CAMS-RM practice question 7 of 15

The FDIC issued FIL 22-2017 in June 2017, what does it imply?

Answer options

A: It stated that for banks with less than $3 billion in assets, "It is not expected that this guidance will pertain to FDIC-supervised institutions with under $1 billion in total assets unless the institution's model use is significant, complex, or poses an elevated risk to the institution."

B: It stated that for banks with less than $1 billion in assets, "It is not expected that this guidance will pertain to FDIC-supervised institutions with under $1 billion in total assets unless the institution's model use is significant, complex, or poses an elevated risk to the institution." Correct answer

C: It is stated that it is essential that the typologies are subjected to periodic review and tuning.

D: It is defined as the sanctions screening application as a model, the management of the application.

Correct Answer:

B. It stated that for banks with less than $1 billion in assets, "It is not expected that this guidance will pertain to FDIC-supervised institutions with under $1 billion in total assets unless the institution's model use is significant, complex, or poses an elevated risk to the institution."

Explanation

The Federal Deposit Insurance Corporation (FDIC) issued Financial Institution Letter (FIL) 22-2017 to provide supervisory guidance on model risk management. The document explicitly addresses its applicability to smaller institutions by setting an asset-based threshold. It states that the guidance is generally not expected to apply to FDIC-supervised institutions with under $1 billion in total assets. However, it includes a crucial exception: the guidance would still pertain to such an institution if its use of models is significant, complex, or poses an elevated risk.

Why Incorrect

A. This option is incorrect; the asset threshold mentioned in the official guidance is $1 billion, not $3 billion.
C. While periodic review and tuning of typologies is a best practice in model risk management, it is not the specific implication of FIL 22-2017 regarding its scope.
D. This is a general definition related to model risk management, not the specific guidance on applicability provided in FIL 22-2017.

References

1. Federal Deposit Insurance Corporation (FDIC). (2017, June 7). FIL-22-2017: Supervisory Guidance on Model Risk Management. Introduction, p. 1. Retrieved from https://www.fdic.gov/news/financial-institution-letters/2017/fil17022.html. (The document states, "It is not expected that this guidance will pertain to FDIC-supervised institutions with under $1 billion in total assets unless the institution's model use is significant, complex, or poses an elevated risk to the institution.").

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