Self Test

The Basel III exam takes the form of multiple choice, of which one of four choice answers is correct. Below are sample questions with answers:

Choice 1 – Formulates broad supervisory standards and guidelines and recommends statements of best practice.
Choice 2 – The Committee encourages standards – does not attempt detailed harmonization of member countries.
Choice 3 – Is an international supervisory authority.
Choice 4 – The Basel Committee was established in the aftermath of serious disturbances in international currency and banking markets, like the failure of Bankhaus Herstatt in West Germany.

Choice 1 – This minimum level of capital is a cushion against its unexpected losses.
Choice 2 – This minimum level of capital is important to promote public confidence in the banking system.
Choice 3 – If capital levels are too low, banks may fail, and put depositors’ funds at risk.
Choice 4 – In Basel I this minimum level of capital is optional. Banks could choose to make the most efficient use of their resources.

Choice 1 – Credit risk.
Choice 2 – Credit Risk and Market Risk.
Choice 3 – Credit, Market and Operational Risk.
Choice 4 – Credit Risk and Reputational Risk.

Choice 1 – Risk weight functions translate a bank’s exposure into specific capital requirements.
Choice 2 – Risk weights are used to measure only credit risk and only after the Basel II framework.
Choice 3 – Risk weights are used to measure only market risk and only after the Basel II framework.
Choice 4 – Risk weights are used to measure only operational risk and only after the Basel II framework.

Choice 1 – 0%
Choice 2 – 20%
Choice 3 – 50%
Choice 4 – It depends on the rating. For example, in countries with sovereigns rated BB+ to B- and on banks in unrated countries the risk weight will be capped at 100% (Basel I)