CAIIB · ABM

COMPLIANCE ISSUES & COMPLIANCE RISK

Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Bank Management — CAIIB.

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What is compliance risk in the context of banking?

Compliance risk is the risk of legal or regulatory sanctions, material financial loss, or loss to reputation that a bank may suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory organization standards, and codes of conduct applicable to its banking activities.

What is the primary objective of a bank's compliance function?

Ensure adherence to laws, regulations, and internal policies.

Which RBI circular established the framework for compliance functions in Indian banks?

RBI's Guidelines on Compliance Function in Banks (2007) established the framework, requiring banks to have a dedicated Compliance Department headed by a Chief Compliance Officer (CCO) who reports directly to the MD & CEO or the Board.

What is a 'compliance universe' in bank risk management?

Complete inventory of all applicable laws and regulations for a bank.

What is the role of the Chief Compliance Officer (CCO) in a bank?

The CCO is responsible for overseeing the bank's compliance programme, identifying compliance risks, reporting compliance failures to senior management and the Board, and ensuring that the bank adheres to all applicable laws, regulations, and internal policies.

What is a whistleblower policy in the context of bank compliance?

Mechanism enabling employees to report misconduct without fear of retaliation.

What distinguishes compliance risk from legal risk?

While legal risk refers broadly to losses arising from lawsuits or unenforceable contracts, compliance risk specifically relates to violations of laws, regulations, and codes of conduct governing banking operations, including reputational damage arising from such non-compliance.

What does 'zero tolerance' mean in compliance risk culture?

No permissible deviation from set compliance standards or rules.

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