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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

An authority wants early warning of building systemic digital risk. Which indicator would be most useful for a macroprudential monitoring framework?

Tracking the share of critical financial services that depend on a few technology providers is most useful, because rising concentration signals growing common-mode vulnerability. Branch counts, management age and deposit rates do not capture systemic digital dependency.

  1. AThe share of critical financial services dependent on a small number of technology providers, tracked over timeCorrect
  2. BThe number of branches each bank operates
  3. CThe average age of senior management
  4. DThe level of retail deposit rates

Explanation

A rising concentration of critical services on few providers signals growing common-mode vulnerability, which is what macroprudential monitoring aims to capture. Branch count, management age and deposit rates do not measure digital systemic exposure.

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