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FRM Part I · FRM Exam Part I · Principles for Effective Data Aggregation and Risk Reporting

A bank's reconciliation shows that its group risk data, aggregated from 5 legal entities, has total credit exposure of USD 1,200 million, while the general ledger shows USD 1,250 million for the same scope. Which of the following is the most appropriate conclusion under BCBS 239?

The USD 50 million gap, 4.0% of the ledger figure, signals a reconciliation weakness that should be investigated and explained. BCBS 239 expects risk data to be reconciled with sources such as accounting data where appropriate, so dismissing it or abandoning automation is wrong.

  1. AThe difference of USD 50 million (4.0% of the ledger) is acceptable because risk data never needs to reconcile to accounting sources
  2. BThe difference should be ignored because accuracy only applies to market risk data
  3. CThe difference indicates a reconciliation gap that should be investigated and explained, since risk data should be reconciled with sources such as accounting data where appropriateCorrect
  4. DThe difference proves that the bank must stop using automated aggregation

Explanation

The gap is 1,250 − 1,200 = USD 50 million, or 50/1,250 = 4.0%. BCBS 239 expects risk data to be reconciled with sources, including accounting data where appropriate, and differences to be explained. Ignoring it or abandoning automation is not supported.

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