Financial Risk Manager Part 1
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According to Basel Committee, A bank should be able to generate aggregate risk data to meet a broad range of on-demand, ad hoc risk management reporting requests, including requests during stress or crises, requests due to changing internal needs, and requests to meet supervisory queries. Which of the following Basel Committee Principles does the above statement refer to?
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A
Principle 1 on Governance
B
Principle 6 on Adaptability
C
Principle 4 on Completeness
D
Principle 11 on Distribution
Explanation:
Explanation
Principle 6 of the Basel Committee's principles for effective risk data aggregation and risk reporting focuses specifically on Adaptability. This principle requires that:
- Banks should be able to generate aggregate risk data to meet a broad range of on-demand, ad hoc risk management reporting requests
- This capability should be available during stress or crisis situations
- The system should accommodate changing internal needs
- Banks must be able to respond to supervisory queries effectively
Why other options are incorrect:
- Principle 1 (Governance): Focuses on governance frameworks and senior management oversight
- Principle 4 (Completeness): Emphasizes that risk data should be comprehensive and capture all material risk exposures
- Principle 11 (Distribution): Concerns the distribution of risk reports to appropriate stakeholders
The key distinction is that Principle 6 specifically addresses the need for flexibility and responsiveness to changing circumstances, including stress scenarios and evolving requirements.
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