FRM Part II · FRM Exam Part II · Governance
A bank's board risk committee receives a quarterly credit report. Which of the following reporting features would best support effective board oversight of credit risk?
The board should receive concise, forward-looking information measured against risk appetite: limit breaches, concentrations, rating migration, stress test outcomes and policy exceptions. Granular loan lists overwhelm directors, and aggregate provisions or old audit findings fail to reveal the evolving risk profile.
- ADetailed loan-by-loan listings of every performing exposure
- BOnly the aggregate provision amount and total loans outstanding
- CForward-looking metrics against appetite, including limit breaches, concentrations, migration trends, stress test results, and exceptions to policyCorrect
- DA summary of audit findings from prior years only
Explanation
Boards need concise, forward-looking information tied to appetite: breaches, concentrations, rating migration, stress results and policy exceptions. Loan-level detail overwhelms, aggregates alone hide risk, and historical audit findings are not a risk profile.
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