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Answer: Review the bank's accountability standards for its senior management
The regulators would be most likely to review the bank's accountability standards for its senior managers to ensure the managers behave in a manner that promotes proper conduct. This is because regulators are focused on the risk culture framework and conduct and culture policies within a banking institution. By examining the accountability standards for senior management, regulators can assess whether the bank's leadership is fostering an environment that aligns with regulatory expectations for conduct and culture. This approach is more directly related to the bank's risk culture than increasing operational risk capital requirements, which do not directly address conduct and culture. Quantitative approaches are not easily applicable to model conduct and culture, and increasing incentive compensation could potentially lead to poorer conduct and a less conservative risk culture, thereby increasing the bank's risk exposure.
Author: LeetQuiz Editorial Team
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The regulators have recently announced their intention to closely examine the global bank's risk culture framework as well as its policies on conduct and culture. Based on best practices outlined in recent publications, what actions are the regulators most likely to undertake?
A
Increase the bank's operational risk capital requirements
B
Review the bank's accountability standards for its senior management
C
Require that the bank implement quantitative approaches to model conduct and culture
D
Recommend that the bank increase the proportion of incentive compensation for its traders and investment bankers
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