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What Are Various Types Of Risks In Banking Operations?

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Deborah Mann Profile
Deborah Mann answered
There are several different types of banks out there. The first type is a central bank which oversees the circulation of money on behalf of the government and helps to regulate the supply of money. A commercial bank accepts and handles deposits and pools these funds in order to provide credit by the direct method of lending or indirectly investing in capital markets. And finally there is a savings banks, also known as a building society within the United Kingdom which shares similarities with savings and loan associations.

There are lots of different types of risks in banking. These include a credit risk, market risk, liquidity risk, operational risk, reputational risk, volatility risk, settlement risk, profit risk and systemic risk. Each of these types has other risk types included in their category.

Firstly we have a credit risk, which is the risk of an investor, who has lent money to the borrower, who does not make the return payments as originally agreed. There are a number of circumstances where a credit risk may arise such as a consumer or a business missing payments on a mortgage or any other type of loan, a business or consumer who does not pay an invoice when it is due, a business who does pay an employee's wages when they are due and many others.

Secondly we have a market risk, which is the risk that an investment or trading portfolio will decrease in value due to change in the market. This risk can also be related to a volatility risk which is the risk of a portfolio price change due to changes in the volatility of any risk factor.

Thirdly, a liquidity risk is the risk that an asset or security cannot be traded quickly enough after receiving it so that the value drops. The two types of liquidity risk include asset liquidity and funding liquidity.

An operational risk is the risk that comes from the execution of a company's business functions. This category can also include fraud risks, physical risks, legal risks and environmental risks.

A reputational risk is, as suggested by the name, a risk which endangers the reputation of a well respected company.
Aisha Profile
Aisha answered
A bank refers to a financial institution which acts as payment agent for customers by borrowing and lending money. The banking operations feature the following risks:
- The borrowers can default taking away the bank's money
- The changing economic environment can pose a risk for banking operations as they govern the interest rates.
- The regulatory institutions pose a risk to the banking operations with their regulations
- The quality of loan
- Aging ownership groups
Anonymous Profile
Anonymous answered
The main types of risks in banking operations are:
Liquidity risk
Interest rate risk
Market risk
Credit risk
Operational risk

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