Risk in Banking Sector

Paper presentation On Risk in banking sector. Abstract: The structure of the paper is three-fold, where we begin by what is risk in banking scenario and its effects on internal operations of a bank, followed by the various types of risk in Indian banks and what can be done or the measurements taken and finally the future look.

Introduction: The Indian Financial System is tasting success of a decade of financial sector reforms. The economy is surging and has gathered the critical mass to convert it into a force to reckon with.The regulatory framework in India has sparked growth and key structural reforms have improved the asset quality and profitability of banks. Growing integration of economies and the markets around the world is making global banking a reality. The RBI requires all banks to comply with the standardized approach of the BASEL II accord by 31st March, 2007. This paper attempts to project the implications of this transition and its effects on the internal operations of a bank followed by its effects on the banking industry and the economy.What is Risk? For the purpose of these guidelines financial risk in a banking organization is possibility that the outcome of an action or event could bring up adverse impacts.

Such outcomes could either result in a direct loss of earnings / capital or may result in imposition of constraints on bank’s ability to meet its business objectives Regardless of the sophistication of the measures, banks often distinguish between expected and unexpected losses.Expected losses are those that the bank knows with reasonable certainty will occur (e. g. , the expected default rate of corporate loan portfolio or credit card portfolio) and are typically reserved for in some manner. Unexpected losses are those associated with unforeseen events (e. g. Losses due to a sudden down turn in economy or falling interest rates).

Types of risk in banks: In the course of their operations, banks are invariably faced with different types of risks that may have a potentially negative effect on their business.The risks to which a bank is particularly exposed in its operations are: liquidity risk, credit risk, market risks (interest rate risk, foreign exchange risk and risk from change in market price of securities, financial derivatives and commodities), exposure risks, investment risks, risks relating to the country of origin of the entity to which a bank is exposed, operational risk, legal risk, reputational risk and strategic risk. Liquidity risk: is the risk of negative effects on the financial result and capital of the bank caused by the bank’s inability to meet all its due obligations.Credit risk: is the risk of negative effects on the financial result and capital of the bank caused by borrower’s default on its obligations to the bank. Market risk: includes interest rate and foreign exchange risk. Interest rate: risk is the risk of negative effects on the financial result and capital of the bank caused by changes in interest rates. Foreign exchange: risk is the risk of negative effects on the financial result and capital of the bank caused by changes in exchange rates.

A special type of market risk is the risk of change in the market price of securities, financial derivatives or commodities traded or tradable in the market. Exposure risks: include risks of bank’s exposure to a single entity or a group of related entities, and risks of banks’ exposure to a single entity related with the bank. Investment risks: include risks of bank’s investments in entities that are not entities in the financial sector and in fixed assets.Operational risk: is the risk of negative effects on the financial result and capital of the bank caused by omissions in the work of employees, inadequate internal procedures and processes, inadequate management of information and other systems, and unforeseeable external events. Legal risk: is the risk of loss caused by penalties or sanctions originating from court disputes due to breach of contractual and legal obligations, and penalties and sanctions pronounced by a regulatory body.Reputational risk: is the risk of loss caused by a negative impact on the market positioning of the bank. Strategic risk: is the risk of loss caused by a lack of a long-term development component in the bank’s managing team.

Risk management: Risk Management is a discipline at the core of every financial institution and encompasses all the activities that affect its risk profile. In every financial institution, risk management activities broadly take place simultaneously at following different hierarchy levels. a) Strategic level: It encompasses risk management functions performed by senior management and BOD. For instance definition of risks, formulating strategy and policies for managing risk etc; b) Macro Level: It encompasses risk management within a business area or across business lines. Generally the risk management activities performed by middle management. c) Micro Level: It involves ‘On-the-line’ risk management where risks are actually created.This is the risk management activities performed by individuals who take risk on organization’s behalf such as front office and loan origination functions.

Risk management in bank operations includes risk identification, measurement and assessment, and its objective is to minimize negative effects risks can have on the financial result and capital of a bank. Banks are therefore required to form a special organizational unit in charge of risk management. Also, they are required to prescribe procedures for risk identification, easurement and assessment, as well as procedures for risk management. The future: Risk management activities will be more pronounced in future banking because of liberalization, deregulation and global integration of financial markets. This would be adding depth and dimension to the banking risks. As the risks are correlated, exposure to one risk may lead to another risk, therefore management of risks in a proactive, efficient & integrated manner will be the strength of the successful banks Conclusion:By taking measures the smaller banks would not have sufficient resources to withstand the intense competition of the sector. Banks would evolve to be a complete and pure financial services provider, catering to all the financial needs of the economy.

Flow of capital will increase and setting up of bases in foreign countries will become commonplace. Finally, the economy will stand to benefit as the banking sector develops. Savings will be mobilized in the right direction and the required funds needed for the country’s development will be made available.

Calculate the price
Make an order in advance and get the best price
Pages (550 words)
$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with MyStudyWriters
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Business and administrative studies
Thanks
Customer 452773, March 3rd, 2023
Business and administrative studies
excellent paper
Customer 452773, March 3rd, 2023
Business and administrative studies
Thank you for your hard work and effort. Made a 96 out of 125 points Lacked information from the rubic
Customer 452773, October 27th, 2023
Business and administrative studies
excellent work
Customer 452773, March 12th, 2023
Business and administrative studies
Excellent work ,always done early
Customer 452773, February 21st, 2023
Sociology
THANK YOUUUUU
Customer 452591, March 18th, 2021
Human Resources Management (HRM)
excellent
Customer 452773, June 25th, 2023
Business and administrative studies
looks good thank you
Customer 452773, March 3rd, 2023
ACC/543: Managerial Accounting & Legal Aspects Of Business
EXCELLENT JOB
Customer 452773, January 10th, 2024
Human Resources Management (HRM)
excellent, great job
Customer 452773, June 19th, 2023
Business and administrative studies
great job as always
Customer 452773, February 26th, 2023
Business and administrative studies
always perfect work and always completed early
Customer 452773, February 21st, 2023
11,595
Customer reviews in total
96%
Current satisfaction rate
3 pages
Average paper length
37%
Customers referred by a friend
OUR GIFT TO YOU
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat
Close

Sometimes it is hard to do all the work on your own

Let us help you get a good grade on your paper. Get professional help and free up your time for more important courses. Let us handle your;

  • Dissertations and Thesis
  • Essays
  • All Assignments

  • Research papers
  • Terms Papers
  • Online Classes
Live ChatWhatsApp