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FRM Part II · FRM Exam Part II · Digital Resilience and Financial Stability: The Quest for Policy Tools in the Financial Sector

A financial stability authority is designing a macroprudential framework for cyber risk. Which feature most distinguishes a macroprudential approach from a purely microprudential approach to digital resilience?

A macroprudential approach focuses on systemic spillovers from common dependencies and correlated cyber incidents across institutions, rather than on each firm's own controls. It addresses how one shock can propagate through shared providers and interconnections, which firm-level supervision alone does not capture.

  1. AFocus on systemic spillovers from common dependencies and correlated cyber incidents across institutionsCorrect
  2. BFocus on each firm's own IT controls to protect that firm's depositors
  3. CFocus on lowering the cost of cyber insurance for individual firms
  4. DFocus on penalties for firms that report incidents late

Explanation

Macroprudential policy targets system-wide risk, such as shared service providers, common software and interconnections that let one incident propagate. Firm-level controls and individual penalties are microprudential or conduct tools, which do not by themselves address the system-wide channel.

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