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FRM Part II · FRM Exam Part II · Capital Planning at Large Bank Holding Companies: Supervisory Expectations and Range of Current Practice

Which practice would supervisors regard as a sign of a weak capital contingency framework in a large bank holding company?

A weak framework lists capital actions without defined triggers, feasibility analysis or timing. Such plans cannot be executed promptly under stress, whereas effective contingency plans tie actions to clear triggers, assess their realism, and set escalation responsibilities.

  1. ACapital actions listed without defined triggers, feasibility analysis, or timingCorrect
  2. BTriggers linked to early warning indicators
  3. CDocumented options such as reducing dividends or selling assets
  4. DEscalation procedures to the board

Explanation

Effective contingency plans specify triggers, assess whether actions are realistic and set timing and responsibility. A list lacking these features is not actionable. The other options are strengths.

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