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SCR Exam - Question 16


As climate change poses new financial risks to a central bank’s monetary policy operations, the bank decides to adapt operations with NGFS guidelines. Because the central bank does not include climate change in supervision practices, the bank consults subject matter experts (SMEs) to develop a proposal for central bank action on climate change. After completing the risk assessment, SMEs recommend the bank incorporate microprudential and macroprudential measures to embed climate change into supervision practices.

Which action are SMEs likely to recommend?

Show Answer
Correct Answer: A

Conducting climate stress tests with standardized policy scenarios and feedback loops is likely a microprudential measure. This action directly embeds climate change into the bank's supervision practices by assessing financial institutions' resilience to climate risks under different hypothetical scenarios. Stress tests are a fundamental tool for evaluating the stability of individual banks and ensuring they can withstand adverse conditions, including those related to climate change.

Discussion

9 comments
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goodformeOption: C
Mar 5, 2023

Microprudential Measures : on disclosure, the Bank expects firms to consider implementing disclosures on climate risk beyond mandatory requirements, suggesting TCFD rec-ommendations as a guideline.

xdudeOption: C
Oct 11, 2023

B is micro prudential measure and not macro. So B is wrong. C is the most appropriate one

A2240Option: B
Apr 11, 2023

Review is the most important part of supervision

KarnitschnigOption: C
Apr 15, 2023

This was poorly worded. B is not macro

Dunjeon_MasterOption: C
Apr 17, 2023

C is correct

MatMat2023Option: C
Oct 15, 2023

SME recommendation is about both micro AND macro measures. None of the answers is correct. C is the most suitable because central banks and regulators are moving towards the direction of adopting TCFD disclosure recommendations, but they are about micro and NOT macro

Shweta_lOption: C
Oct 17, 2023

The answer should be C.

ShawnLearningOption: A
Oct 26, 2023

SCR Book, Chapter 4.1.1, p.85: "Stress tests are another micro-and macroprudential tool at the disposal of central banks. " Why is A incorrect?

Ramki_Looking_For_AnswerkeyOption: A
Apr 21, 2024

As per GARP question bank, it should be A