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FRM Part II · FRM Exam Part II · Risk Reporting

A bank finds that its credit risk and market risk reports use different legal-entity hierarchies and different definitions of the same counterparty, so group-wide exposure cannot be reconciled. Which BCBS 239 principle does this primarily contravene?

This mainly contravenes the data architecture and IT infrastructure principle, which calls for integrated data taxonomies and consistent definitions. If credit and market systems define counterparties and hierarchies differently, exposures cannot be reconciled across the group, regardless of how well the reports are presented or distributed.

  1. ARisk data aggregation: data architecture and IT infrastructure, supported by integrated data taxonomiesCorrect
  2. BRisk reporting practices: distribution
  3. CSupervisory review and tools
  4. DRisk reporting practices: clarity and usefulness

Explanation

Inconsistent hierarchies and counterparty definitions reflect a lack of integrated data taxonomies and architecture. BCBS 239 requires a bank to design and maintain data architecture and IT infrastructure supporting aggregation, including consistent definitions. Distribution and clarity concern how reports are delivered and presented, not underlying data design.

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