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100+ Free IFoA SP10 Practice Questions

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Key Facts: IFoA SP10 Exam

ASSA B100

Delivered As

IFoA banking curriculum

Written

Exam Format

ASSA B100

9

Syllabus Domains

SP10 syllabus

72.5%

Basel Output Floor

BCBS 2017 reforms

30 days

LCR Stress Horizon

Basel III

100

Practice Questions

OpenExamPrep

IFoA SP10 Banking Specialist Principles is delivered through the Actuarial Society of South Africa (ASSA) as course B100 Banking Principles, an online invigilated examination with typed answers rather than a multiple-choice test. Banking SP10 (and the advanced SA10/B200) cannot be booked directly through the IFoA; candidates register on the ASSA website, and fees are quoted in South African Rand. The syllabus covers banking business and the balance sheet, credit-risk modelling (PD, LGD, EAD and IFRS 9 expected credit loss), market and interest-rate risk in the banking book, liquidity risk (LCR and NSFR), operational risk, Basel III/IV capital and RWA, stress testing and ICAAP, ALM and funds transfer pricing, and banking regulation and governance. This free set provides 100 MCQ knowledge-prep questions across those domains.

Sample IFoA SP10 Practice Questions

Try these sample questions to test your IFoA SP10 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1In the IFRS 9 expected credit loss (ECL) framework, what is the standard decomposition of the ECL for a credit exposure over a given horizon?
A.ECL = PD x LGD x EAD (appropriately discounted)
B.ECL = PD + LGD + EAD
C.ECL = EAD / (PD x LGD)
D.ECL = LGD x EAD / PD
Explanation: IFRS 9 expected credit loss is built from three risk parameters: probability of default (PD), loss given default (LGD) and exposure at default (EAD), combined multiplicatively and discounted to present value using the effective interest rate. This is the core credit-risk identity tested in SP10/B100.
2Under IFRS 9, a performing loan with no significant increase in credit risk since origination is classified in which stage, and what ECL is recognised?
A.Stage 3, with lifetime ECL and interest on net carrying amount
B.Stage 1, with 12-month ECL and interest on gross carrying amount
C.Stage 2, with lifetime ECL and interest on gross carrying amount
D.Stage 1, with lifetime ECL and interest on net carrying amount
Explanation: IFRS 9 uses a three-stage model. Stage 1 covers exposures that have not shown a significant increase in credit risk; banks recognise 12-month ECL and accrue interest on the gross carrying amount. A significant increase moves the asset to Stage 2 (lifetime ECL), and credit-impairment moves it to Stage 3.
3A bank's exposure at default is GBP 500,000, the LGD is 40% and the 12-month PD is 2%. Ignoring discounting, what is the 12-month expected credit loss?
A.GBP 200,000
B.GBP 10,000
C.GBP 4,000
D.GBP 40,000
Explanation: ECL = PD x LGD x EAD = 0.02 x 0.40 x 500,000 = GBP 4,000. The PD scales the loss to its probability, the LGD captures the fraction not recovered, and the EAD is the amount outstanding at default.
4Which definition best describes Loss Given Default (LGD) in a credit-risk model?
A.The probability the obligor defaults within one year
B.The total amount owed at the moment of default
C.The discount rate applied to recovered cash flows
D.The proportion of the exposure that is lost if default occurs, net of recoveries
Explanation: LGD is the economic loss as a percentage of the exposure at default, after accounting for recoveries from collateral, guarantees and the workout process. It is one minus the recovery rate and typically lies between 0 and 1.
5Under IFRS 9, what is the primary trigger for moving a financial asset from Stage 1 to Stage 2?
A.A significant increase in credit risk since initial recognition
B.The asset becoming 90 days past due only
C.A fall in the risk-free interest rate
D.The bank breaching its leverage ratio
Explanation: Stage 2 is triggered by a significant increase in credit risk (SICR) relative to origination, assessed using changes in lifetime PD, watchlist status, rating downgrades and other indicators. Crossing into Stage 2 changes the measurement from 12-month to lifetime ECL.
6A bank uses a structural (Merton) model of default. In this model, the firm defaults when which condition holds at the debt maturity?
A.The firm's equity volatility exceeds a threshold
B.The asset value falls below the face value of debt
C.The firm's credit spread widens by more than 100 bps
D.The risk-free rate exceeds the asset return
Explanation: In the Merton structural model, equity is a call option on the firm's assets with strike equal to the debt's face value. Default occurs at maturity if the asset value is below the debt's face value, so equity holders do not exercise and creditors take the assets.
7Within a bank's balance sheet, which item is typically the largest category on the asset side of a traditional commercial bank?
A.Customer deposits
B.Issued subordinated debt
C.Loans and advances to customers
D.Share capital and reserves
Explanation: For a traditional commercial bank, loans and advances to customers (the lending book) dominate the asset side, generating interest income. Deposits, subordinated debt and equity are funding sources and appear on the liability and equity side.
8What does a bank's net interest margin (NIM) primarily measure?
A.Total operating costs divided by total income
B.Loan losses as a percentage of gross loans
C.Tier 1 capital divided by risk-weighted assets
D.Net interest income as a percentage of interest-earning assets
Explanation: Net interest margin expresses net interest income (interest earned minus interest paid) as a percentage of average interest-earning assets. It is a core profitability measure for the banking book and reflects pricing, funding cost and asset mix.
9Which statement best describes the principal economic function of a bank in financial intermediation?
A.It transforms short-term liquid liabilities into longer-term, less liquid assets
B.It eliminates all credit and market risk from the economy
C.It guarantees a fixed return to all depositors regardless of performance
D.It operates without exposure to interest-rate risk
Explanation: Banks perform maturity transformation: they fund longer-term, less liquid loans using shorter-term, more liquid deposits and wholesale funding. This intermediation also involves credit, liquidity and interest-rate risk, which the bank must manage rather than eliminate.
10A bank reports operating expenses of GBP 60m and total operating income of GBP 150m. What is its cost-to-income ratio?
A.250%
B.40%
C.90%
D.60%
Explanation: Cost-to-income ratio = operating expenses / operating income = 60 / 150 = 40%. A lower ratio indicates greater operating efficiency; banks typically target ratios below 50-60%.

About the IFoA SP10 Exam

IFoA SP10 Banking Specialist Principles develops a student's ability to apply actuarial planning and control principles to banking, spanning credit risk and IFRS 9, market and interest-rate risk, liquidity, operational risk, Basel III/IV capital, stress testing, ICAAP, ALM and governance.

Assessment

Online invigilated written examination delivered by ASSA as course B100 Banking Principles, with answers typed

Time Limit

Set by ASSA for each B100 sitting; confirm on the ASSA timetable

Passing Score

ASSA sets the pass mark each session; no fixed percentage is published

Exam Fee

Set by ASSA in ZAR; see the ASSA website for the current B100 fee (Institute and Faculty of Actuaries (IFoA) via the Actuarial Society of South Africa (ASSA))

IFoA SP10 Exam Content Outline

20%

Banking Business and Balance Sheet

Banking business models, financial intermediation, maturity transformation, the bank balance sheet, net interest margin, cost-to-income and return-on-equity decomposition, and off-balance-sheet exposures.

20%

Credit Risk Modelling

Probability of default, loss given default, exposure at default, IFRS 9 three-stage expected credit loss, structural and reduced-form models, and portfolio default correlation and concentration risk.

12%

Market and Interest-Rate Risk

Interest-rate risk in the banking book, repricing, basis and optionality risk, EVE and NII sensitivity, Value-at-Risk, expected shortfall, the FRTB and hedging with interest-rate swaps.

12%

Liquidity Risk

Funding versus market liquidity risk, the Liquidity Coverage Ratio and HQLA, the Net Stable Funding Ratio, intraday liquidity, survival horizons and contingency funding plans.

16%

Basel III/IV Capital and RWA

CET1, Tier 1 and total capital, the conservation and countercyclical buffers, the output floor, the leverage ratio, risk-weighted assets and the three-pillar framework.

8%

Operational Risk

The Basel operational-risk definition, the standardised approach and Business Indicator, conduct and model risk, key-risk indicators, and business continuity and operational resilience.

8%

Stress Testing and ICAAP

Baseline and adverse scenarios, reverse stress testing, the ICAAP and Pillar 2, economic capital, recovery and resolution planning, and risk aggregation.

4%

ALM, FTP and Governance

Asset-liability management and the ALCO, funds transfer pricing and liquidity premia, RAROC, the three lines of defence, risk appetite, the SREP and resolution regimes.

How to Pass the IFoA SP10 Exam

What You Need to Know

  • Passing score: ASSA sets the pass mark each session; no fixed percentage is published
  • Assessment: Online invigilated written examination delivered by ASSA as course B100 Banking Principles, with answers typed
  • Time limit: Set by ASSA for each B100 sitting; confirm on the ASSA timetable
  • Exam fee: Set by ASSA in ZAR; see the ASSA website for the current B100 fee

Keys to Passing

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

IFoA SP10 Study Tips from Top Performers

1Anchor your credit-risk study on the ECL identity (PD x LGD x EAD) and IFRS 9 staging, then practise computing 12-month versus lifetime ECL and moving exposures between Stage 1, 2 and 3.
2Learn the Basel capital stack cold: CET1, Tier 1 and total minimums, the 2.5% conservation buffer, the countercyclical buffer, the leverage-ratio backstop and the 72.5% output floor.
3Distinguish the two main liquidity ratios precisely: the LCR covers a 30-day stress with HQLA, while the NSFR (ASF over RSF) targets stable funding over one year.
4For IRRBB, always classify whether a question is about earnings (NII) or value (EVE), and identify the source of risk: repricing, yield-curve, basis or optionality.
5Because the real exam is written, practise explaining mechanisms (FTP, ICAAP, stress testing, three lines of defence) in your own words, not just selecting an option.

Frequently Asked Questions

Who administers the IFoA SP10 exam?

SP10 Banking Specialist Principles is part of the IFoA curriculum but is delivered through the Actuarial Society of South Africa (ASSA) as course B100 Banking Principles. Candidates register on the ASSA website rather than booking through the IFoA directly.

Is the SP10 exam multiple choice?

No. The ASSA B100 Banking Principles exam is an online invigilated written examination where answers are typed. This practice bank provides 100 multiple-choice questions as technical-knowledge preparation, not a replica of the exam format.

What topics does SP10 cover?

SP10 covers banking business and the balance sheet, credit-risk modelling (PD, LGD, EAD and IFRS 9), market and interest-rate risk, liquidity risk (LCR and NSFR), operational risk, Basel III/IV capital and RWA, stress testing and ICAAP, ALM and funds transfer pricing, and banking regulation and governance.

What is the passing score for SP10?

ASSA sets the pass mark for B100 each examination session and does not publish a single fixed percentage. Candidates should consult the ASSA website for current grading information and results timelines.

How much does the SP10 exam cost?

Banking SP10 (B100) fees are set by ASSA and quoted in South African Rand. Because SP10 and SA10 cannot be booked through the IFoA, the current fee is published on the ASSA website.

How does SP10 fit into the banking specialism?

SP10 is the Specialist Principles stage of the IFoA banking specialism and can be followed by SA10 Banking Advanced (delivered as ASSA B200 Banking Applications). Together they develop applied actuarial skills for banking risk and capital management.