Risk Management in Banks

projects4mp

New member
Introduction.
The significant transformation of the banking industry in India is clearly evident from the changes that have occurred in the financial markets, institutions and products. While deregulation has opened up new vistas for banks to argument revenues, it has entailed greater competition and consequently greater risks. Cross- border flows and entry of new products, particularly derivative instruments, have impacted significantly on the domestic banking sector forcing banks to adjust the product mix, as also to effect rapid changes in their processes and operations in order to remain competitive to the globalized environment. These developments have facilitated greater choice for consumers, who have become more discerning and demanding compelling banks to offer a broader range of products through diverse distribution channels. The traditional face of banks as mere financial intermediaries has since altered and risk management has emerged as their defining attribute.
Currently, the most important factor shaping the world is globalization. The benefits of globalization have been well documented and are being increasingly recognized. Integration of domestic markets with international financial markets has been facilitated by tremendous advancement in information and communications technology. But, such an environment has also meant that a problem in one country can sometimes adversely impact one or more countries instantaneously, even if they are fundamentally strong.
There is a growing realisation that the ability of countries to conduct business across national borders and the ability to cope with the possible downside risks would depend, interalia, on the soundness of the financial system. This has consequently meant the adoption of a strong and transparent, prudential, regulatory, supervisory, technological and institutional framework in the financial sector on par with international best practices. All this necessitates a transformation: a transformation in the mindset, a transformation in the business processes and finally, a transformation in knowledge management. This process is not a one shot affair; it needs to be appropriately phased in the least disruptive manner.
The banking and financial crises in recent years in emerging economies have demonstrated that, when things go wrong with the financial system, they can result in a severe economic downturn. Furthermore, banking crises often impose substantial costs on the exchequer, the incidence of which is ultimately borne by the taxpayer. The World Bank Annual Report (2002) has observed that the loss of US $1 trillion in banking crisis in the 1980s and 1990s is equal to the total flow of official development assistance to developing countries from 1950s to the present date. As a consequence, the focus of financial market reform in many emerging economies has been towards increasing efficiency while at the same time ensuring stability in financial markets.
 

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aju321

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i am unable to view ur report on risk management.please mail me at email ids not allowed
 
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jha.abhaydeep

New member
Introduction.
The significant transformation of the banking industry in India is clearly evident from the changes that have occurred in the financial markets, institutions and products. While deregulation has opened up new vistas for banks to argument revenues, it has entailed greater competition and consequently greater risks. Cross- border flows and entry of new products, particularly derivative instruments, have impacted significantly on the domestic banking sector forcing banks to adjust the product mix, as also to effect rapid changes in their processes and operations in order to remain competitive to the globalized environment. These developments have facilitated greater choice for consumers, who have become more discerning and demanding compelling banks to offer a broader range of products through diverse distribution channels. The traditional face of banks as mere financial intermediaries has since altered and risk management has emerged as their defining attribute.
Currently, the most important factor shaping the world is globalization. The benefits of globalization have been well documented and are being increasingly recognized. Integration of domestic markets with international financial markets has been facilitated by tremendous advancement in information and communications technology. But, such an environment has also meant that a problem in one country can sometimes adversely impact one or more countries instantaneously, even if they are fundamentally strong.
There is a growing realisation that the ability of countries to conduct business across national borders and the ability to cope with the possible downside risks would depend, interalia, on the soundness of the financial system. This has consequently meant the adoption of a strong and transparent, prudential, regulatory, supervisory, technological and institutional framework in the financial sector on par with international best practices. All this necessitates a transformation: a transformation in the mindset, a transformation in the business processes and finally, a transformation in knowledge management. This process is not a one shot affair; it needs to be appropriately phased in the least disruptive manner.
The banking and financial crises in recent years in emerging economies have demonstrated that, when things go wrong with the financial system, they can result in a severe economic downturn. Furthermore, banking crises often impose substantial costs on the exchequer, the incidence of which is ultimately borne by the taxpayer. The World Bank Annual Report (2002) has observed that the loss of US $1 trillion in banking crisis in the 1980s and 1990s is equal to the total flow of official development assistance to developing countries from 1950s to the present date. As a consequence, the focus of financial market reform in many emerging economies has been towards increasing efficiency while at the same time ensuring stability in financial markets.

thanx a very gud project..!!
it relly helped me a lot..

thanx 1ce again...
 

tushar418

New member
here is a presentation on risk mgt for u guys..hope it helps..
 

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santy

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This Topic will help me a great deal in finding a good area for my Project. Thank You very much for such a help.
 

mandarrocks

New member
Risk is any uncertainty about a future event that threatens your organization's ability to
accomplish its mission. Risk management is a discipline for dealing with the possibility
that some future event will cause harm. It provides strategies, techniques, and an
approach to recognizing and confronting any threat faced by an organization in fulfilling
its mission.

Risk management does not aim at risk elimination, but enables the organization to bring
their risks to manageable proportions while not severely affecting their income. This
balancing act between the risk levels and profits needs to be well planned. Two distinct
viewpoints emerge - one that is about managing risks, maximizing profitability and
creating opportunity out of risks and the other that is about minimizing risks/loss and
protecting corporate assets. The management of an organization needs to consciously
decide on whether they want their risk management function to 'manage' or 'mitigate'

Credit risk is defined as the possibility of losses associated with diminution in the credit
quality of borrowers or counterparties. In a bank's portfolio, losses stem from outright
default due to inability or unwillingness of a customer or counterparty to meet
commitments in relation to lending, trading, settlement and other financial transactions.

Over the past few years, the new Basel norms for capital adequacy have been drawing a
lot of attention in international and Indian banking circles. The changes that the Bank for
International Settlements [BIS], based in city of Basel in Switzerland has been ushering
in over past few years will change the banking industry remarkably. The Basel
Committee on Banking Supervision is working with the Central banks around the world
to institutionalize better risk management practices and make banking a safer and more
robust business worldwide.

Credit risk corresponds to changes in the credit quality of a security, an issuer, or counter-
party. A crucial step in credit risk analysis is the modelling of a credit event with respect
to some issuer or counter-party.
Basel II follows a three-step paradigm on identifying the credit risk capital requirement of
a bank. Banks can choose from among the following approaches to estimate credit risk in
their portfolios:
(1) The Basic Standardised Approach
(2) The Foundation Internal-Rating Based Model (FIRB)
(3) The Advanced Internal Rating Based Model (AIRB)
The said models are covered in our study.

We then look at Seven steps to implementing Basel II, which cover Analyzing gaps,
Drawing an implementation roadmap, Implementing/Enhancing the Internal Rating
system, Creating infrastructure for data management, Building data analytics, Testing the
solutions, infrastructure and procedures and Preparing for supervisory certification

There are varies models that are used for the process of Credit Risk Modeling, the current
applications include, Setting of concentration and exposure limits, Setting of hold targets
on syndicated loans, Risk-based pricing, Improving the risk/return profiles of the
portfolio, Evaluation of risk-adjusted performance of business lines or managers using
risk-adjusted return on capital (RAROC); and Economic capital allocation.
 
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