Module: | MODULE B: RISK MANAGEMENT
Q340: Consider the following statements regarding the role of the Board of Directors in a bank's market risk management framework:
1. The Board of Directors holds the ultimate responsibility for the comprehensive management of market risk across the institution.
2. The Board is directly responsible for executing daily treasury operations and actively approving individual daylight open position limits for individual dealers.
3. The Board explicitly approves the overarching Risk Appetite Statement and the Net Open Position Limit (NOPL) of the bank.
2. The Board is directly responsible for executing daily treasury operations and actively approving individual daylight open position limits for individual dealers.
3. The Board explicitly approves the overarching Risk Appetite Statement and the Net Open Position Limit (NOPL) of the bank.
✅ Correct Answer: C
The correct answer is C. Statement 1 is correct: According to RBI guidelines, the Board of Directors possesses the ultimate statutory responsibility for the comprehensive risk management framework of the bank.
Statement 3 is correct: The Board's primary functional role is strategic; it approves the Risk Appetite Statement, broad risk limits, and structural constraints like the Net Open Position Limit (NOPL) for foreign exchange.
Statement 2 is incorrect: The Board does not engage in operational micromanagement.
Executing daily treasury operations, tracking intraday volatility, and setting micro-limits (like individual dealer daylight limits) is strictly the responsibility of executive committees like ALCO, implemented via the Mid-Office and Chief Dealer.
Statement 3 is correct: The Board's primary functional role is strategic; it approves the Risk Appetite Statement, broad risk limits, and structural constraints like the Net Open Position Limit (NOPL) for foreign exchange.
Statement 2 is incorrect: The Board does not engage in operational micromanagement.
Executing daily treasury operations, tracking intraday volatility, and setting micro-limits (like individual dealer daylight limits) is strictly the responsibility of executive committees like ALCO, implemented via the Mid-Office and Chief Dealer.