Risk in banking business
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Bank Financial Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is the primary definition of risk in the context of banking business?
Risk in banking refers to the possibility of loss or adverse outcome arising from uncertainty in financial transactions, operations, or external events that can affect a bank's earnings, capital, or solvency.
What is yield curve risk in the context of bank interest rate management?
Risk from non-parallel shifts in the yield curve affecting bank positions.
Which are the three major categories of risk that banks face in their business?
Banks primarily face credit risk, market risk, and operational risk, which together form the foundation of the Basel regulatory capital framework for risk management.
What is sovereign risk in international banking operations?
Risk that a government may default on its debt obligations to banks.
What is credit risk in banking?
Credit risk is the risk of financial loss arising from a borrower or counterparty failing to meet its contractual obligations, including default on loans, advances, or off-balance-sheet exposures.
What is transfer risk in the context of cross-border banking?
Risk that a borrower cannot convert local currency to repay foreign currency debt.
How is market risk defined in the context of banking?
Market risk is the risk of losses in on- and off-balance-sheet positions arising from movements in market prices, including interest rates, foreign exchange rates, equity prices, and commodity prices.
What is compliance risk in banking institutions?
Risk of legal penalties due to failure to comply with laws and regulations.
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