Oversight and Risk Management System (RMS)
Decipher this –
NOXQQIVIT
No excuse for it
Who has the overall responsibility of the bank, including approving and overseeing the implementation of bank's objectives, risk strategy, corporate governance and corporate values?
Board of Directors
A component of the credit process which involves understanding and making judgments about a borrowers ability and willingness to pay.
Credit initiation and analysis
Risk to earnings or capital arising from adverse movements in factors that affect the market value of instruments, products, and transactions in an institution’s trading book portfolio.
Market Risk
Risk that arises from actions or activities that are unethical and detrimental to the welfare of customers and/or market counterparties
Market conduct risk
Serves as a snapshot of BSFI’s financial condition and risk profile as of given cut-off date, and it also serves as a briefer for BSP higher management
Dashboard
What are the three lines of controls against risks in a Bank?
First line - Business line and Internal control system; 2nd line- Compliance and Risk Management Functions; 3rd line- Internal Audit
A system used to assess a borrower's creditworthiness where a number or letter is usually assigned to represent ability and willingness of borrower to meet its financial obligations.
Internal Credit Risk Rating System (ICRRS)/Credit Scoring System
A static model in measuring interest rate risk in which interest rate sensitive assets, liabilities and off-balance sheet items are slotted in time bands or 'buckets' according to their repricing dates.
Repricing gap model
What is the risk to earnings, capital and liquidity arising from negative perception on the BSFI of its customers, investors, and employees, market analysts, media and other stakeholders that can adversely affect the BSFI’s ability to maintain existing business relationship, establish new businesses or partnership, or continuously access varied funding sources.
Reputational Risk
Supervisory work is conducted through what?
Offsite monitoring and surveillance and virtual/onsite examination.
What are the eight (8) common types of risk in banking operations?
Credit, Market, Liquidity, Operational Risk, Compliance, Legal, Strategic, and Reputational Risks
It is the process of structuring an appropriate credit facility to suit the borrowers requirements (e.g. facility type, amount/limit, maturity, rate, collateral)
Credit underwriting
Refers to the risk that an institution cannot easily eliminate or offset a particular position because of market illiquidity or lack of marketability of an instrument.
Market liquidity risk
The two types of climate risk and give brief description for each type.
a. Physical Risk - potential loss/damage to tangible assets
b. Transition Risk - potential cost for transitioning to low-carbon economy.
3 Major Elements of SAFr
Impact Assessment, Risk Assessment, and Supervisory Intensity
What are the four (4) elements of a sound risk management system?
(1) Active Board and Senior Management Oversight, (2) Adequate Policies, Procedures and Limits, (3) Effective Risk Measurement, Monitoring and MIS, and (4) Comprehensive Internal Controls and Audit.
It is an independent function or part of the overall independent audit function of the bank, which conducts an objective assessment of the loan portfolio, both individual credits and the portfolio in the aggregate.
Loan review
What are the primary risks being managed in the course of asset and liability management or ALM?
Liquidity risk and IRRBB
What is the primary goal of Operational Risk Management?
Reduce frequency and severity of large, rare events.
Describe the process of risk assessment
1) determine the business model by focusing on the significant activities which represent the key risk drivers;
2) Assess how effectively inherent risk emanating from significant activities are managed and controlled.
3) Assess/determine how the institutional level support or risk buffers support the institution’s overall net risk. The end-product of the exercise is the BSFI’s composite rating, which may range from 4 to 1, with banks rated “4” being the most resilient.
5 key duties and responsibilities of the board of directors
1) Shaping corporate culture and values; 2) Setting organizational objectives and strategies and overseeing Management’s implementation thereof; 3) Appointing key management positions and adopting sound remuneration policy; 4) Overseeing the corporate governance framework; and 5) Adopting a risk governance framework.
Give at least four (4) sources of credit risk.
(1) Wholesale or commercial loans and advances, (2) Retail credit (e.g., credit cards, installment loans), (3) Commitments and guarantees, (4) Due from correspondent bank balances, (5) Investments (bond or equity), or (6) Trading products (e.g., foreign exchange and derivatives)
How is liquidity gap measured?
Anticipated cash inflows during a period minus potential cash outflows over the same period of time.
What are the seven (7) types of operational risk events?
(1) Internal fraud, (2) External fraud, (3) Employment practices and workplace safety, (4) Clients, products and business practices, (5) Damages to physical assets, (6) Business disruptions and system failures, and (7) Execution, delivery and process management.
3 Primary Features of SAFr
a. It is a single integrated risk-based framework that replaced the various rating systems employed by the Financial Supervision Sector, including the CAMELS Rating System.
b. Supervisory activities under the SAFr considers not only the BSFI’s risk profile but also its impact to the financial system.
c It is anchored on business model analysis, with the BSFI’s significant activities being the focus of supervisory attention.