Explanation:
The correct answer is A.
A bank-wide view of counterparty credit risk (CCR) involves aggregating exposures across all business units, products, and legal entities. This process requires gathering massive amounts of transaction data, matching it with counterparty netting agreements, tracking collateral, and monitoring dynamic market variables. Doing so on a large scale is incredibly complex and requires significant data infrastructure and continuous transaction monitoring capabilities, which can easily strain human and technical resources.
Choices B, C, and D may represent operational or organizational challenges, but the fundamental and most significant hurdle for aggregating counterparty credit risk for economic capital at a bank-wide level is the sheer volume, complexity, and computational burden of the data and transaction monitoring required.
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Q.2220 A bank-wide view of counterparty credit risk for economic capital purposes can be a challenge mainly because:
A
It involves large-scale gathering of data and transactions monitoring, which can easily strain human resources.
B
It requires the use of expensive software to track transactions.
C
It relies heavily on independent opinions of credit rating agencies, some of which can be compromised.
D
It requires cooperation among all business divisions, some of which could be autonomous.
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