Chapter 2 - Regulatory Implications of Business Strategies Flashcards
1
Q
Who retains responsibility for tasks outsourced?
A
The outsourcer
2
Q
When would a firm need to inform the regulator of an outsourced operation?
A
When a material task is being outsourced.
3
Q
What would regulators expect firms to do before deciding to outsource?
A
- Due diligence of the service provider.
- Retain expertise to provide oversight of the service provider.
- Written contract with a clear SLA and KPIs.
- Agreed business continuity and disaster recovery plan plus periodic testing.
4
Q
Which 2 regulatory frameworks cover capital adequacy?
A
- Basel Accords
2. EU Solvency Directives
5
Q
What are the 2 approaches to calculating capital adequacy requirements.
A
- Standard formula - Risk weightings placed on assets of the firm –> higher the risk –> greater the capital requirement. e.g. Basel 3 requiring restructuring of business models after stress testing.
- Internal models - Firm produce own models based on detailed risk management systems. This might reflect the firm’s risk profile better than a standard formula. Model to be approved by the regulator.
6
Q
What is the process called to amend authorisation status?
A
Variation of Permission (VOP)
7
Q
For minor variations of permission, how long can the process take?
A
2 to 8 weeks.
8
Q
For major variations of permission, what might the regulatory require?
A
- Detailed overview of the firm’s expertise in the new activity, risk assessments, detailed business plan.
9
Q
How long can the process take for a major variation of permission?
A
Up to a year
