GARP GARP Certifications ICBRR Questions & Answers

• Question 71:

  Which of the following statements about implementation of a successful RCSA program is correct?

  A. An RCSA is only complete after all possible mitigating actions have been identified and analyzed as a result of the assessment process.

  B. Internal loss data help to identify the risks and control weaknesses that need to be addressed in the RCSA; external events are not helpful in informing the discussions around potential risks.

  C. The RCSA scoring methodology should include only financial impacts and not include reputational, legal, regulatory, client and life safety impacts.

  D. To ensure that the RCSA is well designed, it is important to interview participants, stakeholders and support functions prior to the launching the RCSA.

  Correct Answer: D

• Question 72:

  Securitization is the process by which banks

  A. Issue bonds where the payment of interest and repayment of principal on the bonds depends on the cash flow generated by a pool of bank assets.

  II. Issue bonds where the bank has transferred its legal right to payment of interest and repayment of principal to bondholders.

  III. Sell illiquid assets.

  B. I, II

  C. I

  D. I, III

  E. I, II, III

  Correct Answer: D

• Question 73:

  Which one of the following four statements about regulatory capital for a bank is accurate?

  A. Regulatory capital is determined by rules imposed by an outside authority, such as a supervisor or central bank.

  B. Regulatory capital is the lowest level of economic capital the bank should have to meet regulatory requirement.

  C. Regulatory capital reflects the economic tradeoffs of the bank as accurately as the bank can represent them.

  D. Regulatory capital is less than the regulatory capital requirement.

  Correct Answer: A

• Question 74:

  Which of the following statements explain how securitization makes the retail assets highly liquid and the balance sheet easier to manage?

  A. By securitizing assets any lack of capital can be accommodated by selling the securitized bonds.

  II. Any need to diversify credit risk can be achieved by selling bank's own securitized bonds and buying other bonds that increase diversification.

  III. Securitization could be used to promote hedging by using limited market instruments.

  B. I, II

  C. I, II, III

  D. II, III

  E. II

  Correct Answer: A

• Question 75:

  Using a forward transaction, Omega Bank buys 100 metric tones of aluminum for delivery in six-months' time. However, after two months, the bank becomes concerned with the potential fluctuations in aluminum prices and wants to hedge its potential exposure against a possible decline in aluminum prices. Which one of the following four strategies could the bank use to offset the risk from its current exposure to aluminum as it sets the price for selling the commodity in four-months' time?

  A. Sell an aluminum futures contract

  B. Buy an aluminum futures contract

  C. Sell an aluminum forward contract

  D. Buy an aluminum forward contract

  Correct Answer: A

• Question 76:

  A trader inadvertently booked a trade with incorrect information. A subsequent market move resulted in a gain to the bank. Should the bank include this amount of gain into its operational loss event data program?

  A. The bank should include this gain in its operational loss event data program as a gain realized due to operational risk events.

  II. The bank should include this gain in its operational loss event data program as it indicates that a control failed or a process is flawed.

  III. The bank should include this event in its operational loss event data program and record the gain as a loss resulting from operational risk.The bank should not include this event in its operational loss event data program as it is not a loss event, but a market risk event.

  B. I and II

  C. II and III

  D. I, II and III

  E. I and III

  Correct Answer: A

• Question 77:

  All of the following factors generally explain the equity bid-offer spread in a market EXCEPT:

  A. Market volatility

  B. Interest rates

  C. Competition among market makers

  D. Market depth

  Correct Answer: B

• Question 78:

  Which statements correctly describe the features of using subscription databases for operational loss data analysis?

  Subscription databases

  A. Provide central data repositories and benchmarking services to their members.

  II. Can provide insight into whether the losses in a firm reflect the usual losses in their industry.

  III. Assist with mapping the events to the appropriate business lines, risk categories and causes.

  IV. Reflect only events that are interesting to the press and are reported in the press.

  B. I and II

  C. II and III

  D. I, II and III

  E. II, III, and IV

  Correct Answer: B

• Question 79:

  Which one of the following four factors typically drives the pricing of wholesale products?

  A. Marketing considerations

  B. Prevailing market price

  C. Long-term competitiveness

  D. Overall risk exposure

  Correct Answer: B

• Question 80:

  Which one of the four following non-statistical risk measures are typically not used to quantify market risk?

  A. Option sensitivities

  B. Net closed positions

  C. Convexity

  D. Basis point values

  Correct Answer: B