Question

The asset management rating is based upon an assessment of the following evaluation factors:

a. The adequacy of overall policies, practices, and procedures governing asset management, considering the size, complexity, and risk profile of the institution's fiduciary activities.
b. The existence of policies an procedures addressing the use of derivatives or other complex investment products.
c. The quality of investment research used in the decision-making process and documentation of the research.
d. The ability of portfolio managers in selecting the highest yielding investments at least 70% of the time.

Answer 1

The asset management rating assesses a bank's policies and procedures related to asset management, the quality of investment research, and the skill of portfolio managers. It is complex due to the challenges associated with measuring the value of a bank's assets, including loans and risk estimates. The correct option is a.

Step-by-step explanation:

The asset management rating is an evaluation of the efficacy and soundness of a bank's policies, practices, and procedures in managing its assets, which include its loans.

This assessment is crucial, as the value of a bank's assets is not easily determined due to the uncertainty regarding whether loans will be repaid, especially when those loans are to international banks or firms, or involve complex financial transactions.

Important factors in an asset management rating include: The adequacy of asset management policies, which should align with the institution's size, complexity, and risk profile. The presence of policies concerning complex investment products, like derivatives.

Additionally, investment strategies are formulated to earn profits over time and require balancing factors like expected return, risk, and liquidity. The correct option is a.