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CS Professional · Banking and Insurance - Laws and Practice · Risk Management in Banks and Basel Accords

Under the usual three lines of defence model in a bank, which function forms the second line of defence?

The second line of defence is the independent risk management and compliance function, which sets frameworks and monitors risk. Business units are the first line owning risks, and internal audit is the third line giving independent assurance.

  1. AIndependent risk management and compliance functionsCorrect
  2. BBusiness units that take and own risks day to day
  3. CInternal audit providing independent assurance
  4. DExternal regulators conducting inspection

Explanation

The first line is the business units owning risk, the second is independent risk management and compliance that set frameworks and monitor, and the third is internal audit giving independent assurance. Business units are first line and internal audit is third.

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