FRM QUIZ

What is the primary goal of stress testing in banks?

• To increase profits

• To assess capital adequacy during tough economic times

• To reduce operational costs

• To enhance customer service

Which of the following is NOT a type of risk typically assessed in stress testing?

• Credit Risk

• Market Risk

• Environmental Risk

• Liquidity Risk

What should stress testing be integrated into according to sound practices?

• Marketing strategies

• Governance and risk management culture

• Customer feedback systems

• Employee training programs

Which of the following describes a purposeful stress testing program?

• It focuses solely on historical data.

• It includes diverse perspectives and techniques.

• It is conducted once a year without updates.

• It only assesses credit risk.

What is reverse stress testing?

• Testing the bank's ability to withstand normal conditions

• Identifying scenarios that threaten a bank's viability

• Assessing past financial performance

• Evaluating customer satisfaction

How often should banks review their stress testing framework?

• Every five years

• Regularly, with independent assessments

• Only when regulatory changes occur

• Once a decade

What type of scenario should be included in stress tests?

• Only historical scenarios

• Only hypothetical scenarios

• A variety of scenarios, including forward-looking ones

• Scenarios based solely on internal data

Which of the following is a recommendation for supervisors regarding stress testing?

• Ignore the results of stress tests

• Mandate corrective actions for deficiencies found

• Allow banks to self-regulate without oversight

• Focus only on liquidity risk

What is the purpose of conducting simultaneous stress in funding and asset markets?

• To simplify the stress testing process

• To understand interconnectedness and its impact on valuation

• To focus solely on funding risks

• To assess customer preferences

What regulatory requirement was introduced after the 2008 financial crisis?

• Banks must increase dividends.

• Banks must conduct regular stress tests.

• Banks can ignore capital adequacy.

• Banks do not need to disclose results publicly.