100+ Free FRR Practice Questions

Pass your GARP Financial Risk and Regulation Certificate exam on the first try — instant access, no signup required.

✓ No registration✓ No credit card✓ No hidden fees✓ Start practicing immediately

Not published Pass Rate

100+ Questions

100% Free

1 / 100

Question 1

Score: 0/0

Which of the following best describes a universal bank?

A bank that focuses exclusively on deposit-taking and small consumer loans within a single state

A financial institution that combines commercial banking, investment banking, and other financial services under one umbrella

A digital-only bank that operates without any physical branches and offers limited product lines

A government-owned bank that lends only to public-sector projects and sovereign borrowers

to track

Same family resources

More FRM Exam Prep

Continue through related practice pages, study guides, comparisons, and articles from the same exam family.

Practice Pages

FRM Part 1 Financial Risk Manager Practice200 questions FRM Part 2 Financial Risk Manager Practice200 questions

Best Calculators for the FRM Exam 2026: All 4 Approved Models Compared12 min read

2026 Statistics

Key Facts: FRR Exam

80 Qs

Exam Questions

GARP FRR (Pearson VUE)

2 hours

Time Limit

GARP FRR exam logistics

$325

Exam Fee

IIBF / non-member pricing

60-120 hrs

Typical Study Time

Self-study guidance

7 domains

Content Areas

GARP FRR curriculum

100%

Free Practice Bank

OpenExamPrep

The GARP FRR Certificate is an entry-level banking risk and regulation credential issued by GARP, the same body behind the FRM. The 80-question, 2-hour Pearson VUE exam costs $325 (IIBF/non-member fee) and covers seven domains: Banking Industry (15%), Credit Risk (25%), Market Risk (15%), Operational Risk + AML/KYC (15%), Liquidity Risk (10%), Regulatory Capital (15%), and Governance and Controls (5%). Self-study with 60-120 hours is typical; banking or finance familiarity helps. The FRR is a stepping stone to FRM Part I and the GARP SCR (Sustainability and Climate Risk) certificate.

Sample FRR Practice Questions

Try these sample questions to test your FRR exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Which of the following best describes a universal bank?

A.A bank that focuses exclusively on deposit-taking and small consumer loans within a single state

B.A financial institution that combines commercial banking, investment banking, and other financial services under one umbrella

C.A digital-only bank that operates without any physical branches and offers limited product lines

D.A government-owned bank that lends only to public-sector projects and sovereign borrowers

Explanation: Universal banks combine commercial banking (deposits, loans), investment banking (underwriting, trading), and often asset management and insurance under one corporate structure. Examples include Deutsche Bank, BNP Paribas, and JPMorgan Chase. This contrasts with specialized models like community banks, neobanks, or pure investment banks.

2On a typical commercial bank's balance sheet, which of the following is recorded as an asset?

A.Customer demand deposits

B.Subordinated debt issued by the bank

C.Loans extended to corporate borrowers

D.Common equity capital

Explanation: Loans receivable are assets because they represent amounts the bank expects to collect. Customer deposits are liabilities (the bank owes them back), as is subordinated debt. Common equity is the residual claim on the asset side, recorded under equity, not assets.

3Which institution type primarily generates revenue from underwriting securities, M&A advisory, and proprietary trading rather than from interest on retail loans?

A.Community bank

B.Investment bank

C.Credit union

D.Neobank

Explanation: Investment banks earn fees from capital markets activity—equity and debt underwriting, M&A advisory, sales and trading—rather than net interest income from retail lending. Community banks and credit unions are deposit-and-loan focused, and neobanks compete on digital consumer banking.

4A bank's net interest margin (NIM) is best defined as:

A.Total interest income divided by total assets

B.The difference between interest income and interest expense, divided by average earning assets

C.Net income divided by average shareholders' equity

D.Operating profit divided by total revenue

Explanation: NIM = (interest income - interest expense) / average earning assets. It measures how effectively a bank earns spread on its interest-earning portfolio. Return on assets and return on equity are different profitability metrics.

5Which of the following best characterizes a neobank?

A.A regional bank serving a specific U.S. state with branches and ATMs

B.A digitally native, branchless bank that typically partners with or holds a banking license to deliver mobile-first services

C.A multilateral development bank funded by multiple sovereign governments

D.A bank that operates primarily in the syndicated loan and project finance markets

Explanation: Neobanks (e.g., Chime, Revolut, N26) are digital-first, branchless institutions targeting consumers via mobile apps. Some hold their own banking license; others partner with chartered banks. Regional and multilateral banks have very different structures.

6Which of the following is NOT typically considered an off-balance-sheet exposure for a bank?

A.Loan commitments and undrawn credit lines

B.Standby letters of credit

C.Customer demand deposits

D.Notional amounts of OTC derivatives

Explanation: Customer demand deposits are recognized on-balance-sheet as liabilities. Loan commitments, standby letters of credit, and derivative notionals are classic off-balance-sheet items that still create credit, market, or liquidity exposure and require capital under Basel rules.

7Maturity transformation refers to a bank's practice of:

A.Issuing long-dated bonds to fund short-term securities holdings

B.Funding long-term loans with shorter-term deposits and borrowings

C.Converting fixed-rate loans into floating-rate exposures via swaps

D.Re-pricing all assets and liabilities on the same daily basis

Explanation: Maturity transformation—funding long-dated, illiquid loans with short-dated deposits—is a defining function of banks. It generates net interest margin but creates liquidity and interest-rate risk in the banking book, which is why LCR, NSFR, and IRRBB frameworks exist.

8Which of the following best describes shadow banking?

A.Banking activities conducted outside the regulated banking system, often by non-bank financial intermediaries

B.Unauthorized banking activity not licensed by any regulator and considered fraudulent

C.Banking conducted exclusively in offshore tax havens

D.Internal trading desks at large universal banks

Explanation: Shadow banking refers to credit intermediation by non-bank entities such as money market funds, hedge funds, finance companies, and securitization vehicles. It is legal but lightly regulated, and the Financial Stability Board monitors it closely because it can amplify systemic risk.

9A bank's return on equity (ROE) is most commonly decomposed via the DuPont identity into:

A.Net interest margin, fee income ratio, and tax rate

B.Return on assets multiplied by the equity multiplier (assets/equity)

C.Cost-to-income ratio plus loan-loss provision rate

D.Tier 1 capital ratio multiplied by total capital ratio

Explanation: DuPont decomposition: ROE = ROA x equity multiplier (total assets / equity). It separates operating performance (ROA) from leverage. Higher leverage boosts ROE but also increases risk—Basel rules constrain leverage via the leverage ratio.

10Which of the following is a primary function of a central bank?

A.Originating retail mortgages to individual consumers

B.Acting as lender of last resort to commercial banks

C.Underwriting corporate IPOs

D.Selling auto insurance to bank customers

Explanation: Central banks (Federal Reserve, ECB, Bank of England) act as lender of last resort, conduct monetary policy, and oversee payment systems. They generally do not lend to retail consumers, underwrite securities, or sell insurance.

About the FRR Exam

The GARP Financial Risk and Regulation (FRR) Certificate is a foundational program for banking-sector risk and regulation. The Pearson VUE-proctored exam delivers 80 multiple-choice questions in 2 hours, covering banking business models, credit risk (PD/LGD/EAD, ECL, IFRS 9, CECL), market risk (VaR, ALM), operational risk and AML/KYC, liquidity risk (LCR, NSFR), Basel III/IV regulatory capital, and governance. GARP co-administers the FRR with partners such as IIBF (India).

Questions

80 scored questions

Time Limit

2 hours

Passing Score

GARP cut score

Exam Fee

$325 (Global Association of Risk Professionals (GARP))

FRR Exam Content Outline

15%

Banking Industry Overview & Business Models

Bank balance sheet (assets, liabilities, equity), business models (commercial, investment, universal, regional, community, neobanks), profitability metrics, and the financial system.

25%

Credit Risk in Banking

PD, LGD, EAD, expected and unexpected loss, ECL frameworks, IFRS 9 three-stage model, CECL, risk rating, vintage analysis, transition matrices, and credit-risk mitigation.

15%

Market Risk

VaR, Expected Shortfall, sensitivities (DV01, Greeks), interest-rate risk in the banking book (IRRBB), and asset-liability management (ALM).

15%

Operational Risk + AML/KYC

Basel's seven op-risk event types, KRIs and RCSA, BSA/AML, CIP and beneficial-ownership rules, sanctions/OFAC, FATF, SAR/STR filings.

10%

Liquidity Risk

Basel III liquidity standards: LCR (HQLA / 30-day net outflows), NSFR (1-year ASF/RSF), liquidity gap analysis, intraday liquidity, and contingency funding plans.

15%

Regulatory Capital

Basel I-IV evolution, three pillars, CET1/Tier 1/Total Capital ratios, capital conservation and countercyclical buffers, leverage ratio, RWA, IRB approaches, and the 72.5% output floor.

Governance, Internal Controls & Compliance

Three lines of defense, the CRO's role, board risk oversight, risk appetite statements, and compliance risk.

How to Pass the FRR Exam

What You Need to Know

Passing score: GARP cut score
Exam length: 80 questions
Time limit: 2 hours
Exam fee: $325

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

FRR Study Tips from Top Performers

1Memorize the Basel III capital stack: 4.5% CET1 + 2.5% conservation buffer + 0-2.5% countercyclical + 1-3.5% G-SIB; Tier 1 6%, Total 8%

2Drill the EL formula (PD x LGD x EAD) and the IFRS 9 three-stage ECL model versus U.S. CECL lifetime ECL at origination

3Lock in liquidity ratios: LCR = HQLA / 30-day net outflows >= 100%; NSFR = ASF / RSF over 1 year >= 100%

4Know Basel's seven operational-risk event types and U.S. AML basics: BSA, CIP, FinCEN CDD 25% beneficial owner rule, SAR/CTR, OFAC

5Map every metric to a pillar: Pillar 1 minimum capital, Pillar 2 supervisory review/ICAAP, Pillar 3 disclosure

Frequently Asked Questions

What is the GARP FRR exam format?

The FRR is a Pearson VUE-proctored exam consisting of 80 multiple-choice questions delivered in a 2-hour window. It is offered as a foundational banking-risk certificate by GARP and co-administered with partners such as IIBF in India. Results are pass/fail against a GARP-set cut score; GARP does not publish a numerical passing percentage.

How much does the GARP FRR cost?

The standard fee for the FRR exam is approximately $325 (IIBF / non-member pricing). Costs may vary slightly by partner channel and currency, and you should confirm pricing on the GARP FRR page or with the local administering partner before registering.

Who should take the GARP FRR exam?

The FRR is designed for early-career bank staff (analysts, operations, audit), risk and compliance hires, and finance professionals who want a structured grounding in banking risk and Basel III before moving to more advanced credentials like FRM. It is also widely used as an internal upskilling certification by Indian PSU and private banks via IIBF.

How long should I study for the FRR?

Most candidates spend approximately 60-120 hours of self-study, depending on prior banking and finance background. Candidates with no banking exposure should plan time to learn balance-sheet basics and Basel III terminology. Working through the official GARP study materials plus 100+ practice questions is a typical preparation pattern.

How is FRR different from FRM Part I?

Both are GARP credentials, but FRR is an introductory, banking-regulation-focused certificate (80 questions, 2 hours, no quantitative depth required). FRM Part I is a much more rigorous quantitative exam (100 questions, 4 hours) covering risk management foundations, quant analysis, financial markets and products, and valuation/risk models. FRR is a useful primer before FRM.

Does the FRR expire or require continuing education?

The FRR is a non-expiring foundational certificate. There is no formal continuing-education requirement attached to the credential, though GARP encourages ongoing professional development and provides additional certificates (FRM, SCR) to deepen specialization.