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BFM - CH - 9 - Module B
BFM - CH - 9 - Module B
BFM - CH - 9 - Module B
CAIIB
Module B
Risk Management
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Risk in Banking Business
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Risk in Banking Business
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Risk in Banking Business
Risks in Banking Book are mainly 4 types:
2. Interest Rate Risk: When Interest rate changes take place during
the period is called interest rate Risk.
The trading book inculeds all the assets which are marketable
like fixed income securities, foreign exchange holdings,
commodities etc.
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Risk in Banking Business
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Risk in Banking Business
1. Liquidity Risk included:
b. Basis Risk: It is the risk that the Interest rate of different Asse
ts/liabilities and off balance items may change in different mag
nitude. The degree of basis risk is fairly high in respect of bank
s that create composite assets out of composite liabilities.
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Risk in Banking Business
3. Market Risk:
a. Forex Risk : Foreign exchange risk is the risk that a bank may suf
fer loss as a result of adverse exchange rate movement during a p
eriod in which it has an open position, either spot or forward or bot
h in same foreign currency.
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Risk in Banking Business
b. Country Risk: This is the risk that arises due to cross border t
ransactions that are growing dramatically in the recent years o
wing to economic liberalization and globalization. It is the possi
bility that a country will be unable to service or repay debts to f
oreign lenders in time.
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Risk in Banking Business
5. Operational Risk
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Risk in Banking Business
6. Other Risk
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Risk in Banking Business
Thank You
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