PART A · QUESTION 1
A business has a US$10m facility, with US$6m drawn. The bank assumes half of any undrawn amount will be drawn before a default.
// EXAM HALL25 QUESTIONS · 30 MINUTES
Bank Credit Risk Analyst Practice Test
The measures every credit seat works with, one quarter's lending pack, a book read by year written, and the calls that keep a second line honest.
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A bank credit risk analyst practice test asks whether you can read a portfolio and not just a file. This paper has four parts: expected loss, exposure and capital; the lending side of one quarter's risk pack; a book read by the year its loans were written, set on an exhibit, with seasoning, migration and limits; and calls on ratings, overrides and policy exceptions. Every question is original, and none comes from any bank's test. Sit it against a thirty-minute clock, or take it as practice.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// HOW TO SIT IT
Answer below as practice, and each read opens as you go. Or sit it as a test: 30 minutes, with every read held back until you finish.
PART A
The measures
The numbers a portfolio is read in. Work each one before you look at the options.
PART A · QUESTION 2
A bank has US$900m of capital. Its largest borrower group owes US$180m, and would lose the bank 40% of that if it failed.
What share of capital would its failure take?
PART A · QUESTION 3
A US$10m loan. The bank estimates a 2% chance the borrower defaults within a year, and expects to lose 40% of what is owed if it does.
What is the expected annual loss?
PART A · QUESTION 4
A loan of US$2m has a 3% chance of default in a year, and the bank would lose half of it. A provision of US$50,000 is held against it.
How does the provision compare with the expected loss?
PART A · QUESTION 5
Two segments each lost 1% last year. One is 10,000 small unsecured loans. The other is 12 large property loans.
What differs most between them?
PART A · QUESTION 6
Under expected-loss accounting, a performing loan is moved to the stage for a significant increase in credit risk. The borrower has missed no payment, but the provision against the loan jumps.
Why does it jump before any payment is missed?
PART B
The risk pack
One quarter's lending table. Read the balances against the losses, and ask how fast each segment grew.
EXHIBIT H · THE RISK PACK
One quarter's risk report for a mid-sized bank, three tables from the pack. Figures in US$m. The Lost and Grew columns cover the last 12 months. PD is the chance of default in a year; LGD is the share lost if it happens.
| US$m | PD | LGD | Lost | Grew | |
|---|---|---|---|---|---|
| Home loans | 6,000 | 0.4% | 15% | 2 | 4% |
| SME loans | 2,000 | 2.5% | 45% | 24 | 3% |
| Commercial property | 1,500 | 2.0% | 35% | 3 | 28% |
| Credit cards | 500 | 4.0% | 80% | 19 | 5% |
| Book | 10,000 | 48 |
| Details | Figure |
|---|---|
| Commercial property, against a limit of 15% of the book | 15.0% |
| Trading: one-day 99% value at risk, against a limit of 3.0 | 2.4 |
| Back-test: days in the last 250 with a loss above value at risk | 9 |
| Liquid assets 1,800; stressed 30-day outflow 1,500 | 120% |
| Share of deposits held by the ten largest depositors | 22% |
| Application scorecard, Gini: all customers | 0.71 |
| Application scorecard, Gini: new-to-bank, 18% of new loans | 0.38 |
| Item | What the log says |
|---|---|
| 1 | A payment batch of US$1.2m was sent twice. All recovered. The second such event in six months. |
| 2 | A leaver's system access stayed active for three months. No loss recorded. Access logs not yet checked. |
| 3 | The arrears report the board reads is built by hand, in a spreadsheet, by one person. |
| 4 | 400 letters went out with the wrong date. Corrected in a day. |
PART B · QUESTION 7
From Exhibit H's lending table: expected loss is balance times PD times LGD.
What is the book's total expected loss for the year?
PART B · QUESTION 8
In Exhibit H, compare the segments by expected loss.
Which has the most dollars at stake, and which the highest rate?
PART B · QUESTION 9
In Exhibit H, commercial property lost US$3m against US$10.5m expected, while the book grew 28%. The business head says: 'Losses are a third of the model. Give us more room.'
What do you say first?
PART B · QUESTION 10
In Exhibit H, commercial property sits at exactly its 15% limit after growing 28%. Nothing has been breached. The next committee is in three months.
Your move?
PART C
The vintage table
One book, nine questions. Compare loans at the same age before you compare anything else.
EXHIBIT V · THE VINTAGE TABLE
A bank's business lending book, from the quarterly portfolio review. Money in US$m.
| Written | US$m | 12m | 24m | 36m |
|---|---|---|---|---|
| 2022 | 400 | 0.8% | 2.1% | 3.4% |
| 2023 | 500 | 1.0% | 2.6% | |
| 2024 | 800 | 1.3% | ||
| 2025 | 900 |
| Last year | This year | |
|---|---|---|
| Balance | 1,400 | 2,000 |
| Default rate | 1.5% | 1.3% |
| Property share (limit 35%) | 28% | 34% |
| Downgrades | 40 | 90 |
| Upgrades | 35 | 20 |
About 40% of a defaulted loan is lost. The bank opened a broker channel in 2023, and most of the 2024 loans came through it.
PART C · QUESTION 11
In Exhibit V, compare 2023's loans with 2022's at the same age, 24 months.
How much worse are they?
PART C · QUESTION 12
Exhibit V's 2022 loans went from 0.8% after 12 months to 3.4% after 36. Suppose 2024's loans follow the same shape.
Where do they end up after 36 months?
PART C · QUESTION 13
Take Exhibit V's US$800m of 2024 loans at 5.5% defaulting, with the 40% loss the note gives.
What loss does that imply?
PART C · QUESTION 14
Exhibit V's default rate on the whole book fell from 1.5% to 1.3%. The head of lending says: 'Credit quality is improving.'
Signal or noise?
PART C · QUESTION 15
In Exhibit V, each year's loans start worse than the year before.
What do you ask first?
PART C · QUESTION 16
Exhibit V's property share is 34% of a US$2,000m book, against a limit of 35%.
How much more property lending fits, if the book stays that size?
PART C · QUESTION 17
In Exhibit V, downgrades rose from 40 to 90 while upgrades fell from 35 to 20.
What does that tell you?
PART C · QUESTION 18
The business head reads Exhibit V: 'The 2024 loans are at 1.3%. That is well below our 2% appetite.'
What do you say?
PART C · QUESTION 19
You recommend tightening Exhibit V's broker channel. The head of lending asks you to hold it until year end, because bonuses depend on this year's volume.
What do you do?
PART D
The calls
What you do when someone senior would rather you did something else.
PART D · QUESTION 20
A review finds loans repeatedly written at just under a branch's approval limit, with a second loan to a related company a few days later. Each file, read alone, follows policy.
Signal or noise?
PART D · QUESTION 21
You have downgraded a borrower's rating on the evidence, which raises its price. The relationship banker calls: 'You will lose me this client, and you have not even met them.'
Your move?
PART D · QUESTION 22
A bank extends a struggling borrower's repayments by two years and cuts its interest rate. The loan is now reported as performing, because no payment is overdue.
Signal or noise?
PART D · QUESTION 23
A stress test shows losses doubling, with capital staying above the minimum. A director says: 'So we passed.'
What do you add?
PART D · QUESTION 24
In one region, 40% of approvals are overrides of the credit scorecard. The regional head says: 'My people know their customers better than a model does.'
Signal or noise?
PART D · QUESTION 25
This quarter's log shows 60 approved exceptions to one lending policy rule, out of 200 loans it applied to. Each was signed by the right person.
What do you do?
0 OF 25 ANSWERED · 0 WITH THE SENIOR READ · 0 STANDS UP · 0 OFF THE LINE
// THE REST OF THE ROUND
Every question here is original; none is any bank's real test. Written for: Credit risk analyst.
- Credit risk analyst: the interview questions, against a two-minute clock.
- Situational judgement, for any seat.
- The assessment centre: a whole case in forty-five minutes.
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