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P1.T1 Limits and Limits Standard Policies


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Crouhy, Chapter 4 Corporate Governance and Risk Management. Topic: Limits and Limits standard Policies

While going through the notes on page 34:
  • Type A (tier 1) limits might include a single overall limit for each asset class and a single overall stress test limit and a cumulative loss from peak limit.
  • Type B (tier 2) limits are more general and cover authorized business and concentration limits
  • .....
  • .....
A consistent limit structure helps a bank to consolidate its approach to risk across many
businesses and activities. If the limits are expressed in a common language of risk, such as
economic capital, then type B limits can be made fungible across business lines. Such transfers

would require the joint approval of the head of a business and the CRO.

Can you please provide an example or point to a resource link, please. Visual representation will be great, if possible.
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David Harper CFA FRM

David Harper CFA FRM
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Thread starter #3
Thank you, this is really helpful and also gives one more data point to look for such information i.e. from annual reports of financial institutions.
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