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100% Pass Quiz 2016-FRR - Fantastic Reliable Financial Risk and Regulation (FRR) Series Test Question

Without practice, you cannot crack the 2016-FRR exam. Pass4Leader facilitates you in this purpose with its desktop GARP 2016-FRR practice exam software. It helps you get practical experience with the final 2016-FRR Exam. By practicing under real Financial Risk and Regulation (FRR) Series (2016-FRR) exam situations again and again, you develop confidence and skills to attempt the 2016-FRR exam within its allocated time.

GARP 2016-FRR Certification Exam consists of two parts, each of which must be completed within four hours. Part 1 covers topics such as market risk, credit risk, and operational risk, while Part 2 covers topics such as risk governance, regulatory compliance, and risk modeling. Candidates must pass both parts of the exam to earn the certification.

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GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q136-Q141):

NEW QUESTION # 136
Which one of the following four options does NOT represent a benefit of compensating balances to the bank?

A. Since the compensating balances reduce the next amount lent to the borrower, the earned return on the loan is increased, further widening the bank's interest rate margin and profitability.
B. Compensating balances allow the bank to net some of the exposure they may have in case of default, by taking funds from these specific deposit account one the borrower defaults.
C. Compensation balances influence the expected loss rate of the bank given the default obligor and improve capital structure by controlling obligor type and avoiding payment delays.
D. Since the compensating balances cannot be withdrawn at short notice, if at all, they are not considered transaction accounts and are able to provide a stable funding to the bank, reducing its reliance on more volatile external inter-bank based funding sources.

Answer: C

Explanation:
Compensating balances refer to minimum balances that borrowers are required to maintain in their accounts with the lender as part of the loan agreement. These balances benefit the bank by providing a stable source of funding and increasing the bank's interest rate margin and profitability. However, they do not directly influence the expected loss rate of the bank or improve capital structure by controlling obligor type and avoiding payment delays. These functions are not typically associated with compensating balances, which is why option C does not represent a benefit of compensating balances.

NEW QUESTION # 137
Which one of the following four statements correctly identifies the Basel II Accord's definition of operational risk?

A. Operational risk is the risk of loss resulting from inadequate or failed processes, people and systems or from external events.
B. Operational risk is a form of risk that summarizes the risks a company or firm undertakes when it attempts to operate within a given field or industry.
C. Operational risk is a risk arising from execution of a company's business functions.
D. Operational risk is all the risk that is not captured by market and credit risks.

Answer: A

Explanation:
The Basel II Accord defines operational risk as the risk of loss resulting from inadequate or failed processes, people, and systems, or from external events. This definition encompasses a wide range of potential risks that banks must manage.

NEW QUESTION # 138
An organization's enterprise risk management framework defines its risk profile and typically reflects the organization's
I. Market and credit risks
II. Operational and liquidity risks
III. Strategic and geopolitical risks
IV. Structural developments and industry position

A. I, II, III
B. II, III
C. I, II
D. I, IV

Answer: A

Explanation:
An organization's enterprise risk management framework typically reflects its risk profile, which includes market and credit risks (I), operational and liquidity risks (II), and strategic and geopolitical risks (III). These categories encompass the broad spectrum of risks that an organization needs to manage as part of its enterprise risk management framework.

NEW QUESTION # 139
From a risk point of view, which of the following factors will generally lead to the fluctuation of equity values with industry P/E levels and a company's individual earnings?
I. Sales
II. Cost management
III. Commercial success of the company
IV. Market sentiment

A. I, II, III
B. I, II
C. III, IV
D. II, IV

Answer: A

Explanation:
* Sales and cost management are fundamental factors affecting a company's earnings, directly influencing equity values.
* The commercial success of the company significantly impacts its earnings, thus affecting the industry P
/E levels.
* Market sentiment also plays a crucial role in the fluctuation of equity values as it influences investor perceptions and market dynamics.
* Therefore, sales, cost management, and commercial success are factors that will generally lead to the fluctuation of equity values with industry P/E levels and a company's individual earnings.

NEW QUESTION # 140
According to Basel II what constitutes Tier 1 capital?

A. Equity capital and accrued profits to reserves
B. Profits to reserves and innovative Tier 1 capital
C. Equity capital and core capital
D. Core capital and innovative Tier 1 capital.

Answer: A

Explanation:
Under Basel II, Tier 1 capital, also known as core capital, includes:
* Equity Capital: This includes common stock and retained earnings. It is the highest quality of capital because it is fully available to cover losses.
* Accrued Profits to Reserves: Profits that are retained and not distributed as dividends are added to reserves, increasing the bank's capital base.
This combination of equity capital and retained earnings ensures that Tier 1 capital is robust and able to absorb significant losses, thereby providing a strong financial cushion.References: How Finance Works, sections on regulatory capital requirements and the components of Tier 1 capital.

NEW QUESTION # 141
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