What does “Basel Core Principles for Effective Banking Supervision (bcbs230)” state?
Correct Answer: D
Explanation:
“Basel Core Principles for Effective Banking Supervision (bcbs230) state that “Where banks use models to
measure components of risk, the supervisor determines that: banks comply with supervisory standards
on their use, banks’ boards and senior management understand the limitations and uncertainties relating
to the output of the models and the risk inherent in their use, they shall perform regular and independent
validation and testing of the models and that the supervisor assesses whether the model outputs appear
reasonable as a reflection of the risks assumed.”
Question 2
There are assigned people to whom periodic reports are provided about the status of model risk
management, who are these people specifically?
Correct Answer: A
Explanation:
The status of model risk management is provided to the risk management committee, the board of
directors, senior management and the audit committee.
Question 3
Which of the following statements is the responsibility of the Model Risk Committee?
Correct Answer: C
Explanation:
A Model Risk Committee is responsible for assisting the board of directors in fulfilling its obligations in
respect to all the models used by the financial institution, ensuring the integrity of the information about
all the models stored in the model inventory, ensuring the composition of the committee membership is
appropriate, providing reports to the risk management committee, the board of directors and senior
management on the status of model risk management.
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