FRM Part II · FRM Exam Part II · Governance
A bank's credit risk committee receives a monthly report showing only the total outstanding exposure and the number of delinquent accounts for its commercial loan book. Which addition would most improve the report's usefulness for governance oversight?
The best addition is limit utilisation and concentration metrics by sector, rating and counterparty with trends. Governance reporting must show how actual exposure compares with risk appetite and where risk is building. Raw loan lists, history narratives or staff personal scores do not give an aggregate, decision-useful view of credit risk.
- ARisk-appetite limit utilisation and concentration metrics by sector, rating grade and counterparty, with trend comparisonsCorrect
- BA longer description of the bank's lending history and its founding principles
- CThe personal credit scores of each relationship manager on the commercial lending team
- DA list of every individual loan approved during the month regardless of size or risk
Explanation
Effective credit risk reports let the board and committee compare actual risk against appetite and limits, and identify concentrations and trends. Listing every loan overwhelms readers with detail and gives no aggregate view. Historical narratives and staff personal scores say nothing about portfolio risk.
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