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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

Which policy tool is most directly aimed at reducing systemic cyber risk arising from firms' reliance on critical third-party providers?

Direct oversight and incident-reporting requirements for critical third-party providers, together with sector-wide cyber crisis exercises, target systemic cyber risk from shared dependencies. Capital buffers, mortgage limits and deposit insurance address credit-cycle or run risks, not operational concentration.

  1. ARaising the countercyclical capital buffer
  2. BDirect oversight and incident-reporting requirements for critical service providers, combined with sector-wide cyber stress or crisis exercisesCorrect
  3. CTightening loan-to-value limits on mortgages
  4. DIncreasing deposit insurance coverage limits

Explanation

Oversight of critical providers, incident reporting and joint sector exercises address common dependencies and coordination in a crisis. The countercyclical buffer, LTV limits and deposit insurance target credit-cycle or run risks rather than operational concentration.

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