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 HALL26 QUESTIONS · 30 MINUTES
Bank Risk Analyst Practice Test
The measures, one quarter's risk pack, and the calls that make a risk team useful or ignored.
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A bank risk analyst practice test asks whether you can read a portfolio, a trading book and a list of incidents, and say what matters. This paper has three parts: expected loss, value at risk and liquidity; one quarter's risk pack set on an exhibit; and calls on limits, ratings and models. It serves credit, market, liquidity and operational risk and model validation, 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 measures
The numbers every risk seat is expected to work with. Work each one before you look at the options.
PART A · QUESTION 2
A trading book's one-day value at risk is US$2.4m. Assume daily moves are independent and alike.
Roughly what is its ten-day value at risk?
PART A · QUESTION 3
In a stress, a bank expects deposits to leave at US$40m a day for the first ten days and US$20m a day after that. It holds US$600m of liquid assets.
How many days does the buffer last?
PART A · QUESTION 4
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 5
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 6
A bank holds US$3bn of assets it could sell within days at little loss. In a severe stress, it estimates US$2.4bn of its funding would leave within 30 days.
What is its liquidity coverage?
PART B
The risk pack
One quarter, eleven questions, across credit, market, liquidity, operational and model risk. Read the whole pack first.
EXHIBIT H · THE RISK PACK
One quarter's risk report for a mid-sized bank, three tables from the pack. Figures in US$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 B · QUESTION 11
Exhibit H reports one-day 99% value at risk of US$2.4m. An executive says: 'So the most we can lose in a day is US$2.4m.'
What do you correct?
PART B · QUESTION 12
Exhibit H's back-test shows nine days in the last 250 with losses above one-day 99% value at risk. The desk points out that it stayed inside its limit on every one.
Signal or noise?
PART B · QUESTION 13
Exhibit H shows a liquidity coverage of 120%. It also shows that ten depositors hold 22% of deposits.
What do you ask about the 120%?
PART B · QUESTION 14
Exhibit H's incident log has four entries. You can take one to the risk committee, with a question about the control behind it.
Which one?
PART B · QUESTION 15
Exhibit H: a leaver's system access stayed active for three months. The log records no loss, and says the access logs have not yet been checked.
What comes first?
PART B · QUESTION 16
Exhibit H: the arrears report the board reads is built by hand, in a spreadsheet, by one person. It has been right every month so far, as far as anyone knows.
What is your first concern?
PART B · QUESTION 17
Exhibit H: the application scorecard scores 0.71 overall, but 0.38 on new-to-bank customers, who are 18% of new loans. The owner says: 'Overall it is excellent. Approve it.'
As the validator, what do you do?
PART C
The calls
What you do when someone senior would rather you did something else.
PART C · QUESTION 18
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 C · QUESTION 19
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 C · QUESTION 20
It is 4:40pm. A market risk limit has been breached on the rates desk. The desk head says it will be back inside by tomorrow's open, and asks you to wait before reporting.
What do you do?
PART C · QUESTION 21
A developer hands you a loss model, and says it fitted past data with very little error. You are asked to validate it.
What do you test first?
PART C · QUESTION 22
A new provisioning model must go into the half-year numbers next week. Validation needs another month. The CFO's office says: 'Sign it off, and finish your work afterwards.'
What do you do?
PART C · QUESTION 23
Two models predict small-business default. The complex one scores slightly better in testing, and nobody outside the team can explain a single decision. The simple one can be explained to a banker.
Which do you lean to?
PART C · QUESTION 24
A team has reported no near misses in two years. Its manager presents this as a sign of good control, and its error rate on the ledger is about average.
Signal or noise?
PART C · QUESTION 25
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 C · QUESTION 26
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?
0 OF 26 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, Market and liquidity risk analyst, Operational risk analyst, Model validator.
- 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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