than lending to consumers
- A consumer lending portfolio is less risky than a corporate lending portfolio
- Neither of the above
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Question 3 of 27

3. Question
Which of the following is not a major market force impacting on retail credit risk?
- Government
- Supply and demand
- Speculators
- Education
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Question 4 of 27

4. Question
What is the maturity date on a bank loan?
- The date the customer receives the loan
- The date that the loan is repaid in full
- The date that the bank accepts the loan application
- The date that the customer submits the loan application
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Question 5 of 27

5. Question
What is a charge document?
- The formal loan application form
- The documents advertising the loan terms
- The formal loan documents with details of all terms, pricing and any security
- None of the above.
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Question 6 of 27

6. Question
Which one of these statements is correct?
- Expected risk is the expected loss due to unexpected loan defaults
- Unexpected risk is the risk of losses that exceed expectations
- Unexpected risk losses reduce the bank’s liabilities
- Provisions for expected risk losses are part of shareholders’ equity
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Question 7 of 27

7. Question
Which of the following would not normally appear on a national credit bureau scorecard?
- All bad debts relating to the customer suffered by the country's banks
- All bad debts relating to the customer worldwide
- Betting losses
- Cryptocurrency holdings
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Question 8 of 27

8. Question
Unspecified purpose loans include which of the following?
- Credit cards
- Auto loans
- Mortgages
- All of the above
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Question 9 of 27

9. Question
Examples of specified loans include which of the following?
- Credit cards
- Auto loans
- Overdrafts
- Corporate charge cards
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Question 10 of 27

10. Question
Typical examples of loan collateral include:
- Farm animals
- A motor vehicle
- Cardigans and other knitted goods
- All of the above
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Question 11 of 27

11. Question
A typical lending service to an SME is:
- Credit cards
- Debit cards
- Prepaid cards
- Overdrafts
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Question 12 of 27

12. Question
Buy Now Pay Later (BNPL) is a form of retail finance where:
- the cost of lending is borne by the merchant
- the consumer pays interest on the outstanding balance, just like a credit card
- the cost of lending is shared by the merchant and the consumer
- consumers can make interest-only payments for up to three years
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Question 13 of 27

13. Question
An overdraft is:
- A fixed-term loan attached to a current account
- A facility that allows the customer to withdraw funds above the amount of funds in a current account
- A short-term credit account that must normally be repaid at the end of the month
- An error where too much money is paid in a bank draft
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Question 14 of 27

14. Question
A credit card:
- Cannot be used to make international payments unless the issuer is a member of one of the international payment networks
- Usually bears a very low interest rate
- Cannot be used to make payments in foreign currencies
- Cannot be used for e-commerce payments
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Question 15 of 27

15. Question
Mortgage loans typically involves the bank:
- verifying the value of the real estate
- taking an equity interest in the real estate
- offering repayment holidays to customers every six months
- checking Google Maps to see if the real estate actually exists
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Question 16 of 27

16. Question
Operational risk arises from:
- fraud
- currency fluctuations
- futures contracts at the Chicago Mercantile Exchange
- liquidity risk
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Question 17 of 27

17. Question
Country risk arises from:
- the imposition of exchange controls
- a sudden increase in interest rates
- negative political changes
- translation documents causing operational errors
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Question 18 of 27

18. Question
Liquidity risk arises where:
- frequent flooding causes a bank to re-assess its property lending portfolio along riverbanks and near coastal areas
- a bank does not have the required liquidity to meet its obligations
- there are major changes in exchange rates
- a country suddenly freezes customer bank accounts
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Question 19 of 27

19. Question
Capital risk arises where:
- a bank faces liquidity shortages
- a bank has more capital than it needs and cannot find somewhere to put the surplus
- a bank has insufficient capital to withstand losses
- a bank establishes its headquarters in a second-tier city
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Question 20 of 27

20. Question
The principal amount of a loan is:
- the total amount of the loan
- the amount outstanding on the loan at any period of time
- the amount of the loan plus the interest due over the course of the lifetime of the loan
- the loan plus interest minus tax relief if the loan is related to a regulated charity
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Question 21 of 27

21. Question
Credit risk departments responsible for monitoring and controlling risk portfolios need to keep the following under review:
- the rate of risk growth versus planned growth
- customer wages
- customer holiday arrangements, especially around New Year's Eve
- prices at credit reporting bureaus
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Question 22 of 27

22. Question
What is the best way for a bank to avoid losses in lending?
- Avoid making loans
- Rigorous credit scoring and risk management
- Have collateral that is still adequate even following a 50% haircut
- Lend only to the top ten percent of eligible borrowers
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Question 23 of 27

23. Question
What is a disbursement date?
- It is the date that a loan amount is paid to a customer.
- The date when the bank arranges an annual dance for its borrowers
- The date of the final repayment of the loan by the customer
- The first date that a customer misses a loan repayment
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Question 24 of 27

24. Question
What is meant by expected loss in the case of a bank loan?
- The price the bank will bear to be able to do business in that customer group
- The level of loss that a bank will not accept when doing business with a particular segment
- The charge against profits that a bank shows as expenses in its income statement
- The name for a loan that the banks knows will go bad within minutes of the customer signing the agreement.
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Question 25 of 27

25. Question
Which organisation is credit with inventing credit scoring for retail banking?
- Visa International
- Citibank
- Fair Isaac Corporation
- Bank of America
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Question 26 of 27

26. Question
Which of the following products meets the definition of revolving credit?
- The personal loan
- A new generation of Swiss watches with digital credit facilities
- Debit cards
- Credit cards
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Question 27 of 27

27. Question
A FICO score is used for:
- Making loans to local football teams as part of a FIFA-backed loan guarantee scheme
- An external credit score provided to the bank
- A score provided by the bank's in-house credit risk team
- None of the above
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EXAM: MODULE 1: INTRODUCTION TO RETAIL CREDIT RISK MANAGEMENT

EXAM: MODULE 1: INTRODUCTION TO RETAIL CREDIT RISK MANAGEMENT

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