Quiz Answer Key and Fun Facts
1. The Central banks of the G10 countries (which includes UK and USA among others) formed a committee in 1974 which issues guidelines regarding the conduct of banks. Which European city is the committee named after?
2. Which of the following terms signifies a basic type of risk that is invoked whenever any lending is involved?
3. Credit rating agencies rate customers based on a number of parameters including their financial strength and their performance relative to industry peers. What is the term used to denote bonds that are below investment grade?
4. The first loan application you have to deal with concerns a project loan for the construction of a bridge by an infrastructure company. Which of the following is NOT likely to be a factor in your assessment of this project?
5. The next loan application seems like a piece of cake. A well known automobile company with an AAA credit rating and impeccable financials has requested a term loan for a period of five years. Everything seems to be in order and you're just about to approve the loan when you suddenly realize that approving it may increase your concentration risk. Which of the following factors is NOT likely to be a cause for your concern?
6. If the loan amount is too high, two or more financiers may decide to get together to service it. In such an arrangement, if you are told that your charge on the security offered by the borrower is pari passu to that of the other lenders, what does it mean?
7. Apart from the regular risks to be assessed in every business loan proposal, which of the following is an additional risk to be considered when funding a company that has its major suppliers or buyers based outside the country?
8. As a banker you may also choose to invest in the bonds issued by another country. Sovereign risk is a type of risk specific to this kind of investment. Which of the following European countries had its credit ratings downgraded in the summer of 2010 causing widespread panic that it might default on its debt?
9. One of the methods that you may use of transferring the risk from your bank to others willing to bear it is by issuing a catastrophe bond. Can catastrophe bonds be used to insure against loss caused by environmental factors like hurricanes and earthquakes?
10. Finally, there is one risk which can't be mitigated by any of the normal portfolio de-risking strategies. Which of the following fits the description?
Source: Author
zorba_scank
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