Transcript 1.1 Bank Exposure to Risk Chapter One: Analyzing and Managing Banking Risk

Chapter One: Analyzing and
Managing Banking Risk
1.1 Bank Exposure to Risk
Banking risks fall into four categories (Fig. 1.1):
A. Financial Risks (Pure & Speculative)
B. Operational Risks
C. Business Risks
D. Event Risks
1.2 Corporate Governance
Key Players:
A. Systemic:
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Legal and regulatory authorities
Supervisory authorities
B. Institutional
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Shareholders
Board of directors
Executive management
Audit committee / internal auditors
External auditors
C. Public / consumers:
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Investors / depositors
Rating agencies and media
Analysts
1.3 Risk-Based Analysis of Banks
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Traditional analysis of a bank’s condition is based
on quantitative supervisory tools (e.g. ratios).
Ratios relate to liquidity, capital adequacy, loan
quality, and open foreign exchange positions.
However, ratios may not reflect real risk as their
quality depend on time, completeness, and
accuracy of data used to compute them.
New analysis adds transparency.