The easiest risk management strategy is to avoid risk by not taking an exposure to a loan or financial assets which have higher risks. Banks may decide not to provide any loan or funding to some specific sector with high credit risk and borrowers with low credit rating in order to reduce its risk exposure. […]Continue Reading... No Comments.
Banking sector is very much competitive with large number of players in the market. That’s why banks need to depend on their existing customer business to increase their business and good reputations help them to retain their customers. Reputational risk arises due to loss of reputation for a bank. The loss of reputation may arise […]Continue Reading... No Comments.
Legal risk refers to the risk of loss arising from contracts which cannot be enforced legally. The laws and legal systems differ from country to country. Multinational banks with operations in different countries are more vulnerable to this risk as different countries have different legal terms. Suppose a bank has signed a contract with a […]Continue Reading... No Comments.
Liquidity risk refers to the risks arising either out of lack of liquidity of the holding shares or assets at the time of selling or out of lower liquidity holding of the banks as cash or cash equivalents. The first one is referred to as market liquidity and the second one is referred to funding […]Continue Reading... No Comments.
Compliance Risk arises due to non-compliance with regulatory standards and consequent levy of penalties, fines on banks or facing any other regulatory action by the appropriate authority or the Central Bank. Compliance with regulatory requirements is critical for long-term survival of a bank and to retain the banking license. Banks should have enough liquidity with […]Continue Reading... No Comments.