Risk Management interview preparation

Questions

100

Traced to a firm

37

Firms

12

Updated

September 2026

Asked at

All firmsUBS14MSCI7BLBlackRock5FTFranklin Templeton3Oaktree Capital Management2Scotiabank2Jane Street1Moody's1Neuberger Berman1PIMCO1SSState Street1TSTruist Securities1

Topic

All topicsMarket risk and VaR14Tail risk and stress testing5Greeks and sensitivities5Credit risk11Counterparty risk and CVA6Operational risk5Model risk and validation6Regulatory capital7Liquidity risk and ALM6Statistics and quant foundations7Indian regulation7Risk governance and appetite4Markets and macro9Fit and career8

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseBrainteaserMarket viewFit

1. 053Give me Basel III in one minute.Regulatory capitalCorephone / first roundRegulatory reportingIndian bank risk and treasury

   Say this

   Basel III was the post-2008 response, and it did three things the earlier accords didn't: it raised the quality and quantity of capital, it added a leverage ratio as a non-risk-based backstop, and it introduced liquidity standards for the first time.

   Then walk it

   1. Capital quality: the focus moved to common equity Tier 1, real loss-absorbing equity. Minimum CET1 of 4.5 percent of RWAs, Tier 1 of 6, total capital of 8, plus a 2.5 percent capital conservation buffer, so a functioning bank runs at 7 percent CET1 minimum before any add-ons.
   2. Buffers on top: a countercyclical buffer of zero to 2.5 percent that supervisors raise in a boom, and a surcharge for global and domestic systemically important banks. Breaching the buffers doesn't close the bank, it restricts dividends and bonuses, which is the point.
   3. Leverage ratio: Tier 1 over total unweighted exposure, minimum 3 percent. It exists because risk weights were gamed before 2008 and banks ran 50-to-1 leverage with beautiful risk-based ratios.
   4. Liquidity, entirely new in Basel III. LCR requires 30 days of high quality liquid assets against stressed outflows. NSFR requires stable funding against illiquid assets over a year. Northern Rock was solvent, so capital rules alone were never going to be enough.
   5. Plus counterparty reforms: a CVA capital charge, higher standards for exposure modelling, and incentives to clear centrally.
   6. The Indian version: RBI applies CET1 of 5.5 percent rather than 4.5, plus a 2.5 percent conservation buffer, so minimum CRAR is 11.5 percent against Basel's 10.5. India has been consistently more conservative on the capital ratio and slower on some of the market risk pieces.
   7. The fair criticism to volunteer: complexity. The framework is thousands of pages, RWA calculations are barely comparable across banks, and that opacity is exactly what the leverage ratio and the Basel IV output floor were added to contain.

   Where candidates lose it

   Listing ratios without the three themes. What an interviewer wants is capital quality, a non-risk-based backstop, and liquidity standards. And know the Indian numbers if you're interviewing in India, because CRAR of 11.5 percent versus 10.5 is a detail that immediately places you.

   Expect next

   • Why add a leverage ratio if you already have risk weights?
   • What happens if a bank dips into its conservation buffer?
   • How does RBI's implementation differ?
2. 054What is CET1, and what qualifies as CET1 capital?Regulatory capitalCoretechnicalRegulatory reportingIndian bank risk and treasury

   Say this

   Common equity Tier 1 is the purest loss-absorbing capital: ordinary shares, share premium, retained earnings and disclosed reserves, minus a set of regulatory deductions. It's the numerator regulators actually care about, because it absorbs losses while the bank is still trading.

   Then walk it

   1. What's in it: paid-up ordinary share capital, share premium, retained earnings, accumulated other comprehensive income, and statutory reserves. Minority interests only in limited circumstances.
   2. The deductions are where the real work is: goodwill and other intangibles, deferred tax assets arising from losses, defined benefit pension surpluses, own shares held, significant investments in other financial institutions above thresholds, and the IRB shortfall of provisions against Basel expected loss.
   3. Why deductions matter so much: goodwill has no value in a liquidation, and a DTA from past losses is only worth something if you're profitable, which you aren't in the scenario the capital is for. So both get removed.
   4. The tiers above it: Additional Tier 1, which is perpetual and loss-absorbing through conversion or write-down, typically AT1 contingent convertibles that trigger when CET1 falls below 5.125 or 7 percent. Then Tier 2, mostly dated subordinated debt, which only absorbs loss in a gone-concern.
   5. That distinction between going-concern and gone-concern capital is the whole logic of the tiering, and it's the sentence that shows you understand it rather than having memorised a list.
   6. The 2023 reality check: Credit Suisse's AT1 was written down in full while shareholders received value in the UBS transaction. That inverted the expected hierarchy and repriced the whole AT1 market, and it's a live example of how gone-concern capital behaves under political pressure.
   7. Indian specifics: RBI requires CET1 of 5.5 percent, and Indian public sector banks have historically carried large DTAs and government recapitalisation bonds, so the deduction rules have a bigger effect on reported CET1 there than the headline ratio suggests.

   Where candidates lose it

   Listing what's included and skipping the deductions. The deductions are where CET1 differs from book equity, and goodwill plus DTA are the two that matter most. The answer that stands out explains going-concern versus gone-concern capital as the reason for the tiering.

   Expect next

   • Why is goodwill deducted?
   • What is an AT1 CoCo and when does it convert?
   • What did the Credit Suisse AT1 write-down change?
3. 055What are risk-weighted assets, and how are they computed?Regulatory capitalCoretechnicalRegulatory reportingBank credit risk

   Say this

   RWAs are the denominator of the capital ratio: exposures scaled by how risky they are. You compute them separately for credit, market and operational risk and add them up. A sovereign bond might carry a zero weight and an unsecured corporate loan 100 percent, so the same balance sheet size can imply very different capital.

   Then walk it

   1. Credit risk RWA, standardised approach: exposure times a prescribed weight by counterparty type and rating. Cash and most domestic sovereign zero, banks 20 to 100 depending on rating, residential mortgages 35 or lower under the revised rules, unrated corporates 100, and some specialised lending at 150.
   2. Credit risk RWA, internal ratings based: you feed your own PD, LGD and EAD into the Basel formula, which computes a 99.9 percent one-year unexpected loss and multiplies by 12.5. Same idea, but the weight is derived from your models rather than a table.
   3. Market risk RWA covers the trading book, now under FRTB with a sensitivities-based standardised approach or an internal models approach built on expected shortfall.
   4. Operational risk RWA under the standardised measurement approach: a Business Indicator Component from income and balance sheet size, scaled by an internal loss multiplier from your own ten-year loss history.
   5. Then the capital ratio is CET1 divided by total RWA. So there are two ways to improve it: raise capital or shrink RWA. RWA optimisation, shifting to lower-weighted assets, buying protection, improving collateral documentation, is a whole industry and a legitimate one within limits.
   6. The criticism: RWA density varies enormously across banks with similar books, largely because of IRB model differences. A European bank might run RWAs at 30 percent of total assets and a US bank at 60 for comparable risk. That comparability failure is why Basel IV added an output floor.
   7. Rough feel for scale: for a typical commercial bank, total RWA runs 50 to 70 percent of total assets, with credit risk 80 to 90 percent of the RWA total. Market risk is usually small unless there's a real trading book.

   Where candidates lose it

   Explaining the weights and never mentioning that banks can and do manage RWA down. An interviewer wants to hear both that RWA optimisation is a real activity and that its abuse is why the output floor exists. Also know the rough RWA-to-assets ratio, because it makes the number concrete.

   Expect next

   • How would a bank legitimately reduce its RWAs?
   • Why do RWA densities differ so much between banks?
   • What proportion of RWAs is credit risk for a typical bank?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.