Module: | MODULE B: RISK MANAGEMENT
Q275: Consider the following statements regarding the role of executive-level committees, within the basic risk management framework:
1. The Asset Liability Management Committee is exclusively responsible, for managing the bank's market risk and structural liquidity position on a continuous basis.
2. The Credit Risk Management Committee focuses strictly, on setting the internal credit rating models and monitoring the overall loan portfolio quality.
3. The Operational Risk Management Committee is directly tasked, with executing high-frequency stock market trades to maximize the bank's daily treasury profits.
Which of the statements given above is/are correct?
2. The Credit Risk Management Committee focuses strictly, on setting the internal credit rating models and monitoring the overall loan portfolio quality.
3. The Operational Risk Management Committee is directly tasked, with executing high-frequency stock market trades to maximize the bank's daily treasury profits.
Which of the statements given above is/are correct?
✅ Correct Answer: A
The correct answer is A. Statement 1 is correct: The Asset Liability Management Committee (ALCO) is the premier executive committee tasked with managing the bank's balance sheet.
Its primary responsibilities include managing structural liquidity risk, interest rate risk, and overall market risk on an ongoing basis.
Statement 2 is correct: The Credit Risk Management Committee (CRMC) governs the bank's credit risk profile.
It is responsible for approving internal credit rating models, reviewing large credit exposures, and actively monitoring the health and quality of the overall loan portfolio to mitigate NPAs.
Statement 3 is incorrect: The Operational Risk Management Committee (ORMC) is strictly focused on mitigating internal process failures, IT system crashes, external frauds, and human errors.
It has absolutely no mandate to execute stock market trades or generate treasury profits.
Those activities belong entirely to the Treasury Front Office.
Its primary responsibilities include managing structural liquidity risk, interest rate risk, and overall market risk on an ongoing basis.
Statement 2 is correct: The Credit Risk Management Committee (CRMC) governs the bank's credit risk profile.
It is responsible for approving internal credit rating models, reviewing large credit exposures, and actively monitoring the health and quality of the overall loan portfolio to mitigate NPAs.
Statement 3 is incorrect: The Operational Risk Management Committee (ORMC) is strictly focused on mitigating internal process failures, IT system crashes, external frauds, and human errors.
It has absolutely no mandate to execute stock market trades or generate treasury profits.
Those activities belong entirely to the Treasury Front Office.