Exam SCR topic 1 question 8 discussion

Actual exam question from GARP's SCR

Question #: 8
Topic #: 1

A climate risk consultant advises an Eastern European central bank. In response to regulatory changes, the bank will incorporate climate-related risks into bank policies. The consultant writes a summary on how central banks incorporated climate-related risks into policies. The summary highlights the Bank of England (BoE) example to demonstrate how the BoE integrated climate-related risks within the bank supervisory scope.
Which of the following BoE practices will the consultant recommend?

A. Integrate climate-related risks into bank monetary policy before attempting to integrate climate into other areas of bank operations.
B. Obligate firms to allocate responsibility for climate-related risks using a bottom-up approach where the risk team assesses climate risks while the board of directors approves or denies.
C. Require banks and insurers include all material exposures relating to financial risks from climate change under capital adequacy and solvency assessments.
D. Adopt a policy that requires firms to submit climate risk disclosures that precisely follow NGFS guidelines.

Show Suggested Answer

Suggested Answer: C 🗳️

by qingyang111000 at April 11, 2024, 1:27 p.m.

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linaSCR

1 year, 1 month ago

Selected Answer: C

B has a misleading definition of "bottom up" to my opinion. So I choose C

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qingyang111000

1 year, 1 month ago

Selected Answer: C

CASE STUDY: BANK OF ENGLAND

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mr_amo

1 year, 1 month ago

The correct answer is D. Pages 89 and 90 of the book. Supervisors expected companies for using NGFS best practices and adopt them.

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qingyang111000

1 year, 1 month ago

Selected Answer: B

Microprudential Measures : Regarding governance, the BoE requires firms to allocate responsibility for climate-related risks to a designated executive under UK rules that allow senior executives to be held responsible.

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qingyang111000

1 year, 1 month ago

Should be C, “ On risk management, the BoE requires banks and insur-ers, under their own capital adequacy and solvency assessments, to include “all material exposures” relat-ing to the financial risks from climate change.”

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