BUISENESS MANAGEMENT
RISK MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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To ensure that bank have adequate capital to support all the risk in their business
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To encourage the banks to develop and use better risk management techniques
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both
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only A
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Detailed explanation-1: -The supervisory review process recognises the responsibility of bank management in developing an internal capital assessment process and setting capital targets that are commensurate with the bank’s risk profile and control environment.
Detailed explanation-2: -The Supervisory Review and Evaluation Process (SREP) is a set of procedures carried out on an annual basis by the supervisory authorities to ensure each credit institution has in place the strategies, processes, capital and liquidity that are appropriate to the risks to which it is or might be exposed to.
Detailed explanation-3: -The Pillar 2 supervisory review process is an integral part of the Basel Framework. It is intended to ensure that banks not only have adequate capital to support all the risks in their business but also develop and use better risk management techniques in monitoring and managing these risks.
Detailed explanation-4: -The Pillar 2 requirement (P2R) is a bank-specific capital requirement which applies in addition to the minimum capital requirement (known as Pillar 1) where this underestimates or does not cover certain risks. A bank’s P2R is determined as part of the Supervisory Review and Evaluation Process (SREP).
Detailed explanation-5: -The SPARC or Supervisory Programme for Assessment of Risk and Capital is a risk based supervisory mechanism developed by the RBI. It is a successor of the CAMELS. Supervising financial institutions in accordance with their risk profile is supposed to be a superior appraoch in supervision.