12.The risk appetite statement is a written articulation of the aggregate level and types of risk that a bank will accept or avoid in order to achieve its business objectives. At a minimum, it must include the following items:
a.For each material risk, the maximum level of risk that the bank is willing to operate within, expressed as a limit in terms of:
i.Quantitative measures expressed relative to earnings, capital, liquidity or other relevant measures as appropriate; and
ii.Qualitative statements or limits as appropriate, particularly for reputation, compliance and legal risks.
b.Delineation of any categories of risk the bank is not prepared to assume;
c.The process for ensuring that risk limits are set at an appropriate level for each risk, considering both the probability of loss and the magnitude of loss in the event that each material risk is realized;
d.The process for monitoring compliance with each risk limit and for taking appropriate action in the event that it is breached; and
e.The timing and process for review of the risk appetite and risk limits.
13.Quantitative risk limits and metrics may include, but are not limited to:
a.Capital targets beyond regulatory requirements, such as economic capital or capital-at-risk;
b.Various liquidity ratios and survival horizons;
c.Net interest income volatility;
d.Earnings-at-risk;
e.Value at risk (VaR);
f.Risk concentrations by internal or external rating;
g.Expected loss ratios;
h.Growth ceilings by asset type, business line or type of exposure;
i.Economic value added; and
j.Stressed targets for capital, liquidity and earnings.