mock interview Q&A simulation

Question 1

Explain COREP and its purpose.

Answer 1

COREP is the EBA regulatory reporting framework used to monitor capital adequacy, risk exposures, and leverage under CRR. It ensures banks hold sufficient capital relative to risk-weighted assets.

Question 2

What is reported in COREP C01?

Answer 2

COREP C01 reports the composition of own funds including CET1, AT1, Tier 2, and regulatory deductions.

Question 3

How do you reconcile CET1 from COREP C01 to FINREP equity?

Answer 3

Start with FINREP equity, deduct goodwill, intangible assets, certain DTAs, and apply prudential filters to derive CET1.

Question 4

Why are intangible assets deducted from CET1?

Answer 4

Because they cannot absorb losses in stress scenarios and are not considered loss-absorbing capital.

Question 5

What is COREP C02 used for?

Answer 5

COREP C02 reports total capital requirements and total risk-weighted assets.

Question 6

What is RWA?

Answer 6

Risk-weighted assets represent exposure adjusted for risk level and determine capital requirements.

Question 7

How is total capital ratio calculated?

Answer 7

Total capital ratio equals total own funds divided by total RWA.

Question 8

What is COREP C07?

Answer 8

COREP C07 reports credit risk exposures broken down by exposure class under the standardized approach.

Question 9

What is COREP C08?

Answer 9

COREP C08 reports detailed credit risk exposures under the standardized approach including risk weights and RWA.

Question 10

What is COREP C09?

Answer 10

COREP C09 reports credit risk exposures under the IRB approach using internal risk parameters.

Question 11

What is PD?

Answer 11

Probability of Default, the likelihood a counterparty defaults within one year.

Question 12

What is LGD?

Answer 12

Loss Given Default, the percentage of exposure lost if default occurs.

Question 13

What is EAD?

Answer 13

Exposure at Default, the total exposure at the time of default.

Question 14

How is RWA calculated under standardized approach?

Answer 14

RWA equals exposure value multiplied by regulatory risk weight.

Question 15

What is credit risk mitigation?

Answer 15

Techniques such as collateral or guarantees used to reduce exposure risk.

Question 16

What is FINREP?

Answer 16

FINREP is the supervisory financial reporting framework based on IFRS financial statements.

Question 17

What is FINREP F01?

Answer 17

FINREP F01 is the balance sheet template.

Question 18

What is FINREP F02?

Answer 18

FINREP F02 is the profit and loss template.

Question 19

What is FINREP F18?

Answer 19

FINREP F18 reports performing and non-performing exposures.

Question 20

Why reconcile FINREP and COREP?

Answer 20

To ensure consistency between accounting and regulatory reporting.

Question 21

Why can COREP exposure differ from FINREP assets?

Answer 21

Because COREP applies regulatory adjustments such as CCF and CRM.

Question 22

What is leverage ratio?

Answer 22

Leverage ratio equals Tier 1 capital divided by total exposure measure.

Question 23

What is minimum leverage ratio requirement?

Answer 23

3 percent under CRR.

Question 24

What is CRR3?

Answer 24

CRR3 is the EU implementation of Basel III final reforms.

Question 25

What is output floor?

Answer 25

Minimum RWA equal to 72.5 percent of standardized approach RWA.

Question 26

Why was output floor introduced?

Answer 26

To limit excessive variability in IRB model outputs.

Question 27

How does output floor affect capital ratios?

Answer 27

It increases RWA, potentially reducing capital ratios.

Question 28

Who receives COREP reports in Germany?

Answer 28

Bundesbank collects and BaFin supervises COREP reports.

Question 29

What is ECB role?

Answer 29

Under the SSM: 🏦 ECB supervises: Significant Institutions (SIs) Large banks Systemically important banks Banks with large cross-border activities 🏛 National Competent Authorities (NCAs) supervise: Less Significant Institutions (LSIs) Smaller domestic banks Under ECB oversightECB supervises significant institutions under SSM. ## Footnote The Single Supervisory Mechanism (SSM) is: The centralised banking supervision framework in the Euro area. It was created after the financial crisis to ensure: Consistent supervision Stronger oversight Reduced national bias Greater financial stability It became operational in November 2014.

Question 30

What is SSM?

Answer 30

Single Supervisory Mechanism under ECB supervision.

Question 31

What is validation rule?

Answer 31

Automated check ensuring report consistency and correctness.

Question 32

What is regulatory reconciliation?

Answer 32

Process ensuring regulatory reports align with accounting and source systems.

Question 33

What is CET1 ratio formula?

Answer 33

CET1 capital divided by total RWA.

Question 34

What is Tier 1 capital?

Answer 34

Sum of CET1 and AT1 capital.

Question 35

What is capital conservation buffer?

Answer 35

Additional CET1 requirement equal to 2.5 percent of RWA.

Question 36

What is counterparty credit risk?

Answer 36

Risk that a counterparty defaults before settlement.

Question 37

What is credit conversion factor?

Answer 37

Factor converting off-balance-sheet exposure into credit exposure.

Question 38

What is exposure class corporate?

Answer 38

Exposure to companies.

Question 39

What is exposure class sovereign?

Answer 39

Exposure to governments.

Question 40

What is exposure class institution?

Answer 40

Exposure to banks.

Question 41

What is exposure class retail?

Answer 41

Exposure to individuals.

Question 42

What is reporting frequency of COREP?

Answer 42

Usually quarterly.

Question 43

What is XBRL?

Answer 43

Standard electronic format used for regulatory reporting submission.

Question 44

What is reporting control?

Answer 44

Process ensuring accuracy and completeness of reports.

Question 45

What is audit trail?

Answer 45

Record tracking data origin and processing.

Question 46

What is regulatory audit?

Answer 46

Audit conducted by regulators or external auditors.

Question 47

What is capital adequacy?

Answer 47

Ability of bank to absorb losses and meet regulatory requirements.

Question 48

What is operational risk RWA?

Answer 48

RWA calculated from operational risk exposures.

Question 49

What is market risk RWA?

Answer 49

RWA calculated from trading book exposures.

Question 50

What is data lineage?

Answer 50

Tracking data flow from source to report.

Question 51

What is reporting governance?

Answer 51

Framework ensuring reporting accountability.

Question 52

What is supervisory review?

Answer 52

Regulator assessment of bank’s risk and capital adequacy.

Question 53

What is regulatory reporting risk?

Answer 53

Risk of incorrect or incomplete regulatory reporting.

Question 54

What is COREP submission deadline importance?

Answer 54

Ensures regulatory compliance and avoids penalties.

Question 55

What is reporting variance analysis?

Answer 55

Process of analyzing changes between reporting periods.

Question 56

What is capital planning?

Answer 56

Forecasting future capital requirements.

Question 57

What is reporting sign-off?

Answer 57

Formal approval before regulatory submission.

Question 58

What is internal control in reporting?

Answer 58

Processes ensuring data accuracy and compliance.

Question 59

What is exposure reconciliation?

Answer 59

Matching exposure data between systems and reports.