Document ID: chunk:federal_register_of_legislation:F2016L01429:body:0:p3
Version: federal_register_of_legislation:F2016L01429
Segment Type: other
Provision Reference: 
Character Range: 5450–8514

must have an 'aggregate risk exposures policy' that addresses all material risk exposures associated with the operations undertaken by Level 3 institutions in the Level 3 group. The policy must include systems and procedures to identify, measure, monitor, evaluate, report and control or mitigate all material risks arising from aggregate risk exposures.
10.         A Level 3 Head must conduct forward-looking scenario analysis and stress testing of the Level 3 group's material aggregate risk exposures. The analysis must assess the impact of changes in market conditions and key risk factors on these aggregate risk exposures, and how these changes impact on the group's risk profile, capital strength and earnings.
11.         The management of aggregate risk exposures must be a part of the Level 3 group's risk management framework.[1]

The role of the Board of a Level 3 Head
12.         The Board of a Level 3 Head must:
(a)          approve the aggregate risk exposures policy for the Level 3 group;
(b)          ensure that adequate systems and controls are in place to identify, measure, aggregate, manage, monitor and report on material risk exposures in the Level 3 group in a timely manner and that those systems and controls are documented;
(c)          engage in oversight, which may be via a board committee, of the approach to the identification, measurement, management and monitoring of aggregate risk exposures and compliance with the aggregate risk exposures policy, which includes receiving regular reviews of material aggregate risk exposures of the Level 3 group; and
(d)          review the aggregate risk exposures policy at least annually to ensure that this policy remains adequate and appropriate for identifying, measuring, aggregating, managing and monitoring the Level 3 group's risk exposures.

The aggregate risk exposures policy
13.         The aggregate risk exposures policy for a Level 3 group must:
(a)          be conceptually sound, consistently implemented, transparent and be subject to independent review;
(b)          capture all material aggregate risk exposures;
(c)          include limits on acceptable levels of aggregate risk exposures for the Level 3 group;
(d)          include a description of the procedures for identifying, aggregating, reviewing, controlling and reporting material risk exposures within the Level 3 group. This must include:
(i)            a clear statement of the respective responsibilities and compliance obligations of the Board of the Level 3 Head, its board committees and senior management of the Level 3 group in relation to the monitoring and management of aggregate risk exposures;
(ii)         escalation procedures for aggregate risk exposures that facilitate responses to identified policy breaches between formal reporting cycles;
(iii)       the circumstances in which aggregate risk exposure limits may be exceeded and the authority required for approving such excesses;
(iv)        thresholds and procedures for reporting material changes to the Board of the Level 3 Head,