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

A supervisor reviewing a bank's compliance with the BCBS 239 principles finds material weaknesses in the bank's risk data aggregation. Which supervisory response is most consistent with the principles' guidance on remedial action?

Supervisors should require timely remedial action and may use tools such as independent third-party reviews or limits on risk-taking or growth. BCBS 239 does not call for ignoring weaknesses, nor for automatic board replacement or mandated public disclosure of the deficiency.

  1. ATake no action, because the principles are non-binding for banks
  2. BRequire the bank to adopt remedial measures and, where needed, use supervisory tools such as restricting risk exposures or requiring independent reviewCorrect
  3. CReplace the bank's board with supervisory appointees immediately
  4. DRequire the bank to publish the weakness in its financial statements

Explanation

The principles state that supervisors should have the ability to use tools to require timely remedial action, including independent reviews by third parties such as experts, and can use measures such as capital add-ons or restrictions on growth. They do not call for immediate board replacement or mandatory public disclosure.

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