FRM Part II · FRM Exam Part II · Governance
A mid-sized bank's board is reviewing its credit risk governance. Which responsibility is most appropriately retained by the board of directors rather than delegated entirely to management?
The board should approve the credit risk appetite and oversee its consistency with strategy and capital. Individual approvals, product pricing and ledger reconciliations are management and operational duties performed under delegated authority, so they are not responsibilities the board retains.
- AApproving the bank's credit risk appetite and overseeing its alignment with strategyCorrect
- BApproving individual loan applications below the delegated lending limit
- CSetting day-to-day pricing for each retail loan product
- DPerforming the monthly reconciliation of loan balances to the general ledger
Explanation
The board sets and oversees the risk appetite and ensures it is consistent with strategy and capital. Individual loan approvals, product pricing and reconciliations are management or operational tasks carried out under delegated authority. The distractors describe execution rather than oversight.
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