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GARP 2016-FRR Exam - Topic 2 Question 1 Discussion

Which one of the following four statements about economic capital of a bank is correct?
B) Economic capital reflects the possible losses that could occur based on the bank's own estimates of the risks it is taking.
A) Economic capital measures how the economy is doing compared to the bank.
C) Economic capital is determined by rules imposed by an external authority.
D) Economic capital is the present value of the earnings generated by the bank in the future.

GARP 2016-FRR Exam - 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?

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Suggested Answer: B

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

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Nu
7 months ago
D sounds interesting, but I’m not sure about that one.
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Samira
7 months ago
Wait, is C really wrong? I thought it was regulated.
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Carmela
7 months ago
B is correct! It’s all about risk estimates.
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Stephaine
7 months ago
A is definitely not it, that makes no sense!
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Jacquline
7 months ago
Totally agree with B, that’s how it works!
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Elke
8 months ago
I’m a bit confused about the definitions; I thought economic capital was more about future earnings rather than just losses.
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Angella
8 months ago
I feel like option B sounds familiar, like something we practiced in class about risk management.
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Hubert
8 months ago
I remember studying that economic capital is not determined by external rules, so I think that's definitely not correct.
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Ahmed
8 months ago
I think economic capital is related to the risks a bank takes, but I'm not sure if it's just about their own estimates.
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Kate
9 months ago
I'm a little confused by the wording of these options. I'll have to re-read them a few times to make sure I understand the differences between them.
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Stevie
9 months ago
I'm feeling confident about this one. Economic capital is the bank's internal measure of the potential losses it could face, so option B is the correct statement.
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Brigette
9 months ago
Okay, let me see. I know economic capital has to do with the bank's own assessment of its risks, so I'm pretty sure option B is the right answer.
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Tennie
9 months ago
Hmm, I'm a bit unsure about this one. The concept of economic capital is not totally clear to me. I'll have to think it through carefully.
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Denae
9 months ago
This question seems pretty straightforward. I think I can eliminate a couple of the options pretty quickly.
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Dong
1 year 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
1 year 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
1 year 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 year 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 year 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 year ago
I'm going with D. Economic capital is just the bank's future earnings, right? Easy money!
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Royal
1 year 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
1 year ago
User 2: I agree with Billy. B sounds right to me too.
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Lisbeth
1 year 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 year 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 year 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
1 year ago
User 3: Definitely. Economic capital is all about the risks the bank is taking.
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Brandon
1 year 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 year 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
1 year 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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