Test 1059

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Subject: Risk Management in Banking and Insurance

Total Number of Question: 40

Time: 41 Minutes

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What is the primary objective of risk management in banking and insurance?

To eliminate all risks

o maximize profits without considering risks

To identify, assess, and mitigate risks

To comply with legal requirements only

None

Which of the following is NOT a type of risk in banking

Credit Risk

Operational Risk

Market Risk

Biological Risk

None

What is the risk that arises due to failure of internal processes, people, or systems?

Credit Risk

Market Risk

Operational Risk

Liquidity Risk

None

What does Basel III focus on?

Strengthening capital requirements

Improving risk management

Enhancing liquidity management

All of the above

None

What is the process of transferring risk to another party known as?

Risk Avoidance

Risk Hedging

Risk Retention

Risk Transfer

None

Which type of risk occurs when borrowers fail to meet their debt obligations?

Credit Risk

Market Risk

Reputational Risk

Insurance Risk

None

What is Credit Default Swap (CDS)?

A type of stock trading strateg

An insurance-like contract to protect against credit default

A method of diversifying risk in banking

A type of investment strategy

None

What is loan provisioning?

Issuing new loans to borrowers

Setting aside funds for potential loan losses

Restructuring existing loans

Increasing interest rates on loans

None

What does Non-Performing Asset (NPA) mean?

An asset that generates high income

A loan where the borrower has not paid interest/principal for a certain period

A loan with the highest interest rate

A risk-free investment

None

10.

In India, after how many days of non-payment does a loan become an NPA?

30 days

60 days

90 days

120 days

None

11.

What is Market Risk?

The risk of economic slowdown

The risk of changes in market variables like interest rates, exchange rates, etc

The risk of a borrower defaulting on a loan

The risk of operational failure

None

12.

Which of the following is an example of market risk?

A borrower failing to repay a loan

A cyberattack on a bank

A decline in stock market prices

Fraud committed by an employee

None

13.

What is Interest Rate Risk?

The risk of inflation reducing purchasing power

The risk of changes in interest rates affecting financial positions

The risk of borrowers not repaying loans

The risk of hacking in online transactions

None

14.

Liquidity risk arises when:

A bank fails to meet short-term financial obligations

Interest rates remain stable

Foreign investments increase

Stock prices rise

None

15.

What is stress testing in risk management?

A method to test market demand

A simulation technique to assess extreme risk scenarios

A strategy for maximizing bank profits

A measure to monitor bank employees

None

16.

What is Actuarial Risk?

Risk due to incorrect pricing of insurance policies

Risk from stock market fluctuations

Risk of fraud in banking

Risk associated with cybercrime

None

17.

What is Underwriting in insurance?

The process of writing legal contracts

The process of assessing and pricing insurance risk

The process of investment banking

The process of selling insurance policies

None

18.

What is Reinsurance?

A secondary insurance policy for individuals

Insurance purchased by an insurance company to reduce risk

A legal contract between a bank and an insurance firm

A policy that covers cyber threats

None

19.

What is Moral Hazard in insurance?

A situation where an insured party takes more risks because they are insured

A situation where insurance companies overprice policies

A type of operational risk in banking

A failure in customer service

None

20.

What is Claim Settlement Ratio in insurance?

The ratio of claims approved to claims received

The ratio of new policies sold to claims made

The percentage of policies renewed each year

The percentage of premium income spent on marketing

None

21.

Which regulatory body oversees banking risk management in India?

SEBI

IRDAI

RBI

NITI Aayog

None

22.

What is the full form of IRDAI?

Indian Regulatory and Development Authority of Insurance

Insurance Regulatory and Development Authority of India

International Risk Development Association of India

Indian Risk and Disaster Association of Insurance

None

23.

Basel III guidelines were introduced to improve which aspect of banking?

Risk management and capital adequacy

Marketing strategies

Employee performance

Customer satisfactio

None

24.

The capital adequacy ratio (CAR) is designed to:

Improve bank profitability

Ensure banks have enough capital to absorb losses

Reduce operational expenses

Enhance customer retentio

None

25.

AML (Anti-Money Laundering) regulations are implemented to prevent:

Insurance fraud

Cybersecurity risks

Illegal financial transactions

Customer complaints

None

26.

What is Phishing in banking fraud?

A cyberattack to steal sensitive information

A legal process to recover loan defaults

A form of data encryption

A method of transferring money securely

None

27.

What is KYC (Know Your Customer) used for?

Tracking customer preferences

Preventing identity fraud and money laundering

Offering discounts on banking services

Reducing interest rates on loans

None

28.

Fraud Risk in insurance is best managed through:

Strict underwriting policies

Increasing policy premiums

Reducing customer claims

Avoiding high-risk customers

None

29.

Cyber Risk in banking refers to:

Risks arising from economic downturns

Risks related to technology failures and cyberattacks

Risk of customers defaulting on loans

Losses due to poor customer service

None

30.

What is Two-Factor Authentication (2FA)?

A type of investment strategy

A risk management approach in banks

A security measure requiring two forms of verification

A method of predicting stock market trends

None

31.

What is Insurable Interest in insurance?

A mandatory government tax on insurance

A financial stake in an insured asset or person

A policyholder’s right to claim dividends

A contract between two insurance companies

None

32.

Deductible in an insurance policy refers to:

The amount paid by the insurer before the policy covers costs

The total premium amount paid annually

The refund given on policy cancellation

The bonus earned on claims

None

33.

What is the role of Actuaries in insurance risk management?

Managing customer claims

Determining the pricing of insurance policies based on risk assessment

Selling insurance policies

Handling insurance fraud cases

None

34.

Moral Hazard in insurance occurs when:

An insurance company denies all claims

A policyholder behaves recklessly after purchasing insurance

An insured asset is stolen

An insurance company overcharges its customers

None

35.

What is Adverse Selection in insurance?

When only high-risk individuals purchase insurance

When all customers receive the same premium rates

When low-risk customers are given high premiums

When insurers refuse to provide coverage

None

36.

Climate change risk in insurance affects:

Home insurance claims

Agricultural insurance

Disaster coverage policies

All of the above

None

37.

What is Reputational Risk in banking?

The risk of losing customers due to bad publicity or unethical practices

The risk of customers defaulting on loans

The risk of cyberattacks on financial data

The risk of regulatory fines

None

38.

What is Cryptocurrency Risk in banking?

The risk of blockchain failure

The risk of cyber theft and unregulated transactions

The risk of losing government funding

The risk of digital wallets being banned

None

39.

Artificial Intelligence (AI) in risk management is used for:

Detecting fraud and automating decision-making

Reducing the workforce in banks

Managing loans manually

Avoiding all financial risks

None

40.

The main objective of risk management in banking and insurance is:

Maximizing profits while minimizing risks

Eliminating all financial risk

Avoiding technological advancements

Encouraging customers to take loans

None

1 out of 4

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