OBB flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Three Pillars of Basel
- The framework combines minimum capital requirements, supervisory review of capital adequacy and risk management, and public disclosure to reinforce market discipline.
- Risk-Weighted Assets
- Exposures are assigned risk weights reflecting credit, market, and operational risk, producing a denominator against which regulatory capital ratios are measured.
- Leverage Ratio
- Tier 1 capital divided by total exposure measure, without risk weighting, acting as a backstop against excessive balance-sheet build-up.
- Liquidity Coverage Ratio
- High-quality liquid assets divided by net cash outflows over a 30-day stress horizon, ensuring short-term liquidity resilience.
- Consolidated Supervision
- Supervisors assess capital, risk, and controls across the entire group, including subsidiaries and affiliates, not just the licensed entity.
- Supervisory Enforcement Escalation
- Findings progress from remediation plans to formal restrictions, monetary penalties, and ultimately license revocation when deficiencies persist.
- Board Risk Appetite
- The board defines the types and levels of risk the institution accepts, which management translates into limits and escalation triggers.
- Three Lines of Defense
- Business units own risk, an independent risk and compliance function monitors it, and internal audit provides independent assurance to the board.
- Segregation of Duties
- No single individual should initiate, authorize, record, and reconcile the same transaction, reducing error and fraud risk.
- Internal Audit Independence
- Audit reports to the board or audit committee, is free from management influence, and does not perform the activities it reviews.
- Control Environment
- The tone set by leadership, including integrity, ethical values, organizational structure, and commitment to competence, underpins all internal controls.
- Customer Due Diligence
- Identifying the customer and beneficial owners and understanding the purpose of the relationship before or during onboarding.
- Enhanced Due Diligence
- Additional scrutiny applied to higher-risk relationships such as politically exposed persons, correspondent banks, and high-risk jurisdictions.
- Suspicious Activity Reporting
- Suspicions of money laundering or fraud are reported to the financial intelligence unit; informing the customer of the report is prohibited.
- Transaction Monitoring
- Automated surveillance compares activity against expected patterns and generates alerts requiring documented investigation and disposition.
- Record Retention Period
- Identification and transaction records must be kept for a defined period after the relationship ends, available to regulators on request.
- Outsourcing Accountability
- Third-party arrangements do not transfer regulatory responsibility; due diligence, contractual controls, and exit plans remain with the institution.
- Affordability Assessment
- Before granting credit, the lender evaluates whether the borrower can repay without undue hardship under plausible stress scenarios.
- Suitability Obligation
- When providing advice, the firm must ensure the recommendation matches the client's objectives, risk tolerance, and financial circumstances.
- Best Execution
- Firms must take reasonable steps to obtain the best possible result for clients considering price, cost, speed, and likelihood of execution.
- Deposit Insurance Limit
- Coverage protects depositors up to a stated amount per depositor per institution; balances above the limit carry counterparty risk.
- Product Governance
- Manufacturers define target markets, test products before launch, and review performance and suitability after launch.
- Derivative Risk Disclosure
- Counterparties must receive clear explanation of leverage, valuation, termination, and potential loss characteristics before transacting.
- Insider Dealing
- Trading or communicating material non-public information to others breaches market integrity rules and attracts criminal and civil liability.
- Market Manipulation
- False orders, wash trades, and practices distorting price discovery undermine market integrity and are prohibited.
- Conflicts of Interest Management
- Firms identify, manage, and disclose conflicts so that client interests are not improperly impaired by inducements or proprietary interests.
- Personal Account Dealing
- Staff trades require pre-clearance and holding periods to prevent front-running and misuse of confidential information.
- Whistleblowing Protection
- Confidential channels allow staff to report misconduct without retaliation, with escalation to the board or regulator.
- Fitness and Propriety
- Approved persons must demonstrate honesty, competence, and financial soundness before appointment and on an ongoing basis.
- Regulatory Reporting Deadline
- Reports must be accurate, complete, and filed by the prescribed date; late or erroneous submissions can attract penalties.
- Pillar 3 Disclosure
- Public disclosure of capital, risk-weighted assets, and risk management practices at a prescribed frequency to support market discipline.
- Audit Trail Integrity
- Records must be tamper-evident and retrievable, logging who changed reported data, when, and on what justification.