Abm 23c New
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Operational Risk — Definition / Examples?
Definition: Risks from human error, fraud, system failure or external events.; Examples: Fraud, cyberattacks, system breakdown, regulatory non-compliance, natural disasters.
Market Risk — Definition / Examples?
Definition: Risks from movements in market variables — interest rates, exchange rates, commodity prices.; Examples: Rising repo rate hurting loan demand; INR depreciation reducing forex earnings.
Credit Risk — Definition / Examples?
Definition: Risks from a borrower defaulting on repayment of principal or interest.; Examples: NPAs, loan defaults, fraudulent borrowing, wilful defaulters.
Default Risk?
the borrower fails to pay principal or interest when due.
Downgrade Risk?
the borrower's credit rating deteriorates, increasing default probability and the bank's required provisioning.
Concentration Risk?
excessive exposure to a single borrower, group, sector or geography; a sector downturn triggers a large-scale loss.
Country / Sovereign Risk?
a special case where the sovereign of the borrower restricts cross-border payments.
Counterparty Risk?
risk that the other side of a derivatives or money-market contract defaults before settlement.
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