Corporate Governance Principles Flashcards
7 cards from real CBA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Corporate Governance Principles flashcards as text
Which governance failure was most commonly cited as a contributing factor to the 2008 global financial crisis among major banks?
Answer: Inadequate board oversight of risk-taking activities
Post-crisis analyses repeatedly found that bank boards failed to understand or effectively challenge the excessive risks being taken by management.
The 'three lines of defense' model assigns which role to the internal audit function?
Answer: Third line — provides independent assurance on the effectiveness of governance and controls
Internal audit is the third line of defense, providing independent assurance to the board and senior management on governance, risk management, and control effectiveness.
A bank's Risk Appetite Statement (RAS) should be:
Answer: Approved by the board and clearly linked to the bank's strategic plan
Best practice requires the board to approve the RAS and ensure it is integrated with strategy, capital planning, and compensation.
Under the Sarbanes-Oxley Act (SOX) Section 302, which bank officers must certify the accuracy of financial reports?
Answer: The Chief Executive Officer and Chief Financial Officer
SOX Section 302 requires the CEO and CFO to personally certify the accuracy of periodic financial reports filed with the SEC.
Which of the following board compositions would BEST reflect sound corporate governance at a publicly traded bank?
Answer: Majority independent directors with diverse expertise
A majority of independent directors with varied expertise reduces conflicts of interest and improves objective oversight.
How does executive compensation structure relate to bank governance and risk management?
Answer: Short-term bonus incentives can encourage excessive risk-taking misaligned with long-term stability
Poorly structured compensation that rewards short-term profits can incentivize excessive risk-taking, a key governance and systemic risk concern.
In the context of bank governance, 'constructive challenge' by board members refers to:
Answer: Active, critical questioning of management's assumptions and proposals without being adversarial
Constructive challenge means directors critically evaluate management information and proposals to improve decisions without undermining collaboration.