GARP Exam 2016-FRR Topic 2 Question 1 Discussion

Actual exam question for GARP's 2016-FRR exam

Question #: 1
Topic #: 2

[All 2016-FRR Questions]

Which one of the following four statements about economic capital of a bank is correct?

AEconomic capital measures how the economy is doing compared to the bank.

BEconomic capital reflects the possible losses that could occur based on the bank's own estimates of the risks it is taking.

CEconomic capital is determined by rules imposed by an external authority.

DEconomic capital is the present value of the earnings generated by the bank in the future.

Show Suggested Answer

Suggested Answer: B

by An at May 02, 2025, 06:55 AM

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Dong

6 days ago

I see where you're coming from, Mitsue, but I think B makes more sense. It's about managing risks, not just looking at future earnings.

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Mitsue

14 days ago

I'm not sure about that. I think it might be D) Economic capital is the present value of the earnings generated by the bank in the future.

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Fabiola

29 days ago

I agree with Ariel. Economic capital is all about measuring the potential risks and losses for the bank.

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Denny

1 months ago

Wow, this is a tough one. I'm going to have to go with my gut and say B. But who knows, maybe the bank's accountants are just making this stuff up as they go along.

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Sharan

1 months ago

Haha, good one C! I think you've confused economic capital with something else entirely. Option B is the way to go, trust me.

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Quiana

1 months ago

I'm going with D. Economic capital is just the bank's future earnings, right? Easy money!

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Royal

14 days ago

User 3: I'm not sure, but I think B makes sense. It's about estimating risks and potential losses.

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Billy

16 days ago

User 2: I agree with Billy. B sounds right to me too.

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Lisbeth

19 days ago

User 1: I think B is the correct statement. Economic capital is about possible losses based on risks.

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Kanisha

1 months ago

Hmm, I'm torn between B and C. Isn't economic capital also about meeting regulatory requirements? Either way, this question is making my brain hurt.

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Rosalia

1 months ago

Option B seems to be the correct answer. Economic capital is all about the bank's own risk assessments, not the economy as a whole.

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Margery

6 days ago

User 3: Definitely. Economic capital is all about the risks the bank is taking.

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Brandon

14 days ago

User 2: I agree. It's not about how the economy is doing, but about the bank's potential losses.

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Deeanna

1 months ago

User 1: I think B is the right answer. Economic capital is about the bank's own risk estimates.

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Ariel

2 months ago

I think the correct statement is B) Economic capital reflects the possible losses that could occur based on the bank's own estimates of the risks it is taking.

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