RISK AND BANKING BUSINESS
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Bank Financial Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is the primary definition of risk in the context of banking business?
Risk in banking is the possibility of loss or adverse outcome arising from uncertainty in future events, including credit, market, liquidity, and operational exposures.
What is residual risk in banking after applying risk mitigation measures?
Risk remaining after controls and mitigation strategies are applied
Which Basel framework introduced a formal three-pillar approach to bank risk management?
Basel II introduced the three-pillar framework: Pillar 1 (minimum capital requirements), Pillar 2 (supervisory review), and Pillar 3 (market discipline).
What is pipeline risk faced by banks in loan origination?
Risk of rate changes between loan commitment and actual disbursement
What distinguishes systematic risk from unsystematic risk in banking?
Systematic risk affects the entire financial system and cannot be diversified away, whereas unsystematic risk is entity-specific and can be reduced through diversification.
What is basis risk in banking interest rate risk management?
Risk arising from imperfect correlation between different interest rate indices
How is credit risk defined under RBI guidelines for Indian banks?
Credit risk is the risk of loss arising from the failure of a borrower or counterparty to meet its financial obligations as per the agreed terms.
What is gap risk in a bank's interest rate risk framework?
Risk from maturity mismatch between assets and liabilities in rate-sensitive buckets
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