FRM Part II · FRM Exam Part II · Governance
A bank's board risk committee receives a quarterly credit risk report. Which feature would most improve the report's usefulness for board-level oversight of credit risk?
Board credit reports are most useful when they aggregate exposures against board-approved risk appetite limits and highlight trends, concentrations and breaches with explanations. Raw loan-level detail or only historical losses do not support forward-looking oversight or timely decisions by directors.
- ALoan-level listings of every exposure above a minimal threshold, without aggregation
- BAggregated exposures against board-approved risk appetite limits, with trends, concentrations and breaches highlighted and explainedCorrect
- COnly backward-looking realised loss figures for the prior year
- DA summary of the front-office's profit and loss by desk, excluding credit metrics
Explanation
Board reporting should be concise, aggregated and tied to the approved risk appetite, showing trends, concentrations and limit breaches with explanations. Loan-level data overwhelms the board, and realised losses alone are backward-looking and do not show how risk is positioned against appetite.
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