Pillar Risks Flashcards
Credit Risk is in which Pillar?
Pillar 1 Risk
Market Risk is in which Pillar?
Pillar 1 Risk
includes interest rate risk
Operational Risk is in which Pillar?
Pillar 1 Risk
the risk of loss of principal or financial reward caused by the borrower’s failure to repay a loan or otherwise meet a financial obligation
falls under which risk?
Credit Risk
the risk to value, earnings, or capital arising from movements of risk factors in financial markets
falls under which risk?
Market Risk
includes interest rate risk (including real- and nominal interest rates, credit spreads and basis spreads), currency risk, equity risk (including dividend risk), and commodity risk (including precious metals) and risks from changes in volatilities or correlations.
falls under which risk?
Market Risk
the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
falls under which risk?
Operational Risk
includes legal risk, but excludes strategic and reputational risk.
falls under which risk?
Operational Risk
Credit Concentration Risk is in which Pillar?
Risks not Fully Covered in Pillar 1
Residual Risk is in which Pillar?
Risks not Fully Covered in Pillar 1
Securitization Risk is in which Pillar?
Risks not Fully Covered in Pillar 1
should be analyzed at both a local legal entity level and a consolidated basis.
falls under which risk?
Credit Concentration Risk
any single exposure or group of similar exposures (eg, to the same borrower or counterparty, geographic area, industry or other risk factors) with the potential to produce losses large enough (relative to a CIF’s earnings, capital, total assets or overall risk level) to threaten a CIF’s ability to maintain its core operations or a material change in a CIF’s risk profile.
falls under which risk?
Credit Concentration Risk
occurs, for example, as a result of the low performance or failure of credit risk mitigation techniques such as ineffective documentation, or delay or inability to realise payment from a client in a timely manner.
falls under which risk?
Residual Risk
a CIF should ensure that it fully understands the credit quality and risk characteristics of the underlying exposures in structured credit transactions, including any risk concentrations.
falls under which risk?
Securitization Risk
Settlement Risk is in which Pillar?
Risks not Fully Covered in Pillar 1
Foreign Exchange Risk is in which Pillar?
Risks not fully covered under Pillar 1
is the risk that one party fails to deliver the asset or cash value at the time of settlement of a trade. This is of particular importance when transferring funds on behalf of clients.
falls under which Risk?
Settlement Risk
Due to the high liquidity and volatility of the market, these losses can be significant and it is therefore essential for CIFs to identify, measure and manage this risk effectively.
falls under which Risk?
Foreign Exchange Risk
Liquidity Risk is in which Pillar?
Pillar 2 Risks
Business Risk is in which Pillar?
Pillar 2 Risks
Legal and Compliance Risk is in which Pillar?
Pillar 2 Risks
Reputational Risk is in which Pillar?
Pillar 2 Risks
Strategic Risk is in which Pillar?
Pillar 2 Risks
Group Risk is in which Pillar?
Pillar 2 Risks
inability to manage unplanned decreases or changes in funding sources
falls under which risk?
Liquidity Risk
failure to recognise or address changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value.
falls under which risk?
Liquidity Risk
CIFs are exposed to performance risk and need to assess how they will manage their relationships with clients during periods of poor performance.
falls under which risk?
Business Risk
Performance risk may affect a CIF’s ability to generate income.
falls under which risk?
Business Risk
may arise as a result of breaches or non-compliance with legislation, regulations, practices or ethical standards:
falls under which risk?
Legal and Compliance Risk
investment advice – risk of breaching the customer’s obligations, for example, by providing unsuitable advice
falls under which risk?
Legal and Compliance Risk
execution-only services – risk of not executing orders appropriately.
falls under which risk?
Legal and Compliance Risk
may arise from providing poor customer service or from fines imposed by CySEC that create a negative feeling towards the CIF from the market.
falls under which risk?
Reputational Risk
occurs as a result of adverse business decisions, improper implementation of decisions or lack of responsiveness to changes in the business environment.
falls under which risk?
Strategic Risk
applies to all subsidiaries that are part of a group which is established either in the Republic, another member state, or a third country.
falls under which risk?
Group Risk
a CIF that has a parent in a third country which does not apply Basel II rules and has exposure to high political risk, needs to assess the possibility of being indirectly adversely impacted from a political event in the set-up stage of the parent company.
falls under which risk?
Group Risk
