Management of financial risks of a commercial bank. Banking risks Another definition of risk is any event due to which the financial performance of the company may be lower than expected
In the course of their activities, commercial banks are exposed to many risks. IN general view banking risks are divided into 4 categories: financial, operational, business and emergency. Financial risks, in turn, include 2 types of risks: pure and speculative. Pure risks - incl. credit risk, liquidity and solvency risks - may, if not properly managed, lead to a loss for the bank. Speculative risks based on financial arbitrage can result in a profit if the arbitrage is done correctly, or a loss if it is not. The main types of speculative risk are interest rate, currency and market (or positional) risks. Like any enterprise operating in market conditions, the bank is exposed to the risk of losses and bankruptcy. Naturally, while striving to maximize profits, the bank's management simultaneously seeks to minimize the possibility of losses. These two goals contradict each other to a certain extent. Maintaining an optimal ratio between profitability and risk is one of the main and most difficult problems of bank management. Risk is associated with uncertainty, the latter being associated with events that are difficult or impossible to foresee. The loan portfolio of a commercial bank is subject to all the main types of risk that accompany financial activities: liquidity risk, interest rate risk, loan default risk. The latter type of risk is especially important, since the failure to repay loans by borrowers brings large losses to banks and is one of the most common causes of bankruptcy of credit institutions.
Credit risk depends on exogenous factors related to the state economic environment, with conjuncture, and endogenous, caused by erroneous actions of the bank itself. The ability to manage external factors is limited, although the bank can mitigate their impact to a certain extent and prevent losses by timely actions. However, the main levers of credit risk management lie in the sphere of the bank's internal policy.
The main task facing banking structures is to minimize credit risks. To achieve this goal, a large arsenal of methods is used, including formal, semi-formal and informal procedures for assessing credit risks. The credit risks of banks can be minimized by the diversification of the loan portfolio, the quality of which can be determined on the basis of assessing the degree of risk of each individual loan and the risk of the entire portfolio as a whole. One of the criteria that determine the quality of the loan portfolio as a whole is the degree of portfolio diversification, which is understood as the presence of negative correlations between loans, or at least their independence from each other. The degree of diversification is difficult to quantify, so diversification rather refers to a set of rules that a lender must adhere to. The most famous of them are the following: do not provide credit to several enterprises of the same industry; do not provide credit to enterprises of different industries, but interconnected with each other by the technological process, etc. In fact, the desire for maximum diversification, which is the process of collecting the most diverse loans, is nothing more than an attempt to form a portfolio of loans with the most diverse types of risks, so that changes in the external economic environment where borrowing enterprises operate do not have negative impact on all loans. The ongoing changes in the economic environment should affect the situation of borrowing enterprises in different ways. This means that under the most differentiated types of risks, lenders understand the most diverse response of loans to events in the economy. Ideally, it is desirable that the negative reaction of some loans, when the probability of their default increases, is offset by the positive reaction of others, when the probability of their default decreases. In this case, we can expect that the amount of income will not depend on the state of the market and will be preserved. It is important to note here that, if the concept of the variety of risks by type is rather difficult to define, then the variety of the impact exerted on the situation of borrowers by changes in the economic situation is quite simple, since. a natural measure of impact is the amount of lost income on a single loan compared to the planned one. In other words, the impact on credit is the difference between the planned and actual income on a given loan over a certain period of time.
Different types of financial risks are also closely related to each other, which can significantly increase the overall risk profile of banks. For example, a bank engaged in foreign exchange transactions is usually exposed to foreign exchange risk, then it will also be exposed to additional liquidity risk and interest rate risk if it has open positions in a net position on futures transactions or discrepancies in the terms of claims and obligations.
Operational risks depend on: the overall business strategy of the bank; from its organization: from the functioning of internal systems, including computer and other technologies; on the consistency of the bank's policies and procedures; from measures aimed at preventing management errors and against fraud (although these types of risk are extremely important and are covered by banking risk management systems, this work does not devote much attention to them, since it focuses on financial risks). Business risks are associated with the external environment of the banking business, incl. with macroeconomic and political factors, legal and regulatory conditions, as well as with the general infrastructure of the financial sector and the payment system. Extraordinary risks include all types of exogenous risks that, if the event occurs, are capable of endangering the bank's activities or undermining it. financial condition and capital adequacy.
Deposit risk - the risk associated with the possibility of non-return of deposits (non-redemption of certificates of deposit). This risk is quite rare and is associated with an unsuccessful choice of a commercial bank for the enterprise's deposit operations. Nevertheless, cases of deposit risk realization are found not only in our country, but also in countries with developed market economies. Abroad, the insurer of this type of risk is the bank, and insurance is carried out in a mandatory form.
Credit risk - the risk associated with the danger of non-payment by the borrower of principal and interest due to the creditor. The reasons for the emergence of credit risk may be the bad faith of the borrower, the deterioration of the competitive position of a particular company, and the unfavorable economic situation.
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1. Financial risks in the activities of a commercial bank
In the course of their activities, commercial banks are exposed to many risks. In general, banking risks are divided into 4 categories: financial, operational, business and extraordinary. Financial risks, in turn, include 2 types of risks: pure and speculative.
Pure risks - incl. credit risk, liquidity and solvency risks - may, if not properly managed, lead to a loss for the bank.
Speculative risks based on financial arbitrage can result in a profit if the arbitrage is done correctly, or a loss if it is not. The main types of speculative risk are interest rate, currency and market (or positional) risks.
Like any enterprise operating in market conditions, the bank is exposed to the risk of losses and bankruptcy. Naturally, while striving to maximize profits, the bank's management simultaneously seeks to minimize the possibility of losses. These two goals contradict each other to a certain extent. Maintaining an optimal ratio between profitability and risk is one of the main and most difficult problems of bank management. Risk is associated with uncertainty, the latter being associated with events that are difficult or impossible to foresee. The loan portfolio of a commercial bank is subject to all the main types of risk that accompany financial activities: liquidity risk, interest rate risk, loan default risk. The latter type of risk is especially important, since the failure to repay loans by borrowers brings large losses to banks and is one of the most common causes of bankruptcy of credit institutions. Credit risk depends on exogenous factors associated with the state of the economic environment, with the conjuncture, and endogenous, caused by erroneous actions of the bank itself. The ability to manage external factors is limited, although the bank can mitigate their impact to a certain extent and prevent losses by timely actions. However, the main levers of credit risk management lie in the sphere of the bank's internal policy.
The main task facing banking structures is to minimize credit risks. To achieve this goal, a large arsenal of methods is used, including formal, semi-formal and informal procedures for assessing credit risks. The credit risks of banks can be minimized by diversifying the loan portfolio, the quality of which can be determined on the basis of assessing the degree of risk of each individual loan and the risk of the entire portfolio as a whole. One of the criteria that determine the quality of the loan portfolio as a whole is the degree of portfolio diversification, which is understood as the presence of negative correlations between loans, or at least their independence from each other. The degree of diversification is difficult to quantify, so diversification rather refers to a set of rules that a lender must adhere to. The most famous of them are the following: do not provide credit to several enterprises of the same industry; do not provide credit to enterprises of different industries, but interconnected with each other by the technological process, etc. In fact, the desire for maximum diversification, which is the process of collecting the most diverse loans, is nothing more than an attempt to form a portfolio of loans with the most diverse types of risks, so that changes in the external economic environment where borrowing enterprises operate do not have negative impact on all loans. The ongoing changes in the economic environment should affect the situation of borrowing enterprises in different ways. This means that under the most differentiated types of risks, lenders understand the most diverse response of loans to events in the economy. Ideally, it is desirable that the negative reaction of some loans, when the probability of their default increases, is offset by the positive reaction of others, when the probability of their default decreases. In this case, we can expect that the amount of income will not depend on the state of the market and will be preserved. It is important to note here that, if the concept of the variety of risks by type is rather difficult to define, then the variety of the impact exerted on the situation of borrowers by changes in the economic situation is quite simple, since the natural measure of impact is the amount of lost income on a single loan compared to the planned one. . In other words, the impact on credit is the difference between the planned and actual income on a given loan over a certain period of time.
Different types of financial risks are also closely related to each other, which can significantly increase the overall risk profile of banks. For example, a bank engaged in foreign exchange transactions is usually exposed to foreign exchange risk, then it will also be exposed to additional liquidity risk and interest rate risk if it has open positions in a net position on futures transactions or discrepancies in the terms of claims and obligations.
Operational risks depend on: the overall business strategy of the bank; from its organization: from the functioning of internal systems, including computer and other technologies; on the consistency of the bank's policies and procedures; from measures aimed at preventing management errors and against fraud (although these types of risk are extremely important and are covered by banking risk management systems, this work does not devote much attention to them, since it focuses on financial risks).
Business risks are associated with the external environment of the banking business, incl. with macroeconomic and political factors, legal and regulatory conditions, as well as with the general infrastructure of the financial sector and the payment system.
Extraordinary risks include all types of exogenous risks that, if an event occurs, could jeopardize a bank's operations or undermine its financial condition and capital adequacy.
In the course of their work, commercial banks face various types of risks, which differ in the place and time of occurrence, the totality of external and internal factors affecting their level, in the way of risk analysis and methods of their description. In addition, all types of risks are interrelated and affect the activities of banks. A change in one type of risk causes a change in almost all other types, which makes it difficult to choose a method for analyzing the level of a particular risk.
Banking risks cover all aspects of the activities of banks - both external and internal. Thus, there are internal and external risks.
In accordance with the letter of the Central Bank of the Russian Federation (CBR) dated June 23, 2004 No. 70-T “On Typical Banking Risks”, the following typical risks of commercial banks are distinguished:
Credit;
Country;
Market, including stock, currency and interest risks;
Liquidity risk;
Operating;
Legal;
Risk of loss of business reputation;
Strategic.
2. The main types of risks in the activities of a commercial bank
2.1 Credit risk
Credit risk occupies a central place among internal banking risks. It can be considered as the largest risk inherent in banking. Low rates of growth in the volume and profitability of lending are forcing banks to systematically and systematically develop and improve the methodology for managing credit risks and create organizational structures for its implementation in everyday banking practice.
Credit risk- the risk of a credit institution incurring losses due to non-performance, untimely or incomplete performance by the debtor financial obligations before it in accordance with the terms of the agreement, in other words, the risk of non-payment by the borrower of the principal and interest on it in accordance with the terms and conditions of the loan agreement.
To the specified financial obligations debtor's obligations may include:
Loans received, including interbank loans (deposits, loans), other placed funds, including claims for receipt (return) of debt securities, shares and promissory notes provided under a loan agreement;
Promissory notes discounted by the credit institution;
Bank guarantees under which the funds paid by the credit institution are not reimbursed by the principal;
Financing transactions against the assignment of a monetary claim (factoring);
Rights (claims) acquired by a credit institution under a transaction (assignment of a claim);
Mortgages acquired by a credit institution in the secondary market;
Transactions of sale (purchase) of financial assets with deferred payment (delivery of financial assets);
letters of credit paid by a credit institution (including uncovered letters of credit);
return Money(assets) under a transaction to acquire financial assets with an obligation to sell them back;
requirements of a credit institution (lessor) for financial lease (leasing) transactions.
As part of the credit risk, the following types of risks can be distinguished:
The risk of non-repayment of the loan means the risk of non-fulfillment by the borrower of the terms of the loan agreement: full and timely repayment of the principal amount of the debt, as well as payment of interest and commission.
The risk of delay in payments (liquidity) means the risk of delayed repayment of the loan and late payment of interest and leads to a decrease in the liquidity of the bank. The risk of delay in payments can be transformed into the risk of non-payment.
The risk of securing a loan is not an independent type of risk and is considered only when the risk of default on the loan occurs. This type of risk is manifested in the insufficiency of the income received from the sale of the loan security provided to the bank to fully satisfy the bank's debt claims to the borrower.
The risk of non-repayment of the loan is preceded by the risk of the borrower's creditworthiness, which is understood as the inability of the borrower to fulfill its obligations in relation to creditors in general. Each borrower is subject to individual credit risk, which is present independently of the business relationship with the bank and is the result of business and capital structure risk.
Business risk covers all types of risks associated with the operation of enterprises (purchasing, production and marketing activities). But unlike the named types of risks that can be managed by the company's management, business risk is influenced by uncontrollable external factors, in particular the development of the industry and the situation. The magnitude and nature of the risk is largely determined by investment programs and manufactured products.
Capital structure risk is determined by the structure of liabilities and reinforces business risk.
By issuing a loan, the bank thereby increases the overall risk of the enterprise, since the use of borrowed funds increases, due to the effect of financial leverage, possible both positive and negative changes in the return on equity of the enterprise.
A feature of credit risk that distinguishes it from other types of banking risks is its individual nature. This circumstance largely determines the originality of the credit risk management methodology. When making a decision to issue a loan, the bank should focus not on assessing individual types of risk, but on determining the overall risk of the borrower. General risk is a combination of business risk and capital structure risk.
Credit risk concentration manifested in the provision of large loans individual borrower or a group of related borrowers, as well as as a result of the fact that the credit institution's debtors belong either to certain sectors of the economy or to geographical regions or if there are a number of other obligations that make them vulnerable to the same economic factors.
Credit risk increases when lending to persons related to a credit institution (related lending), i.e. granting loans to individual individuals or legal entities that have real opportunities to influence the nature of decisions made by the credit institution on the issuance of loans and on lending conditions, as well as persons whose decision-making can be influenced by the credit institution.
When lending to related parties, credit risk may increase due to non-compliance or insufficient compliance with the rules, procedures and procedures established by the credit institution for considering applications for loans, determining the creditworthiness of the borrower(s) and making decisions on granting loans.
When lending to foreign counterparties, a credit institution may also face country risk and the risk of non-transfer of funds.
Level of credit risk depends on the type of loan provided by the bank. Depending on the timing of the loans are: short, medium and long-term; on the type of collateral: secured and unsecured; on the specifics of creditors: banking, commercial, state, etc.; from the direction of use: consumer, industrial, investment, seasonal, import, export; size: small, medium, large.
When developing a risk management policy, banks need to take into account that they are exposed to negative trends in the development of borrowers to a much greater extent than positive ones. Even with a favorable development of the economic situation of the borrower, the bank can count on receiving the maximum payments provided for in the contract, but if it is unfavorable, it risks losing everything. When making a lending decision, banks should take into account the possible negative development of borrowers to a greater extent than the positive one.
Banks should strive to detect and assess the risk of bankruptcy as early as possible in order to reduce lending in a timely manner and take adequate measures. Banks should not lend to borrowers who are at significant risk of bankruptcy. Therefore, it is necessary to correctly evaluate the loan offer provided by the potential borrower. First of all, you need to find out the reputation of the borrower. This is especially important for new clients. Then it is necessary to analyze whether the loan offer is realistic from an economic point of view, for which the bank should develop its requirements for the loan offer and bring them to the attention of the borrower. After analyzing the loan offer, the bank must determine how its loan portfolio will change with the advent of a new loan, whether this will lead to a diversification of the loan portfolio, and, consequently, to a decrease in the level of the bank's overall risk, or, conversely, a new loan will lead to a concentration of the loan portfolio in one industry or on the same terms of payment, which will increase the level of risk. The next stage of credit risk assessment is the selection of financial information about a potential borrower, on the basis of which the bank assesses the borrower's creditworthiness, determines the possible volumes of lending, the amount and method of fixing interest rates, the maturity of loans, and the requirements for their security. At the same time, the bank should be guided by the fact that the higher its risk, the greater should be the profit of the bank.
Reducing credit risk is possible through the following measures:
Checking the solvency of a potential borrower;
Current control over issued loans;
Risk insurance;
Use of collateral, guarantees, guarantees;
Receiving a risk premium from the client;
Limitation of risk through certain standards established by the Central Bank.
2.2 Country risk
Country risk(including the risk of non-transfer of funds) - the risk of a credit institution incurring losses as a result of non-performance by foreign counterparties (legal entities, individuals) of obligations due to economic, political, social changes, as well as due to the fact that the currency of the monetary obligation may not be available to the counterparty due to for the peculiarities of national legislation (regardless of the financial position of the counterparty itself).
Numerous factors are taken into account when analyzing this risk, as country risk is a complex risk that includes economic and political risk. The economic risk depends on the state of the country's balance of payments, the economic system, the economic policy pursued by the state, especially restrictions on the transfer of capital abroad. The assessment of economic risk is usually made on the basis of national statistics. hallmark country risk is the complexity of its calculation and analysis, since in order to assess it, the bank needs to create a highly efficient, flexible and reliable data bank.
2.3 Market risk
Market risk- the risk of the credit institution incurring losses due to unfavorable changes in the market value of the financial instruments of the trading portfolio and derivative financial instruments of the credit institution, as well as foreign exchange rates and (or) precious metals.
Market risk includes equity risk, currency risk and interest rate risk.
stock risk- the risk of losses due to unfavorable changes in market prices for stock assets (securities, including those securing rights to participate in management) of the trading portfolio and derivative financial instruments under the influence of factors related both to the issuer of stock assets and derivative financial instruments, and general fluctuations market prices for financial instruments.
Currency risk- the risk of losses due to unfavorable changes in the exchange rates of foreign currencies and (or) precious metals on positions opened by the credit institution in foreign currencies and (or) precious metals.
Interest risk- the risk of financial losses (losses) due to unfavorable changes in interest rates on assets, liabilities and off-balance sheet instruments of the credit institution.
The main sources of interest rate risk can be:
Mismatched maturities of assets, liabilities and off-balance sheet exposures and liabilities on instruments with a fixed interest rate;
Mismatch between the maturities of assets, liabilities and off-balance sheet claims and liabilities on instruments with a variable interest rate (repricing risk);
Changes in the configuration of the yield curve for long and short positions in financial instruments of one issuer, creating the risk of losses as a result of the excess of potential expenses over income when closing these positions (yield curve risk); for financial instruments with a fixed interest rate, provided that their maturity dates coincide - a discrepancy in the degree of change in interest rates on the resources attracted and placed by the credit institution; for financial instruments with a floating interest rate, subject to the same frequency of revision of the floating interest rate - a discrepancy in the degree of change in interest rates (basis risk);
The widespread use of option transactions with traditional
interest-bearing instruments that are sensitive to changes in interest rates (bonds, loans, mortgage loans and securities, etc.), giving rise to the risk of losses as a result of refusal to fulfill the obligations of one of the parties to the transaction (option risk).
The most exposed to interest rate risk are banks that regularly practice interest rate gambling for profit, and those banks that do not carefully forecast changes in interest rates.
There are two types of interest rate risk: positional risk and structural risk. Positional risk is the risk on any one position - on the percentage at this particular moment. For example, a bank has issued a loan with a floating interest rate, while it is not known whether the bank will make a profit or incur losses. Structural risk is the risk on the bank's balance sheet as a whole, caused by changes in the money market due to fluctuations in interest rates. Thus, interest rate risk affects both the balance sheet as a whole and the results of individual transactions.
The main causes of interest rate risk are:
incorrect choice of interest rate types (constant, fixed, floating, declining);
underestimation in loan agreement possible changes in interest rates;
changes in the interest rate of the Central Bank of Russia;
the establishment of a single interest for the entire period of use of the loan;
lack of a developed interest rate policy strategy in the bank;
incorrect definition of the cent of the loan, that is, the value of the interest rate.
Interest risk can be avoided if changes in asset returns are fully balanced by changes in fundraising costs. This is theoretical. However, it is practically impossible to achieve such a balance all the time, so banks are always exposed to interest rate risk.
Interest rate risk management includes the management of both assets and liabilities of the bank. The peculiarity of this management is that it has boundaries. Asset management is limited by credit risk and liquidity requirements, which determine the content of the bank's portfolio of risky assets, as well as price competition from other banks in the established loan cents.
Liability management is also hampered primarily by the limited choice and size of debt instruments, that is, the limited funds needed to issue a loan, and again price competition from other banks and lending institutions.
You can also reduce interest rate risk by conducting interest rate swaps. These are special financial transactions, the terms of which provide for the payment of interest on certain obligations at a predetermined time, that is, in essence, the parties entering into the contract exchange the interest payments that they must make. The exchange of interest payments on a fixed rate transaction occurs against a variable rate transaction. At the same time, the party that undertakes to make payments at fixed rates expects significant growth over the period of the variable rate transaction; and the opposite side - to reduce them. Then the party that correctly predicted the dynamics of interest rates wins.
2 . 4 Liquidity risk
Liquidity risk- the risk of losses due to the inability of the credit institution to ensure the fulfillment of its obligations in full. Liquidity risk arises as a result of an imbalance in the financial assets and financial liabilities of a credit institution (including as a result of untimely fulfillment of financial obligations by one or more counterparties of the credit institution) and (or) an unforeseen need for the credit institution to immediately and simultaneously fulfill its financial obligations.
2 . 5 Operational risk
Operational risk- the risk of losses as a result of non-compliance with the nature and scope of the credit institution's activities and requirements current legislation internal procedures and procedures for conducting banking operations and other transactions, their violation by employees of the credit institution and other persons (due to incompetence, unintentional or deliberate actions or inaction), disproportion (insufficiency) of the functionality (characteristics) of the information, technological and other systems used by the credit institution and their failures (malfunctions), as well as as a result of the impact of external events.
2 . 6 Legal risk
Legal risk- the risk of a credit institution incurring losses due to:
non-compliance by the credit institution with the requirements of regulatory legal acts and concluded agreements;
allowable legal errors in the implementation of activities (incorrect lawyer consulting or incorrect preparation of documents, including when considering controversial issues in the judiciary);
imperfections of the legal system (inconsistency of legislation, lack of legal norms to regulate certain issues that arise in the course of a credit institution's activities);
violations by counterparties of regulatory legal acts, as well as the terms of concluded agreements.
2 . 7
Risk of loss of business reputation for a credit institution (reputational risk) - the risk that a credit institution will incur losses as a result of a decrease in the number of customers (counterparties) due to the formation in society of a negative perception of the financial stability of a credit institution, the quality of its services or the nature of its activities in general.
2 . 8 Strategic risk
Strategic risk- the risk of a credit institution incurring losses as a result of errors (shortcomings) made when making decisions that determine the strategy for the activities and development of the credit institution (strategic management), and expressed in the failure to take into account or insufficient consideration of possible dangers that may threaten the activities of the credit institution, incorrect or insufficiently substantiated definition promising directions activities in which a credit institution can achieve an advantage over competitors, the absence or incomplete provision necessary resources(financial, logistical, human) and organizational measures ( management decisions), which should ensure the achievement of the strategic goals of the credit institution.
3. The concept and methods of risk management in the activities of a commercial bank
3.1 The concept of risk management
What is hidden behind these words? Ways of influence of the managing subject on the managed object in order to minimize losses. In the case of a bank, we have ways to influence the bank on possible banking risks in order to minimize losses from their implementation.
A very important part of developing a risk strategy is the development of measures to reduce or prevent the identified risk. In general, the term hedging is used to describe actions aimed at minimizing financial risk.
It is in the development of basic approaches to risk assessment, determination of its acceptable level and development of an appropriate strategy that the main task of risk management or risk management lies.
To take into account the factors of uncertainty and risk, when assessing the feasibility of carrying out any risky activity or in the process of its implementation, all available information is used and, on its basis, possible ways of managing risks are considered.
Risk management methods are divided into analytical and practical methods. Analytical risk management methods are used as a tool for proactive risk management and allow you to develop forecasts and risk management strategies before the start of the project. The main task of analytical risk management methods is to identify risk situations and develop measures aimed at reducing negative consequences their occurrence. The tasks of analytical methods of risk management also include the prevention of risk situations.
Practical methods of risk management are designed to reduce the negative result of risk situations that have arisen in the course of implementation. As a rule, they are based on analytical methods of risk management. At the same time, practical methods of risk management are the basis for creating an information base for risk management and the subsequent development of analytical methods.
There are the following risk management methods:
a) avoidance (avoidance) of risk;
b) risk limitation;
c) risk reduction;
d) transfer (transfer) of risk, including insurance;
e) risk acceptance.
Within the framework of these methods, various strategic decisions are applied aimed at minimizing the negative consequences of the decisions made:
risk avoidance;
retention (limitation) of risk;
self-insurance;
distribution of risks;
diversification;
limiting;
hedging;
insurance;
coinsurance;
double insurance; reinsurance
3.2 Bank risk management methods
1. Risk avoidance. Development of strategic and tactical decisions that exclude the occurrence of risky situations, or the refusal to implement the project.
2. Retention (limitation) of risk. Delimitation of the system of rights, powers and responsibilities in such a way that the consequences of risky situations do not affect the implementation of the project. For example, the inclusion in the contract for the supply of equipment of the conditions for the transfer of ownership of the delivered goods upon receipt by the customer.
3. Self-insurance. Creation of reserves to compensate for the consequences of risky situations. Self-insurance acts in monetary and in-kind forms, when a self-insurer forms and uses a monetary insurance fund and (or) reserves of raw materials, materials, spare parts, etc. in case of unfavorable economic conditions, delays in payments by customers for delivered products, etc. Procedure for using funds insurance fund under the conditions of self-insurance is provided for in the charter of an economic entity. Market economy significantly expands the boundaries of self-insurance, transforming it into a risk fund.
4. Distribution of risks. Organization of project management, providing for collective responsibility for the results of the project.
5. Diversification. Reduction of risks due to the possibility of compensating for losses in one of the areas of the enterprise's activity with profits in another.
Diversification is widely used in financial markets and is the basis for portfolio investment management. It has been proved in financial management that portfolios consisting of risky financial assets can be formed in such a way that the total risk level of the portfolio is less than the risk of any individual financial asset included in it.
6. Limitation. Establishing limit values for indicators when making tactical decisions. For example, limiting the amount of expenses, setting export quotas, etc.
The most convenient and applicable way to limit risks is to set limits on financial results. If it is decided that the maximum level of losses is limited, for example, to the amount of 500 thousand dollars, then all limits in the integrated calculation should correspond to this parameter. The use of such widely used in international practice limits as stop-loss, stop-out, take profit and take out, allow you to effectively control the level of losses.
7. Hedging. Insurance, reducing the risk of losses caused by changes in market prices for goods that are unfavorable for sellers or buyers in comparison with those that were taken into account when concluding the contract.
Hedging ends with a buy or sell. The essence of hedging is that the seller (buyer) of the goods enters into an agreement for its sale (purchase) and at the same time carries out futures deal of the opposite nature, that is, the seller enters into a transaction for the purchase, and the buyer - for the sale of goods.
Thus, any change in price brings sellers and buyers a loss in one contract and a gain in another.
As a result of this, they generally do not suffer a loss from the rise or fall of the prices of commodities, which are to be sold or bought at future prices. To confirm the validity of classifying transactions with financial instruments of futures transactions as hedging transactions, the taxpayer submits a calculation confirming that the performance of these transactions leads to a decrease in the amount of possible losses (loss of profit) on transactions with the hedging object.
8. Insurance.
The most common insurance is bank credit risks. The objects of credit risk insurance are bank loans, obligations and guarantees, investment loans. If the loan is not repaid, the lender receives an insurance indemnity that partially or fully compensates for the amount of the loan.
9. Coinsurance.
Insurance of the same insurance object by several insurers under one insurance contract.
If the co-insurance contract does not define the rights and obligations of each of the insurers, they are jointly and severally liable to the insured (beneficiary) for payment insurance compensation under a property insurance contract or the sum insured under a contract personal insurance. In certain cases, the insured may act as an insurer in respect of its own deductible deductible. And sometimes insurers participating in co-insurance require that the insured is a co-insurer, that is, he holds a certain share of the risk on his responsibility.
In co-insurance, a joint or separate insurance policy may be issued based on the share of risk accepted by each co-insurer and fixed in the sum insured.
10. Double insurance.
Insurance with several insurers of the same type of risk. 11. Reinsurance.
Activities for the protection by one insurer (reinsurer) of the property interests of another insurer (reinsurer) associated with the obligations of insurance payment accepted by the latter under the insurance contract (main contract). An insurer accepting a risk for insurance that exceeds its ability to insure such a risk.
Relations are formalized by an agreement under which one party - the reinsurer, or assignor - transfers the risk and the corresponding part of the premium to the other party - the reinsurer, or assignee. The latter undertakes upon occurrence insured event pay for the share of the risk. Risk transfer operations are called cessions.
In turn, the reinsurer can transfer part of the risk for reinsurance to the next insurance company. In this case, the reinsurer acts as a retrocedent, the new insurance company is called a retrocessionary, and the risk transfer operation is called a retrocession.
Reinsurance relations involve two types of contracts - for the reinsurance of all received risks, regardless of their size, and for the reinsurance of only certain "excessive" risks.
Distinguish between compulsory reinsurance, based on the conclusion of an agreement with the assignee on the mandatory acceptance of reinsurance of all the risks of the company, facultative, suggesting the possibility of refusing to reinsure certain risks, and facultative-mandatory in the form of a combination of the first and second.
Reinsurance is carried out on the basis of a reinsurance agreement concluded between the insurer and the reinsurer in accordance with the requirements of civil law.
Along with the contract of reinsurance, other documents applicable on the basis of business practices may be used as confirmation of the agreement between the reinsurer and the reinsurer.
Conclusion
Any form of human activity is associated with a variety of conditions and factors that influence the positive approach of decisions. No business activity is without risk. The main place is occupied financial risk. The greatest profit is brought by financial transactions with increased risk. However, the risk must be calculated up to the maximum allowable limit.
Financial risk is understood as the probability of unplanned losses, shortfall in planned profit. Financial risk arises in the process of financial and economic activities of the organization. A variety of financial risk is banking risk.
Financial risk is an objective economic category. And this economic category represents an event that may or may not occur. If such an event occurs, three economic outcomes are possible:
Negative (loss, loss);
Null;
Positive (gain, benefit).
Risk is the probability of losing something. For a bank, financial risk is the risk of losing money. Huge amounts of money pass through banks and thousands of transactions are made, therefore, loss prevention is one of the main tasks of the bank, the more opportunities for the bank to make a profit, the greater the risk of losing invested funds.
Banking activities are subject to a large number of risks. Since the bank, in addition to the function of business, has the function of social significance and a conductor of monetary credit policy, then knowledge, definition and control of banking risks is of interest to a large number of external stakeholders: the National Bank, shareholders, financial market participants, customers.
Consideration of the most well-known types of risk showed their diversity and complex nested structure, that is, one type of risk is determined by a set of others. The above list is far from exhaustive. Its diversity is largely determined by the ever-increasing spectrum banking services. The variety of banking operations is complemented by a variety of customers and changing market conditions. It seems quite natural to want to be not only the object of all kinds of risks, but also to bring a share of subjectivity in the sense of influencing the risk in the implementation of banking activities.
Bibliography
risk credit bank expense
1. Letter Central Bank RF No. 70-T dated June 23, 2004 "On Typical Banking Risks"
2. Law of the Russian Federation “On Banks and Banking Activity” No. 395-1 dated December 2, 1990 (as amended on December 6, 2011 No. 409-FZ).
3. Law of the Russian Federation “On the Central Bank of the Russian Federation (Bank of Russia)” No. 86 dated July 10, 2002 (as amended on October 19, 2011 No. 285-FZ).
4. Banking: textbook / Ed. G.N. Beloglazova, L.P. Krolivetskaya - M.: Finance and statistics, 2008.
5. Banking: textbook / Ed. IN AND. Kolesnikova, L.P. Krolivetskaya - M.: Finance and statistics, 2009.
6. Balabanov I.T Financial management: textbook - M.: Finance and statistics, 2008.
7. Money, credit, banks: textbook / Ed. G.N. Beloglazova - M.: Yuray Publishing House, 2009.
8. Money, credit, banks. Express course: tutorial/ Ed. O.I. Lavrushina - M.: Knorus, 2010.
9. Kovalev V.V. Course of financial management: textbook. - 3rd ed.-M.: Prospect, 2009.
10. Lavrushin OI and others Banking: textbook. - M.: Knorus, 2009
11. Starodubtseva E.B. Fundamentals of banking: Textbook. - M.: Forum: Infra-M, 2007.
12. Suits V.P., Akhmetbekov A.N., Dubrovina T.A. Audit: general, banking, insurance: Textbook. - M.: Infra-M, 2010.
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Financial risk is a probabilistic characteristic of an event that in the long term may lead to losses, loss of income, shortfall or receipt additional income, as a result of conscious actions of a credit institution under the influence of external and internal development factors in an uncertain economic environment. To determine banking risks, it seems appropriate to build such a logical chain that will show where financial risks are, what they are and how general economic risks in particular can be transformed into financial risks of banks. To do this and to refine the classification of risks, we have developed a number of our own criteria that the risk system must satisfy:
Relevance to the purpose of a particular organization. Like any commercial structure, banks aim to make a profit, at the same time, to the goals of banking
organizations, the goal of ensuring the safety of funds and valuables placed on current accounts of clients received for management or storage is added.
Attitude towards regulation, i.e. division into external and internal. External risks can only be taken into account in activities, and internal ones can be affected by their study and minimization, and in some cases their elimination is also possible.
Compliance with the conditions of the banking operation (term, collateral, currency of payment, ratio of lending to large and small borrowers, shareholders and insiders).
Acceptability of the risk system for subsequent management and control.
By belonging to active and passive operations and to a certain structural unit. So, in banks, risks arise in three large divisions: Credit, Treasury and Operational. The credit division primarily faces credit risks. When conducting active operations, the Treasury assumes currency risk, interest rate risk, portfolio risk, liquidity risk, credit risk and others. Operational management is mainly concerned with operational and transfer risks.
The system of financial risks in banks is inextricably linked with the development and improvement of the banking system and banking legislation. In the West, the system of studying banking risks has received a fairly wide development, which is inextricably linked with the processes taking place in the banking world system, in which risk is an inevitable part of banking.
The Western financial system of the late 1970s and early 1980s was characterized by a steady growth in the profitability of banks, which was facilitated by a number of extremely favorable circumstances: the ability to raise funds at low interest rates, low competition, vertical integration and a wide range of services. Contributed to this and the upper limit of the interest rate paid on deposits, set by the authorities regulating banking activities. The attraction of funds at low interest rates also served to create banking cartels. The banks that were part of the cartel, as a rule, had an agreement among themselves on the rate of interest paid to depositors. In addition, a significant volume of checks passing through banking structures in the process of collection provided banks with practically free liabilities.
It should be noted that due to excessively rigid licensing practices in Western Europe and the United States, which artificially restrained the emergence of new banks, and, in some cases, the creation of banking cartels, external competition, that is, competition emanating from a different banking jurisdiction for each of the domestic banks, was significantly limited. markets. The number of institutions authorized to perform certain banking functions also played a role in mitigating interbank competition. For example, in Finland, which had a population of 4.8 million by 1984, there were 7 commercial banks, 272 savings banks, 371 cooperative banks, and Post Bank with 3,500 branches. All this complicated banking system remained stable only due to a number of agreements between banks regarding the rate of interest on deposits (to control the costs of raising funds), as well as compliance with the market segments divided by the Central Bank among various types of Banks, limiting their competition (for example, cooperative banks served agricultural industries, savings banks - consumers, and large commercial banks - the industry). A "gentlemen's agreement" on mutual non-penetration of each other's domestic financial markets existed between Swiss and West German banks for decades, until 1985. There are many such examples in banking practice. In addition, various barriers prevented banks "external" in relation to this market from attracting funds at low costs, sometimes these barriers took the form of a ban on issuing loans in national currency (for foreign banks) or on opening a branch.
The expansion of the range of services provided by banks has led to the fact that banks have become universal, meeting the financial needs of most of society; traditional banks have grown into "supermarkets" financial services. "Auxiliary" services, such as stock brokerage, insurance brokerage, and the like, also contribute to the expansion of banking services and increase the profitability of banking activities. International banking operations have emerged, which include:
export lending,
lending to international transactions of residents and ensuring their money transfers and investment services
opening access to international capital and money markets to find new sources of raising funds.
The modern banking system of Russia began to take shape in 1989, with the creation of 5 specialized banks, then commercial banks began to actively form. In total, more than 2,500 were created, and as of February 1, 2005, 145,511 remained, the rest could not stand the competition and were abolished. Commercial banks and the credit and banking system as a whole in the conditions of Russia are the determining and one of the main factors in the preservation and development of the economy, the implementation and promotion of investment programs, including state ones, and the increasing merger of industrial and production and banking capital in the form of financial and industrial groups .
As a dependent element of the economy, Russian banks affected by the global financial crises. financial crises 1997-98 in emerging markets in Southeast Asia, South America and Russia have clearly demonstrated the complexity of the problem of financial risk management in banks. Successful overcoming of such crises provides financial and credit institutions with a strengthening of market positions, therefore, the maximum mitigation of the consequences of crisis phenomena in international financial markets is a task of exceptional importance for such structures; at the same time, bank customers also need to have information about risk management methods in their institution in order to improve the efficiency of financial management.
In a situation "when the conditions for the functioning of commercial banks have changed, achieving their goals becomes possible only by changing the quality of management. However, many theoretical issues of banking risk management remain insufficiently developed to date. This is especially true for such issues as: the concept of cash flow, the price of capital, the efficiency of the capital market, portfolio management of assets, a compromise between profitability and risk, etc. In the economic literature there is no unity in the interpretation of individual terms and concepts (reliability, stability, stability, etc.), far from being sufficient for applying the development of a methodological nature.
Thus, their classification becomes the basis for the functioning of an effective financial risk management system.
In our opinion, the most meaningful is the classification of banking risks proposed by Peter S. Rose12, who distinguishes the following six main types of commercial bank risk and four additional types. The main types of risk P. Rose considers the following:
Credit risk
Liquidity risk
Market risk
Interest risk
Profit loss risk
Insolvency risk
To others important species Risk Rose P. refers to four more types, which he defines as follows:
inflation risk
Currency risk
Risk of abuse
The advantage of this classification is that this system includes both risks arising within the bank and risks arising outside the bank and affecting its activities. At the same time, at present, such a classification cannot be used by commercial banks for practical application due to its enlargement, which means that a more detailed classification is needed with the allocation of risk groups and subgroups, depending on the specifics of the bank's operations.
More demonstrative and practical in application is the classification of Sheremet A.D., Shcherbakov G.N. This allows you to separate the risks that arise outside the bank and affect the bank's operations and the risks that arise within the bank in the course of the bank's "production" activities. This fundamental difference between the two classes of risks determines the attitude of banks towards them, methods of control and management capabilities.
In the proposed scheme, risks according to the type of relationship to the internal and external environment of the bank are classified as follows:
risks associated with the instability of economic legislation and the current economic situation, the conditions for investing and using profits.
foreign economic risks (the possibility of introducing restrictions on trade and supplies, closing borders, etc.).
the possibility of deterioration of the political situation, the risk of adverse socio-political changes in the country or region.
the possibility of changing natural and climatic conditions, natural disasters.
market fluctuations, exchange rates etc.
Internal:
associated with active operations (credit, currency, market, settlement, leasing, factoring, cash, correspondent account risk, financing and investment, etc.)
associated with the obligations of the bank (risks on deposit and deposit operations, on attracted interbank loans)
related to the quality of the bank's management of its assets and liabilities (interest rate risk, risk of unbalanced liquidity, insolvency, risks of the capital structure, leverage, insufficient capital of the bank)
associated with the risk of financial services (operational, technological, innovation, strategic, accounting, administrative, abuse, security risks).
Unlike Western risk management practices, Russia has only recently issued instructions from the Central Bank of the Russian Federation in the form of letter No. 70-T dated June 23, 2004 "On Typical Banking Risks", which identifies 10 risk groups: credit, country, market, stock, currency , interest rate, liquidity, legal, reputational risk and strategic.
Besides, Central bank suggested that commercial banks exercise control over risks at three main levels: individual (employee level), micro and macro levels.
The risks of the individual level include risks caused by the consequences of illegal or incompetent decisions of individual employees.
The micro-level risks include liquidity risks and capital decline, formed by the decisions of the management apparatus.
Macro-level risks include risks predetermined by external macroeconomic and legal conditions of activity in relation to the bank.
The main documents that guide the risk managers of Western companies in their practical activities are developed by the Basel Committee on Banking Supervision14 and are called Principles of Banking Supervision. This document contains 25 principles, the implementation of which is intended to be minimal. necessary condition ensuring effective banking supervision, as well as comments on them, based on the recommendations of the Basel Committee and the best international practice in the field of banking and banking supervision. Among the Basel principles, principles 6-15 related to the risks of banking can be distinguished. The integration of Russian banking financial statements with International Financial Reporting Standards (IFRS) will undoubtedly be developed in the application of these principles in Russian practice.
International audit companies operating in Russia, based on the recommendations of the Basel Committee, develop their own risk classifications, an example is the risk map 15>15 (a detailed structure of financial risks of a commercial bank), created by PricewaterhouseCoopers, called GARP.
Money. Credit. Banks [Answers to examination papers] Varlamova Tatyana Petrovna
115. Financial risks in the activities of a commercial bank
In any economic activity, there is always a risk of losses arising from the specifics of business transactions. The danger of such losses is commercial risk . Integral part commercial risks are financial risks associated with the probability of losing any sums of money or lack thereof.
Risks are divided into two types:
1) clean, meaning the possibility of a loss or a zero result;
2) speculative, expressed in the probability of getting both a positive and a negative result.
Financial risks are speculative. An investor, making a venture capital investment, knows in advance that only two types of results are possible for him - income or loss. A feature of financial risk is the likelihood of damage as a result of any operations in the financial, credit and exchange areas, transactions with securities, stock values, i.e. the risk that follows from the nature of these operations.
The leading principle in the work of commercial banks is the desire to obtain as much profit as possible. It is limited to the possibility of incurring losses. The greater the risk, the higher the chance of making a profit. The risk is formed as a result of the deviation of the actual data from the assessment of the current state and future development. These deviations can be both positive and negative. In the first case we are talking about the chances of making a profit, in the second - about the risk of having losses.
In general, the risks associated with manufacturing banking operations include the following.
1. Credit risk – the risk of non-payment of principal and interest on a loan.
Credit risk is determined by factors that lie both on the side of the client and on the side of the bank.
The group of factors that lie on the side of customers include creditworthiness and the nature of the credit transaction. The group of factors lying on the side of the bank includes the organization of the credit process by the bank.
2. Interest risk– danger of losses by commercial banks, credit institutions, investment funds as a result of the excess of interest rates paid by them on attracted funds over the rate on loans granted.
3. Currency risk represents a risk of currency losses associated with a change in the exchange rate of one of the currencies in relation to another, including the national currency, during foreign economic, credit and other currency transactions.
4. portfolio risk– the possibility of losses in the securities market when their market value changes.
5. Risk of lost opportunity- this is the risk of indirect (collateral) financial damage (non-receipt of profit) as a result of the failure to carry out any event or stop economic activity.
In addition, there is often talk about the risk associated with the inability of the bank to reimburse administrative and business expenses.
All of these risks are interrelated. Obviously, credit risk can lead to liquidity and insolvency risks for the bank, as well as the risk associated with the inability of the bank to recover administrative and economic expenses. Interest rate risk is independent in its own way, because it is associated with the situation on the market for credit resources and acts as a factor independent of the bank. However, it is able to exacerbate credit risk and the entire chain if the bank does not adjust to changes in the level of the market interest rate.
Thus, the main type of financial risks of commercial banks is credit risk and interest rate risk.
This text is an introductory piece. author Varlamova Tatyana Petrovna98. Functions of a commercial bank
From the book Money. Credit. Banks [Answers to exam tickets] author Varlamova Tatyana Petrovna104. Issuing operations of a commercial bank Issuing operations - issuing and placement operations commercial bank own securities. If a bank is organized in the form of an open joint stock company, then its own authorized capital consists of
From the book Money. Credit. Banks [Answers to exam tickets] author Varlamova Tatyana Petrovna105. The significance of passive operations in the activities of a commercial bank Passive operations are understood as such operations of banks, as a result of which there is an increase in funds held on passive accounts or active-passive accounts in terms of excess liabilities
author Ioda Elena Vasilievna3.1. ORGANIZATIONAL STRUCTURE OF A COMMERCIAL BANK The creation of a commercial bank and other credit institutions on a share and joint-stock basis is carried out with the aim of accumulating temporarily free funds of enterprises, organizations and institutions and their
From the book Fundamentals of the Organization of Commercial Banking author Ioda Elena Vasilievna5. INTERMEDIATE OPERATIONS OF A COMMERCIAL BANK Among the most well-known operations, Russian banks, in addition to the traditional provision of loans and deposits, offer so-called intermediary operations - leasing, trust, factoring operations,
From the book Bank Audit author Shevchuk Denis Alexandrovich56. Audit of foreign exchange operations of a commercial bank First of all, it is necessary to make sure that the bank has a license from the Central Bank of Russia foreign currency. Revaluation of currency funds "Regulations on the procedure for maintaining accounting
author Kanovskaya Maria Borisovna28. Organizational structure of a commercial bank The organizational structure of a commercial bank is determined primarily by its organizational and legal form of ownership, which, of course, is reflected in the charter of the bank. The statute contains provisions for
From the book Banking Law. cheat sheets author Kanovskaya Maria Borisovna29. The management structure of a commercial bank
author Kanovskaya Maria Borisovna17. Essence and functions of a commercial bank A bank is an institution of the credit and banking system that organizes the movement of loan capital in order to make a profit. The bank performs the following functions: Accumulation and mobilization of money capital. With this function
From the book Banking. cheat sheets author Kanovskaya Maria Borisovna23. Organizational structure of a commercial bank The organizational structure of a commercial bank is determined primarily by its organizational and legal form of ownership, which, of course, is reflected in the charter of the bank. The statute contains provisions for
From the book Banking. cheat sheets author Kanovskaya Maria Borisovna24. The management structure of a commercial bank
From the book Banking. cheat sheets author Kanovskaya Maria Borisovna44. Problems of analysis of liabilities of a commercial bank It is necessary to analyze attracted and borrowed resources by groups that characterize the main sources of attracting bank resources: time deposits and demand deposits; funds in settlements; facilities,
author Shevchuk Denis AlexandrovichTopic 15. The concept of liquidity of a commercial bank Liquidity is the ability of a bank to ensure the fulfillment of its obligations to all counterparties in a timely manner, in full, without loss, including in the future. Lossless means providing additional
From the book Banking: a cheat sheet author Shevchuk Denis AlexandrovichTopic 27. Passive operations (PO) of a commercial bank PO is the bank's activity aimed at creating its own and borrowed sources of funds for their further use for conducting operations and generating income. KB liabilities: relationship groups: 1.
author Shevchuk Denis AlexandrovichBalance sheet of a commercial bank. Assets: cash on hand and cash equivalents; granted loans; financial investments; other assets. Liabilities: liabilities of a commercial bank; attracted funds of the bank's clients; loans received from the Central Bank;
From the book Money. Credit. Banks: lecture notes author Shevchuk Denis AlexandrovichResources of a commercial bank All resources of a commercial bank are divided into own and borrowed. 3 groups of funds attracted by a commercial bank: a) funds of the bank's customers; b) loans from the Central Bank; c) funds of credit institutions. Bank deposit (deposit) -
Banking risk is considered to be the possibility of material losses for a financial institution. The reasons for this may be an unexpected change in the market value of various financial instruments. In addition, losses may arise due to changes in the foreign exchange market.
Types of banking risks
There is the following classification:
- by time. Risks are current, prospective and retrospective;
- by level. The degree of possibility of losses may be either low or moderate or complete;
- according to the main factors. Such circumstances are caused by economic or political reasons. The first option includes various changes of an unfavorable nature in economic area the financial institution itself. It can also happen in the economy of a country. Political risks are driven by changes in the political environment.
Main banking risks
These include the following factors:
- liquidity risk. The value of assets as well as liabilities banking institutions should correspond to the current market indicator. If this does not happen, then the financial institution may experience serious difficulties in paying off its obligations;
- the risk of changes in lending rates. Unforeseen changes in this segment can seriously affect the structure of assets and liabilities of a banking institution;
- credit risk. This direction requires a constant balance between the quality of loans issued and the liquidity factor;
- capital adequacy. It is necessary for the bank to be able to freely absorb losses and have sufficient financial resources in a period of negative situations.
Features of banking risks
In their activities, financial institutions have to take into account various nuances. In particular, the nature of the risks is of considerable importance. There are external and internal causes of their occurrence. The category of the first includes those risks that are not directly related to the activities of the bank. These are losses incurred as a result of some serious events. These may include wars, nationalizations, the introduction of various prohibitions, exacerbation current situation in any particular country. As for internal risks, they represent losses arising from incorrectly carried out (main or auxiliary) activities of a banking organization.
Bank risk assessment
Determining the costs (in quantitative terms) that are associated with risks during the implementation of banking activities is called the assessment of such risks. The purpose of this procedure is to identify the conformity of the results of the work of a particular credit institution current market conditions. Most often, an analytical method is used for this - in relation to both the loan portfolio and its main indicators. This allows you to display a general picture of the activities of a particular bank, as well as its main areas of operation. In addition, such an assessment process helps to determine the degree of credit risk.
Bank risk management
Proper financial risk management plays an important role in the activities of each credit institution. In this matter, the choice of the most appropriate strategy is of great importance. The main purpose of such bank risk management is to minimize or limit the possibility of financial losses. To this end, a number of special events are regularly held. Much attention is paid to management issues - in relation to assets and liabilities, control of established standards and limits, as well as reporting. In addition, monitoring, analytical and audit areas are of considerable importance - in relation to the activities of any credit institution.
Financial banking risks
The widest group of banking risks includes financial factors. Such probabilities of loss are usually associated with unexpected changes that have occurred with the main constituent elements of any financial institution. Most often this happens with the volumes of banking components, or is associated with a loss of their profitability. In addition, unforeseen changes in the very structure of assets and liabilities of a credit institution can play an important role. The group of financial risks includes such types as investment, credit, currency, market, inflationary and other options for changes.
Credit risk
Credit risk is the probability of non-payment by the debtor of the agreed financial amounts, the default of the debtor. Direct and indirect lending, purchase and sale operations without guarantees (prepayment) are at risk. In a broad sense, credit risk of loss is the probability of events affecting the debtor's condition to pay money on obligations.
Risk assessment is based on indicators: default probability, credit rating, migration, amount, level of losses. Subject to assessment, depending on the objectives pursued, the risk of a particular transaction or portfolio. The final estimate is divided into expected and unexpected losses. Expected losses are compensated by capital, unexpected losses - by formed reserves.
Bank's unbalanced liquidity risk
The liquidity of the balance sheet is called the totality of the level of fulfillment by the company's assets of obligations, the correspondence of the period for which the asset turns into finance, the time of repayment of debts. The risk of unbalanced liquidity of the bank is the probability of non-fulfillment of obligations by the bank due to a mismatch between the receipt and issue of financial units in terms of volumes, terms, currencies. The risk arises under the influence of factors: loss of liquidity, early repayment of loans, non-fulfillment by customers of the terms of contracts, the impossibility of selling an asset, errors in accounting.
Groupings of assets and liabilities are the basis for determining liquidity risk. To assess the risk, an analysis of the company's financial flows is developed in terms of terms, groups of payments, currencies. It is necessary to assess the possibility of a requirement for early return loans, the level of asset recovery.
Interest risk
Interest risk - the probability of receiving losses due to fluctuations in interest rates, discrepancies in the time of reimbursement of obligations, claims, discrepancies in changes in interest rates. The market price of financial instruments with a fixed profitability decreases when market rates become more expensive, and increases when they decrease. The strength of dependence is determined by the duration of the bonds.
The issuance of a long-term loan is fraught with the risk that appears when interest rates rise in the market, the discovery of lost profits as a result of a decrease in profitability on previously this loan. Financial instruments with a flexible rate are directly dependent on market rates. Instruments that do not have a market price are at risk, whether or not they report losses.
The essence of banking risks
The essence of banking risks is the probability of non-repayment of funds issued on credit. The classification of the Basel Committee highlights credit, market, operational, government, strategic, liquidity, reputational risks that can cause asset and liability imbalances.
Banking risks are divided into individual, micro and macro levels, depending on the ways of occurrence. Risks are manifested by the need for additional expenses, leading to losses up to liquidation. The possibility of loss exists in every financial transaction, banking activity reduces the likelihood of events affecting the default of creditors and debtors.
Risks in banking
Risks in banking activity are the probability of loss of liquidity, monetary losses due to external, internal factors. Risk is a part of banking, but all banks make efforts to reduce the possibility of financial losses. The desire of banks to acquire marginal revenue limited by the possibility of monetary loss.
The possibility of risks constantly exceeds the mark of 0, the task of the bank: to calculate the exact value. The level of risks increases with sudden problems, setting tasks that were not previously solved by the bank, and the impossibility of taking urgent measures to resolve the situation. The consequence of an incorrect assessment is the impossibility of taking the necessary actions, the consequence is ultra-high losses.
Calculation of banking risks
The calculation of banking risks is complex and private. The calculation is based on the search for a relationship between acceptable risk and the amount of possible losses. Complex risk - the total probability of loss of the bank's finances for all types of activities. Private - receiving losses on a specific operation, measured empirically according to selected methods.
There are three methods for calculating the possibility of loss: analytical, statistical, expert. The statistical method considers statistical series over a large time span. Expert method - collecting the opinions of banking professionals, compiling ratings. The analytical method is the analysis of risky areas using the above methods of calculation.
Bank risk analysis
Analysis of banking risks is a measure aimed at reducing losses and increasing the bank's profitability. The analysis is carried out by the risk management department, which regulates the decision-making process aimed at increasing the occurrence of a favorable outcome. The analysis methods used give a rating assessment of the client's ability to fulfill obligations under accepted credit obligations.
Risk analysis allows you to calculate the possibility of losses on loan portfolios, the size of the mandatory bank reserve, classify debts of debtors by the level of risk. During the analysis, a critical level of risk is identified, based on which it is possible to avoid collapse and liquidation. When calculating possible complex losses, ready-made calculations for private risks are used.
Advice from Sravni.ru: banking risks are of great importance for the efficient operation of any credit institution. For this reason, they should be given great attention.