The banking risk management

Résumé du document

The risk of diversification is a basic precept of the banking activity. A big part of the large banking failures was due, in a way or another, to a concentration of the credit risk. The banking controlling authorities have, at all times, strongly encouraged the banks placed under their jurisdiction to avoid the concentration of risks. This concentration can take several forms. Apart from the credit risk, it can comprise an over-exposure to the market risks or an excessive financing risk when a bank calls too exclusively upon a given compartment of the market to get resources. Certain forms of risk concentration do not lend themselves easily to an objective measurement, in spite of their considerable importance for the monitoring of such or such bank. Moreover, the fact that the banks are often specialized in a particular field can mean that the profitability of this type of activity is above the average, although the risk which they incur is also higher than the average if the external factors seem less favorable.

Extraits

[...] It also underlines that a suitable and careful risk management, is a way of creating value for the bank. In order to detect the great effect of credit risk on the bank activity, one can calculate a score called index Risk, or, which is function of several risks. One Can white then: With: Risk Index ROA = clear benefit/total balance sheet CAPE = stockholders' capital/total asset RCR = ratio of covering of the risks (Cooke) On the other hand the banking risk can be detected by other ratios such as: The risk covering ratio (RCR or Cooke), the credit risk, the market risk. [...]

[...] From the point of view of aligning with the international dispositions with regards to risk management, the bank urged a building site of setting in conformity with the future regulation on capital adequacy. In this way, the pole of Total Management of Risks is the entity of the bank which covers the headlight project of the installation of risk management system in conformity with the requirements bâloises. The committee of Balle having neither legislative nor lawful power, the new directives on equities in the international scales has value of recommendations. It then belongs to the various central banks to adapt them to their jurisdictions. [...]

[...] On the level of popular bank, this strategic role from now on, falls on the Management of Engagements and Risks. What is the mission of this direction? How is it organizes? Paragraph The composition of the risks pole The risk division has as a main mission piloting all the tools of financial and strategic control of the Bank, with a particular accent on the risk management. On this last point, the general direction has the will to operate an important cultural change within the Bank, while reinforcing and by professionnalising the risk approach suitable for the banking activity (credits, markets, operationals). [...]

[...] As they can be in the search of new strategies of the output increase The banking management of the credit risk As regards banking management, one generally distinguishes the «macro management from “micro management the credit risk. The macro management of the credit risk is where the resort to the derived products of credit allows diversifying the banking portfolios without spoiling the commercial relations which can exist between these establishments and their customers. The micro management of the credit risk is where the derivative products of credit offer a protection against the default risk or widening of the margin of credit of individual debtors. [...]

[...] Paragraphe1: The banking performance determinants 1. The banking balance sheet The bank balance sheet is a photograph of its economic situation. It can be presented out of a brief description of the accounts of balance sheet and outside balance sheet Interbank operations The accounts of class 1 include the interbank operations, those which the bank carries out with other financial institutions, within the framework of its cash management. Indeed, when its exploitation enables it to release cash surpluses, the bank is in position of Net lender on the interbank market. [...]