Risk management Framework

Question 1

Credit risk policy development, modelling and control should be dependant on…

Answer 1

Structure
Policy
Customer assessment
Reducing risks
Exposure monitoring
Review
Potential credit events

Question 2

The board of directors should approve the…

Answer 2

Policy.

Make recommendations

Question 3

The policy will be…

Answer 3

Implemented
Kept under review
Make clear which tools are to be used e.g. Customer assessment techniques, stress testing, scenario modelling etc etc

Question 4

How many principles for sound practices does the Basel committee present ?

Answer 4

10

Question 5

1.supervisory expectations…

Answer 5

Banks directors and senior management
Experience systems in place to reliably classify loans
Process for credit risk assessment should provide bank with necessary tools. Procedures and observable data to use for assessing credit risk

Question 6

2. Supervisory evaluation of credit risk assessment for loans, controls and capital adequacy

Answer 6

Banking supervisors should periodically evaluate the effectiveness of a banks credit risk policies and practices

Consider credit risk assessment and valuation policies and practices when assessing a banks capital adequacy

Question 7

What is the fundamental responsibility of a credit risk department within a firm ?

Answer 7

To assess the health of customers and counter parties that the firm is dealing with and provide input into the decision as to whether to lend funds or not