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Explanation:
The correct answer is A.
The failure to appropriately validate or independently review the model indicates a breach in internal controls. Robust internal controls are essential to ensure that models used in the capital planning process are independently reviewed, validated, and functioning accurately as intended.
Q.2225 The Great Falls Bank of Montana, USA, part of a Bank Holding Company (BHC), is performing an annual CCAR (Comprehensive Capital Analysis and Review). During the process, it is revealed that one of the existing models has not been appropriately validated nor independently reviewed. Which principle of effective capital adequacy has been violated?
A
Robust internal controls
B
Sufficient capital adequacy impact assessment
C
Effective loss-estimation methodologies
D
Effective governance
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