TUESDAY: 6 December 2022. Afternoon Paper. Time Allowed: 3 hours.
Answer any FIVE questions. ALL questions carry equal marks. Do NOT write anything on this paper.
QUESTION ONE
1. Explain the term “risk infrastructure”. (2 marks)
Enumerate FOUR benefits of quantitative risk analysis. (4 marks)
2. Describe the term “balance of payment”. (2 marks)
Highlight FOUR causes of unfavorable balance of payment. (4 marks)
3. Analyse FOUR elements of periodic credit risk review. (8 marks)
(Total: 20 marks)
QUESTION TWO
1. State FOUR objectives of credit risk management. (4 marks)
2. List SIX benefits of developing a risk assessment matrix. (6 marks)
3. Discuss FIVE types of company strategies. (10 marks)
(Total: 20 marks)
QUESTION THREE
1. Explain the term “credit rating”. (2 marks)
Outline FOUR factors that influence credit rating. (4 marks)
2. Define the term “reputation risk”. (2 marks)
List FOUR actions of a credit officer that could trigger company reputation risk. (4 marks)
3. Examine FOUR factors that could influence barriers to new entrants to an industry. (8 marks)
(Total: 20 marks)
QUESTION FOUR
1. State SIX challenges encountered by credit analysts during cashflow-based loan assessment. (6 marks)
2. Identify the SIX principles of lending. (6 marks)
3. Describe FOUR types of qualitative risk assessment techniques. (8 marks)
(Total: 20 marks)
QUESTION FIVE
1. Explain the following terms:
Value at Risk (VaR). (2 marks)
Unexpected losses. (2 marks)
Probability of default. (2 marks)
2. Enumerate SIX sources of strategic risk. (6 marks)
3. Discuss FOUR factors that influence an organisation’s level of risk appetite. (8 marks)
(Total: 20 marks)
QUESTION SIX
1. State FOUR details that should be included in a loan agreement. (4 marks)
2. List SIX benefits of a good credit risk grading system. (6 marks)
3. Explain the 5P’s of lending as used in credit assessment. (10 marks)
(Total: 20 marks)
QUESTION SEVEN
1. Describe THREE factors that could determine the intensity of competition among rivals in an industry. (6 marks)
2. Highlight FOUR types of exposure limits that should be clearly defined in a bank’s credit policy. (4 marks)
3. CCCPARTS is a model of credit risk assessment.
Required:
Explain the “PARTS” as applied in the model. (10 marks)
(Total: 20 marks)
