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Credit risk
What is credit risk in banking?
Credit risk is the risk of loss arising from a borrower's failure to repay a loan or meet contractual obligations, leading to financial loss for the lender.
What is the difference between obligor risk and facility risk in credit assessment?
Obligor risk relates to borrower; facility risk relates to specific loan terms.
How does the Basel II framework classify credit risk?
Basel II classifies credit risk under Pillar 1 (minimum capital requirements) and prescribes three approaches: Standardised Approach, Foundation IRB, and Advanced IRB for its measurement.
What is the Basel III capital requirement for credit risk under the Standardised Approach?
Risk-weighted assets multiplied by minimum capital ratio of 8%.
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