Basel I MCQ | JAIIB Principles & Practices of Banking MCQ

Basel-I MCQ JAIIB

Here is the next quiz in the quiz/MCQ series for Principles and Practices of Banking subject of JAIIB. This post covers the topics of Basel I MCQ. Answers are given at the end of the quiz.

Q1. Name the tool that involves constantly evaluating the quality of loan book and to bring about qualitative improvements in credit administration?

  1. Loan Review Mechanism (LRM)
  2. Loan Inspection Review
  3. Loan Internal Audit
  4. Long Form Audit Report

Answer: (1)
Loan Review Mechanism is an effective tool for constantly evaluating the quality of loan book and to bring about qualitative improvements in credit administration. It involved putting in place, for large value accounts with responsibilities assigned in various areas such as, evaluating the effectiveness of loan administration, maintaining the integrity of credit grading process, assessing the loan loss provision, portfolio quality, etc

Q2. Name the risk that emanates from inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, hedging etc?
  1. Operational Risk
  2. Market Risk
  3. Credit Risk
  4. Liquidity Risk

Answer: (3)
Credit risk or default risk involves inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions.

Q3. Which among the following is not a kind of market risk?
  1. Interest Rate Risk
  2. Operational risk
  3. Foreign Exchange Rate (Forex) Risk
  4. Commodity Price Risk

Answer: (2)
With progressive deregulation, market risk arising from adverse changes in market variables, such as interest rate, foreign exchange rate, equity price and commodity price has become relatively more important.

Q4. Name the risk that arises in banks due to human or technical error? 
  1. Interest Rate Risk
  2. Operational risk
  3. Foreign Exchange Rate (Forex) Risk
  4. Commodity Price Risk

Answer: (2)
Operational risk is defined as any risk, which is not categoried as market or credit risk, or the risk of loss arising from various types of human or technical error

Q5. In which year did the Basel Committee for Banking Supervision established? 
  1. 1981
  2. 1979
  3. 1977
  4. 1974

Answer: (4)
The Basel Committee – initially named the Committee on Banking Regulations and Supervisory Practices – was established by the central bank Governors of the Group of Ten countries at the end of 1974 in the aftermath of serious disturbances in international currency and banking markets

Q6. Who is hosting the secretariat of Basel Committee for Banking Supervision (BCBS)? 
  1. WEF
  2. BCSBI
  3. BIS
  4. WTO

Answer: (3)
The Secretariat of BCBS is provided by the Bank for International Settlements (BIS) and supports the work of the Committee, the Chair and the groups around which the Committee organises its work

Q7. In which year the Basel-I accord was released? 
  1. 1988
  2. 1991
  3. 1999
  4. 2004

Answer: (1)
The first Basel Accord, known as Basel I, was issued in 1988 and focused on the capital adequacy of financial institutions

Q8. Which type of risk was primarily covered under Basel-I guidelines? 
  1. Market Risk
  2. Credit Risk
  3. Operational Risk
  4. None of the Above

Answer: (2)
Basel I primarily focuses on credit risk and risk-weighted assets (RWA) Maintaining a minimum amount of capital helps to mitigate the risks.

Q9. In the Basel-I classification system, the bank’s asset were classified into _____ risk categories?
  1. Two
  2. Three
  3. Four
  4. Five

Answer: (4)
The Basel I classification system groups a bank’s assets into five risk categories, classified as percentages: 0%, 10%, 20%, 50%, and 100%. A bank’s assets are placed into a category based on the nature of the debtor

Q10. What was the minimum Capital Adequacy Ratio banks have to maintain as per Basel-I framework?
  1. 6%
  2. 7%
  3. 8%
  4. 9%

Answer: (3)
The Basel-I framework requires the minimum capital ratio of capital to RWA for all banks to be at 8%

Q11. In which year did India adopted the Basel-I guidelines? 
  1. 1999
  2. 1995
  3. 1993
  4. 1988

Answer: (1)
India adopted Basel-I guidelines in 1999

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Tags: Basel I MCQ JAIIB, Basel I MCQ