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Bank Credit Risk Management

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Questions and Answers

What is the primary responsibility of the Board of Directors regarding credit risk management?

To delegate all credit risk management tasks to the Risk Management Committee.

To approve individual credit proposals without any restrictions.

To conduct audits on credit risk decisions independently.

To oversee overall credit risk exposure management in line with the Policy. (correct)

What is one function of the Risk Management Committee of the Board (RMCB)?

To approve the Policy and establish credit risk appetite and monitoring limits. (correct)

To monitor the daily trading activities of the bank.

To review all individual credit proposals for final approval.

To conduct regular training sessions for all staff on credit policy.

If multiple aspects of a credit proposal require approval from different authorities, who has the authority to grant approval?

Any member of the Board of Directors.

The authority with the highest Discretionary Lending Powers. (correct)

The Risk Management Committee of the Board.

The committee with the least amount of Discretionary Lending Powers.

What must be recorded when a deviation, modification, concession, or waiver is approved?

<p>Justification recorded in writing.</p> Signup and view all the answers

How does the Board ensure that credit risk decisions align with the desired outcomes?

<p>By ensuring benchmark risk-adjusted returns are achieved on exposures.</p> Signup and view all the answers

Study Notes

Board of Directors Responsibilities

Oversee the bank's overall credit risk management.
Ensure all credit risk decisions follow the established policy.
Achieve benchmark risk-adjusted returns on credit exposures.

Risk Management Committee of the Board (RMCB)

Approves the credit risk policy and sets major appetite/monitoring limits.
Advises the board on matters related to credit risk exposure management, including policy formulation and review.

Deviation, Modification, Concession, and Waiver Approvals

The Bank’s CACB may approve deviations, modifications, concessions, and waivers within regulatory limits, with written justification.
The CACB can also approve such requests if the MCB has the authority.
If a credit proposal involves multiple approvals (e.g., deviations, modifications), the authority with the highest discretionary lending powers will handle the entire proposal.
The responsible authorities will complete the final approval and review of any credit facility per their discretionary lending power.

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Description

This quiz covers the responsibilities of the Board of Directors in overseeing credit risk management in a bank, including the role of the Risk Management Committee. It also addresses the protocols for approving deviations, modifications, concessions, and waivers in credit proposals.