PART A · QUESTION 1
A branch lends at 7.0%. Treasury charges the branch 4.5% for the money. Credit and running costs are charged separately.
// EXAM HALL25 QUESTIONS · 30 MINUTES
Bank Finance Practice Test
The sums, one bank's accounts, and the calls that fall to the people who stand behind the numbers.
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A bank finance practice test checks that you can read a bank's accounts and stand behind its numbers. This paper has three parts: risk weights, provisions and transfer pricing; one bank's balance sheet and results set on an exhibit; and calls on reconciliations, marks and a regulatory return gone wrong. It serves financial accounting, product control, regulatory reporting and treasury, at the level they share. Every question is original, and none comes from any bank's test. Sit it against a thirty-minute clock with the reads held to the end, 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 sums
What a bank's numbers are made of. Work each one before you look at the options.
PART A · QUESTION 2
A bank raises its provisions on loans by US$10m, before tax. There is no cash movement, and no loan has been written off.
What happens in the accounts, ignoring tax?
PART A · QUESTION 3
A bank lends US$100m to sound borrowers at the start of the year. Under an expected-credit-loss standard, it books a provision of US$0.3m on day one.
Why, before anything has gone wrong?
PART A · QUESTION 4
A bank has US$10bn of loans: half to companies, half home mortgages. Suppose the capital rules weight company loans at 100% and these mortgages at 35%.
What are its risk-weighted assets?
PART A · QUESTION 5
A bank holds US$900m of capital against US$10bn of risk-weighted assets, a ratio of 9%. A loan book goes bad and it writes off US$200m. Assume its risk-weighted assets are unchanged.
How much new capital takes it back to 9%?
PART A · QUESTION 6
A bank holds US$3bn of assets it could sell within days at little loss. In a severe stress, it estimates US$2.4bn of its funding would leave within 30 days.
What is its liquidity coverage?
PART B
The bank's numbers
One bank, nine questions. A calculator is fine; read the definitions in each question.
EXHIBIT J · THE BANK'S NUMBERS
One small bank's year. Figures in US$m.
| US$m | |
|---|---|
| Loans, net of provisions | 8,000 |
| Liquid assets | 2,000 |
| Total assets | 10,000 |
| Deposits | 7,000 |
| Wholesale funding, 600 due within three months | 2,200 |
| Equity | 800 |
| US$m | |
|---|---|
| Interest income | 560 |
| Interest expense | (300) |
| Net interest income | 260 |
| Fees | 40 |
| Total income | 300 |
| Costs | (165) |
| Impairment charge | (35) |
| Profit before tax | 100 |
| Tax | (28) |
| Profit after tax | 72 |
| Gross loans | Provision | |
|---|---|---|
| Stage 1 | 7,330 | 20 |
| Stage 2 | 600 | 30 |
| Stage 3 | 200 | 80 |
| Details | US$m |
|---|---|
| Regulatory deductions from equity | 80 |
| Risk-weighted assets | 5,400 |
| Gross loans on the general ledger | 8130.0 |
| Gross loans on the loan system | 8126.8 |
PART B · QUESTION 7
From Exhibit J, on total assets.
What is the net interest margin?
PART B · QUESTION 8
From Exhibit J.
What is the cost-to-income ratio?
PART B · QUESTION 9
From Exhibit J.
What is the return on equity?
PART B · QUESTION 10
From Exhibit J: equity less regulatory deductions, over risk-weighted assets.
What is the capital ratio?
PART B · QUESTION 11
From Exhibit J's provision table.
What is the coverage on stage 3 loans?
PART B · QUESTION 12
In Exhibit J, stage 1 carries a provision of 0.27% and stage 2 carries 5.0%. US$100m of performing loans now shows a significant increase in credit risk.
What does that do to this year's profit before tax?
PART B · QUESTION 13
The day before close, Exhibit J's general ledger is US$3.2m above the loan system. Someone suggests posting it to a suspense account, so the close can finish on time.
What do you do first?
PART B · QUESTION 14
In Exhibit J, US$600m of the wholesale funding matures within three months. Credit markets have become nervous.
What do you look at first?
PART B · QUESTION 15
Take the bank in Exhibit J, and suppose US$6,000m of assets and US$7,000m of liabilities reprice within a year. Rates rise one percentage point, and everything reprices fully at once.
What happens to a year's net interest income?
PART C
The calls
When the number is yours to stand behind, and someone would like it to be different.
PART C · QUESTION 16
A bank's rates desk reports US$2.1m for the day. Market moves explain US$1.2m, the passing of time US$0.1m and new trades US$0.3m. The desk says: 'The rest is just noise.'
Signal or noise?
PART C · QUESTION 17
The CFO's team asks you to release a US$15m management overlay this half, just as profit falls short of guidance. Nothing in the loan book has changed since it was booked.
What do you do?
PART C · QUESTION 18
You are a product controller. Your independent price shows a desk's position US$800,000 lower than its mark. The trader calls: 'Your number is wrong. You do not understand this market.'
Your move?
PART C · QUESTION 19
After a regulatory return has gone out, you find that a loan portfolio was given the wrong risk weight. The capital ratio was overstated by 0.2 points. It was not close to any minimum.
What do you do?
PART C · QUESTION 20
A loan to a property developer could arguably go in two exposure classes, with different risk weights. The rule's wording does not settle it. The lower weight would save capital.
How do you decide?
PART C · QUESTION 21
A business head says: 'Treasury charges us too much for funding. A rival would lend this at half a point less. Your transfer price is killing my growth.'
What are you hearing?
PART C · QUESTION 22
An executive asks why the capital ratio fell 0.4 points this quarter, although profit was good. You have two minutes.
What do you say?
PART C · QUESTION 23
A desk holds a private-company loan that has not traded in a year. At year-end you must value it, and the desk's model says par.
What do you do?
PART C · QUESTION 24
News of a rival's failure breaks at noon. Online withdrawals at your bank are running at three times normal. You are on the treasury desk, and the liquidity report is not due until tomorrow.
What do you do?
PART C · QUESTION 25
A bank holds government bonds at amortised cost, on the basis that it will hold them to maturity. Rates have risen, and it now needs cash.
What happens if it sells the bonds?
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: Financial accountant, Product controller, Regulatory reporting analyst, Treasury analyst.
- Financial accountant: 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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