CAIIB · Bank Financial Management · Module B — Risk Management
CAIIB BFM Unit 13 — Risk Regulations in Banking Industry: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper II of the December 2026 cycle (Saturday 12 December 2026)
This is the free practice page for CAIIB BFM Unit 13 — Risk Regulations in Banking Industry (Module B — Risk Management). The CAIIB Mock Centre holds 187 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
BFM · Module B187 MCQs in the Mock Centre5 free belowPaper on 12 December
Key facts examiners test from this unit
Why regulate, and Basel I — banks are leveraged on depositors' money and failures spread, so regulators set risk-based capital; the Basel Committee writes the standards, which bind only when national regulators adopt them.
Basel II and Basel III — Basel II made capital risk-sensitive with three pillars and added operational risk; Basel III raised the quality and quantity of capital, added buffers, leverage and liquidity ratios.
Pillar 1 capital charges — credit risk by rating-based weights with collateral relief, market risk by the standardised duration method, operational risk by 15% of average positive gross income.
Changed since the textbook
Financial Stability Report, June 2026 (30 Jun 2026). RBI's Financial Stability Report showed scheduled commercial banks in March 2026 with CRAR of 17.7%, CET1 of 15.3% and GNPA of 1.8%; under the most severe stress scenario CET1 could fall to 11.4%, still above the minimum. Source: ABC Live
Investment Fluctuation Reserve discontinued (18 May 2026). RBI discontinued the Investment Fluctuation Reserve requirement from 18 May 2026; balances as on 17 May 2026 move to the statutory reserve, general reserve or profit and loss balance and count as Tier 1 capital. Source: KNN India
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 187 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
Under Basel I, bank assets were placed in risk-weight buckets of:
Why (c): The textbook lists five buckets: 0, 10, 20, 50 and 100%. (a) is wrong: Basel I had no 150% bucket. (b) is wrong: 30% is a later rating-based weight. (d) is wrong: There were five buckets.
Question 2 of 5
Which capital is "gone-concern" capital?
Why (b): Tier 2 absorbs losses only in liquidation, so it is gone-concern capital. (a) is wrong: CET1 is going-concern (Tier 1) capital. (c) is wrong: AT1 is going-concern (Tier 1) capital. (d) is wrong: The buffer is held in CET1.
Question 3 of 5
For a guarantee to count as credit risk mitigation, it must be:
Why (a): 13.9 requires a guarantee to be direct, explicit, irrevocable and unconditional before it counts as credit risk mitigation; the bank must also be able to claim promptly without first suing the borrower. (b) is wrong: The guarantee must be an explicitly documented obligation. (c) is wrong: It must be irrevocable. (d) is wrong: The bank must be able to claim without first suing the borrower.
Question 4 of 5
Pillar 3 disclosures apply at:
Why (b): 13.13.3 sets the scope at the top consolidated level, with stand-alone disclosure for banks that are not the top entity. (a) is wrong: Disclosure is at bank or group level. (c) is wrong: The scope is the whole group. (d) is wrong: The scope is the whole group.
Question 5 of 5
Under the capital change that accompanies RBI's expected credit loss rules, which provisions can count in Tier 2 capital, up to 1.25% of credit RWAs?
Why (a): From 1 April 2027, Stage 1 and Stage 2 provisions count in Tier 2 up to 1.25% of credit RWAs; Stage 3 provisions stay excluded. (b) is wrong: Stage 3 provisions are specific and stay excluded. (c) is wrong: The 1.25% cap still applies. (d) is wrong: Eligible provisions count in Tier 2 and are not deducted.
0 of 5 answered.
Traps in this unit
11.5%, not 9%, is the all-in minimum.
Drop negative-income years from both sum and count.
Inside the buffer is not a breach: only distributions are limited.
Practise all 187 questions on Unit 13. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the BFM Online Mock Centre unlocks all 7,600+ BFM questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. CAIIB content follows rules and developments up to IIBF's cut-off of 30 June 2026 (where a rule changed later, the update box says so); verify from official sources before relying on them in practice.