FBO Prudential – Risk Management – Flashcards
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Recent reviews of risk management practices of banking organizations conducted by ? illustrated deficiencies in risk management.
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the Senior Supervisors Group (SSG)
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SSG stands for ?
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Senior Supervisors Group
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The SSG found that business line and senior risk managers did not jointly act to address risks on a ? basis.
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enterprise-wide
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The SSG found that business line and senior risk managers did not jointly act to address risks on an enterprise-wide basis and business line managers made decisions in ?
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isolation
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The SSG found that business line and senior risk managers did not jointly act to address risks on an enterprise-wide basis and business line managers made decisions in isolation. In addition, ? functions were not closely aligned with risk management processes, preventing market and counterparty risk positions from being readily assessed on an enterprise-wide basis.
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treasury
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Consolidated risk management practices across FBOs, while efficient from a global perspective, have at times limited ? ability to understand the risks posed to US financial stability by the US operations of foreign banks.
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US supervisors'
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Centralized risk management practices that focus on risk by ? have generally limited the ability of large FBOs to effectively aggregate, monitor, and report risks across their US legal entities on a timely basis.
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business line
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Section 165(h) of Dodd Frank directs the Fed to issue regulations requiring publicly traded BHCs with consolidated assets of $10 bn and publicly traded nonbank companies supervised by the Fed to ?
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establish risk committees
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Section 165(h) of Dodd Frank directs the Fed to issue regulations requiring ? and ? to establish risk committees.
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publicly traded BHCs with consolidated assets of $10 bn and publicly traded nonbank companies supervised by the Fed
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In its December 2011 proposal, the Fed proposed to establish enhanced risk management standards for ? and ?
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US $50 bn BHCs, US NFCs supervised by the Fed
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The December 2011 proposal would, among other things, require oversight of enterprise-wide risk management by a stand-alone risk committee of the board of directors and ?
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CRO
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The December 2011 proposal would, among other things, reinforce the ? of a firm's risk management function.
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independence
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The December 2011 proposal would, among other things, ensure appropriate expertise and ? for the CRO.
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stature
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The Fed also proposed to require US BHCs with consolidated assets of $10 bn that are ? to establish an enterprise-wide risk committee of the board of directors.
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publicly traded companies
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The proposal includes a general requirement that ? and ? certify that they maintain a risk committee to oversee the US operations of the company.
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$10 bn FBOs that are publicly traded, all $50 bn FBOs
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The proposal includes a general requirement that FBOs that are publicly traded with consolidated assets of $10 bn and all FBOs, regardless of whether their stock is publicly traded, with consolidated assets of $50 bn or more certify that they maintain a risk committee to oversee ?
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US operations
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The proposal would set forth additional requirements for the US risk committee of an FBO with combined US assets of $50 bn and would require these companies to appoint a ? in charge of implementing and maintaining a risk management framework for the company's combined US operations.
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US CRO
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Consistent with the requirements of section 165(h) of Dodd Frank, the proposal requires a $10 bn FBO with publicly traded stock and any $50 bn FBO to certify annually to the Fed that it maintains a committee that (1) oversees the US risk management practices of the company, and (2) has at least one member with risk management expertise. This certification must be filed with the Fed concurrently with the FBO's ?
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Form FR Y-7
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Consistent with the requirements of section 165(h) of Dodd Frank, the proposal requires a $10 bn FBO with publicly traded stock and any $50 bn FBO to certify annually to the Fed that it maintains a committee that oversees the US risk management practices of the company. The committee must ?
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have at least one member with risk management expertise.
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The Fed expects that the US risk committee of an FBO that poses greater risks to the US financial system would have members with commensurately greater ? than the US risk committees of other companies whose combined US operations pose less systemic risk.
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risk management expertise
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Generally, an FBO will be permitted to maintain its US risk committee as a committee of either ? or ?
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global board, US IHC board
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If the US risk committee is a committee of the global board of directors, it may be organized on a standalone basis or as part of ?
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the enterprise-wide risk committee
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An FBO with combined US assets of $50 bn that conducts its operations in the US solely through a US IHC must maintain its US risk committee ?
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at its US IHC
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In order to accommodate the diversity in corporate governance philosophies across countries, the proposal would not require the US risk committee of an FBO ? to maintain a specific number of independent directors on the US risk committee.
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has combined US assets of less than $50 bn
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An FBO with combined US assets of $50 bn or more must maintain ? on its US risk committee.
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an independent director
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An FBO's enterprise-wide risk committee may fulfill the responsibilities of the US risk committee, unless the FBO ? and ?
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has combined US assets of $50 bn, operates in the US solely through a US IHC
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An FBO with publicly traded stock and consolidated assets of $10 bn or an FBO with consolidated assets of $50 bn as of ?, must comply with the proposed risk committee certification requirement on ?, unless that time is extended by the Fed.
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July 1, 2014; July 1, 2015
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An FBO that crossed the relevant asset threshold after ? must comply with the proposed risk committee certification requirement beginning ?, unless that time is accelerated or extended by the Fed.
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July 1, 2014; 12 months after it crosses the relevant asset threshold
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The proposal would establish additional requirements for the US risk committee of an FBO with combined US assets of $50 bn relating to the committee's ? and ?
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responsibilities, structure
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The proposal would establish additional requirements for the US risk committee of ? relating to the committee's responsibilities and structure.
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an FBO with combined US assets of $50 bn
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Each FBO with combined US assets of $50 bn would be required to appoint a ? in charge of overseeing and implementing the risk management framework of the company's combined US operations.
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US CRO
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Each FBO with ? would be required to appoint a US CRO in charge of overseeing and implementing the risk management framework of the company's combined US operations.
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combined US assets of $50 bn
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A US risk committee of a $50 bn US assets FBO must review and approve the risk management practices of the ? and oversee the operation of an appropriate risk management framework that is commensurate with the capital structure, risk profile, complexity, activities, and size of the company's ?
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combined US operations
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The risk management framework for the combined US operations of a $50 bn US assets FBO must be consistent with the ? risk management framework of the FBO.
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enterprise-wide
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The risk management framework for the combined US operations of a $50 bn US assets FBO must include policies and procedures relating to risk management governance, risk management practices, and risk control ? for the combined US operations of the company.
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infrastructure
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The risk management framework for the combined US operations of a $50 bn US assets FBO must include processes and systems for identifying and reporting risks and risk management deficiencies, including ? risks, on a combined US operations basis.
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emerging
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The risk management framework for the combined US operations of a $50 bn US assets FBO must include processes and systems for ? the policies and procedures relating to risk management governance, practices, and risk controls across the company's combined US operations.
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monitoring compliance with
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The risk management framework for the combined US operations of a $50 bn US assets FBO must include processes designed to ensure effective and timely implementation of ? to address risk management deficiencies.
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corrective actions
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The risk management framework for the combined US operations of a $50 bn US assets FBO must include specification of management and employees' ? and ? to carry out risk management responsibilities.
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authority, independence
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The risk management framework for the combined US operations of a $50 bn US assets FBO must include integration of risk management and control objectives in management ? and ? structure of the company's combined US operations.
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goals, compensation
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A US risk committee of a $50 bn US assets FBO must meet at least ? and as needed, and that the committee fully document and maintain records of its proceedings, including risk management decisions.
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quarterly
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The Fed expects that members of a US risk committee of an FBO with combined US assets of $50 bn generally would have a ? of risk management principles and practices relevant to the US operations of their company.
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understanding
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US risk committee members generally should have ? developing and applying risk management practices and procedures, measuring and identifying risks, and monitoring and testing risk controls with respect to banking organizations.
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experience
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The US risk committee of a $50 bn US assets FBO must include at least one member who (1) is not, and has not been for three years, a ? or ? of the company or its affiliates (2) is not a member of the immediate family of a person who is, or has been within three years, an executive officer of the company or its affiliates.
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officer, employee
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The US risk committee of a $50 bn US assets FBO must include at least one member who (1) is not, and has not been for three years, an officer or employee of the company or its affiliates (2) is not ?
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a member of the immediate family of a person who is, or has been within three years, an executive officer of the company or its affiliates
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The independent risk committee member requirement would apply regardless of ?
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where the US risk committee was located
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The independent risk committee member requirement is adapted from director independence requirements of ? and is similar to the requirement in the December 2011 proposal that the director of the risk committee of a US BHC or NFC supervised by the Fed be independent.
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certain US securities exchanges
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The December 2011 proposal requires that the director be independent either under the SEC's regulations, or, if the domestic company was not publicly traded, the company be able to demonstrate to the Fed that the director ?
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would qualify as an independent director under the listing standards of a national securities exchange if the company were publicly traded.
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The proposal requires ? or ? to appoint a US CRO that is employed by a US subsidiary or US office of the FBO.
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an FBO with combined US assets of $50 bn or its US IHC subsidiary
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The proposal requires an FBO with combined US assets of $50 bn or its US IHC subsidiary to appoint a US CRO that is employed by ? or ?
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a US subsidiary, a US office
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A US CRO must have ? that is commensurate with the capital structure, risk profile, complexity, activities, and size of the combined US operations of an FBO with combined US assets of $50 bn.
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risk management expertise
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A US CRO must receive appropriate ? and ? to provide an objective assessment of the risks taken by the company's combined US operations.
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compensation, other incentives
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The Fed expects that the primary responsibility of the US CRO will be risk management oversight of the combined US operations and that the US CRO would not also serve as ?
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the company's global CRO
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In general, a US CRO would report directly to ? and ?
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the US risk committee, the company's global CRO
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In general, a US CRO would report directly to the US risk committee and the company's global CRO. However, the Fed may approve an alternative reporting structure on a case-by-case basis if the company demonstrates that the proposed reporting requirements would ?
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create exceptional hardship
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The US CRO must directly ? the measurement, aggregation, and monitoring of risks undertaken by the company's combined US operations.
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oversee
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The proposal requires a US CRO to directly oversee the regular provision of information to the US risk committee, the global CRO, and the Fed or Fed supervisory staff, including about the nature of and changes to material risks undertaken by the company's combined US operations, including risk management ? and emerging risks, and how such risks relate to the global operations of the company.
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deficiencies
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The proposal requires a US CRO to directly oversee the regular provision of information to ?, ? and ?
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the US risk committee, the global CRO, the Fed
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The US CRO will be expected to oversee ? meetings, as well as ? meetings, with the Fed or Fed supervisory staff to assess compliance with its risk management responsibilities.
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regularly scheduled, special
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Responsibilities for which a US CRO must have direct oversight include, among others, implementation of and ongoing compliance with appropriate policies and procedures relating to risk management ?, ? and ? of the company's combined US operations and monitoring compliance with such policies and procedures.
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governance, practices, risk controls
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Responsibilities for which a US CRO must have direct oversight include, among others, development appropriate processes and systems for identifying and reporting risks and risk management ?, including emerging risks, on a combined US operations basis.
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deficiencies
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Responsibilities for which a US CRO must have direct oversight include, among others, management risk ? and risk ? within the parameters of the risk control framework for the company's combined US operations.
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exposures, controls
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Responsibilities for which a US CRO must have direct oversight include, among others, monitoring and ? of the risk controls of the combined US operations.
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testing
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Responsibilities for which a US CRO must have direct oversight include, among others, ensuring that risk management deficiencies with respect to the company's combined US operations are ? in a timely manner.
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resolved
