2024 Revised Basel Core Principles Quiz

A set of international standards that assess the effectiveness of a country's banking regulatory and supervisory regime.

The process of reviewing a country's banking system to ensure its compliance with international standards.

They aim to promote financial stability at both national and international levels.

A program by the IMF and World Bank that assesses the overall financial health of a country.

Stand-alone reports that evaluate a country's compliance with specific international standards.

The revised BCP aims to reflect the latest changes in banking regulations and the impact of recent events.

The revisions incorporated lessons from recent events such as the COVID-19 pandemic and the implementation of the Core Principles since 2012.

The new BCP focuses on the potential risks posed by digital technology, including online banking security and data breaches.

A detailed report, produced by the IMF, summarizing the findings of the FSAP and providing recommendations for improvement.

A concise document, produced by the IMF, that outlines the key findings of the FSAP and focuses on specific areas requiring attention.

Changes in banking regulations or practices that could significantly impact the financial system's stability.

A series of principles designed to strengthen the supervision of banking institutions globally, aiming to prevent future financial crises.

The process of providing assistance to countries to improve their capacity to implement the Core Principles for Effective Banking Supervision.

Financial institutions considered to be essential to the stability of the entire financial system of a country.

The likelihood that the failure of one financial institution can trigger a cascade of failures within the financial system.

The practice of ensuring banks operate sustainably in the long term, considering environmental, social, and governance (ESG) factors.

A set of guidelines for managing business relationships between companies and their connected parties, including subsidiaries, joint ventures, and related individuals, preventing conflicts of interest and ensuring fair transactions.

Public disclosures by banks on their operations, risks, and governance, enabling investors and the public to understand their practices and performance.

Financial risks arising from the effects of climate change, such as extreme weather events, rising sea levels, and changes in resource availability.

The process by which supervisors assess and manage the potential risks posed by climate change to banks' financial stability.

The ability of banks to withstand disruptions and maintain essential operations in the face of technological challenges, such as cyberattacks and data breaches.

The integration of digital technologies into financial services, leading to new business models, customer interactions, and operational processes.

The access and review of relevant information, including that stored digitally, to ensure comprehensive oversight of banking groups and their service providers.

Nonbank financial institutions and their activities are increasingly monitored for potential risks to financial stability.

Supervisory authorities need to implement group-wide oversight to manage risks arising from interconnected financial entities.

A situation where a supervisor may have to intervene and take over the operations of a failing financial institution.

The risk associated with a counterparty's inability to fulfill their obligations in a financial agreement.

Banking supervision has clear objectives and responsibilities, and each authority involved has the legal power to enforce regulations.

Supervisors must operate independently, be transparent, maintain sound governance, and have sufficient resources.

Cooperation and collaboration between domestic and foreign authorities are essential for effective banking supervision.

The activities of institutions claiming to be banks are strictly defined, and the use of the term 'bank' is controlled to prevent misleading the public.

Banks must have a system to identify, measure, evaluate, and control all potential risks, including those related to digitalization, climate change, and emerging threats.

Supervisors must ensure banks have sufficient capital reserves to absorb potential losses. These reserves should be proportionate to the risks the bank takes on.

Banks must have a system to manage credit risk, which involves assessing the likelihood of borrowers not repaying their loans.

Banks must have a system to identify and manage problem loans and maintain adequate reserves to cover potential losses.

Banks must have a comprehensive risk management process, covering all material risks, to ensure their operations are sustainable and resilient.

Supervisors must set capital requirements for banks that reflect the risks they undertake and the market conditions in which they operate.

Supervisors need to ensure banks take proactive steps to manage credit risk, considering their risk appetite, market conditions, and future risks.

Banks must have a system to identify and deal with problem loans early on, ensuring that they have enough reserves set aside.

The supervisor ensures banks have a robust strategy to manage their liquidity risk. This includes identifying, measuring, evaluating, monitoring, reporting, and controlling or mitigating the risk over time, considering the bank's risk profile, market conditions, and macroeconomic factors. The strategy should be aligned with the bank's risk appetite.

Supervisors ensure banks manage their operational risk and operational resilience. This includes identifying, assessing, evaluating, monitoring, reporting, and controlling operational risks to prevent disruptions in critical operations. Banks should be able to respond, recover, and adapt to potential failures, minimizing the impact on their services.

Supervisors require banks to have strong internal control frameworks to ensure their business is conducted responsibly and ethically. This involves clear delegation of authority, separation of duties, reconciliation of processes, safeguarding assets, and independent audits to check compliance with laws and regulations.

The strategy for managing liquidity risk should be aligned with the bank's risk appetite, which outlines the level of risk that the bank is willing to take. This helps the bank to make decisions about their liquidity risk in a way that is consistent with their overall risk profile.

International banks must abide by the Basel standards, which set minimum requirements for liquidity and funding. These standards help to ensure that banks have enough liquid assets to cover their short-term obligations, promoting global financial stability by reducing the risk of a bank failing.

The banking supervisor ensures banks proactively identify and address emerging risks, not just those already known. This allows banks to adapt to changing circumstances and stay ahead of potential threats, such as new technologies or economic trends. These emerging risks need to be assessed and managed alongside existing ones.

Operational resilience is crucial for banks to maintain their services even during disruptions. This means having processes and systems in place to respond to and recover from various events, including cyberattacks, natural disasters, or internal failures, ensuring smooth operations and customer trust.

A bank's risk profile captures the nature and level of risks it faces across various areas, like credit, market, and operational risks. It serves as a foundation for implementing risk management strategies, ensuring that the bank's activities align with its overall risk appetite.