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GARP ICBRR Exam (page: 3)
GARP International Certificate in Banking Risk and Regulation (ICBRR)
Updated on: 25-Dec-2025

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ICBRR PDF 342 Questions

A bank customer chooses a mortgage with low initial payments and payments that increase over time because the customer knows that she will have trouble making payments in the early years of the loan. The bank makes this type of mortgage with the same default assumptions uses for ordinary mortgages, thus underestimating the risk of default and becoming exposed to:

  1. Moral hazard
  2. Adverse selection
  3. Banking speculation
  4. Sampling bias

Answer(s): B



The potential failure of a manufacturer to honor a warranty might be called ____, whereas the potential failure of a borrower to fulfill its payment requirements, which include both the repayment of the amount borrowed, the principal and the contractual interest payments, would be called ___.

  1. Credit risk; market risk
  2. Market risk; credit risk
  3. Credit risk; performance risk
  4. Performance risk; credit risk

Answer(s): D



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

  1. 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.
  2. Since the compensating balances cannot be withdrawn at short notice, if at all, they are not considered transaction accounts and are able to provide a stable funding to the bank, reducing its reliance on more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.
  3. 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.
  4. 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.

Answer(s): C



According to a Moody's study, the most important drivers of the loss given default historically have been all of the following EXCEPT:

I) Debt type and seniority
II) Macroeconomic environment
III) Obligor asset type
IV) Recourse

  1. I
  2. II
  3. I, II
  4. III, IV

Answer(s): D



A credit rating analyst wants to determine the expected duration of the default time for a new three-year loan, which has a 2% likelihood of defaulting in the first year, a 3% likelihood of defaulting in the second year, and a 5% likelihood of defaulting the third year.
What is the expected duration for this three-year loan?

  1. 1.5 years
  2. 2.1 years
  3. 2.3 years
  4. 3.7 years

Answer(s): C



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Vey 5/27/2023 12:06:00 AM

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CAMBODIA