The contingency planning is a regular part of risk management for exceptional risk though unlikely, may have disastrous consequences when an unexpected event or situation occurs. In the other words, contingency planning is a process that includes risk assessment and a mitigation strategy for those risks. It generally refers to a negative situation like direct…
The International Monetary Fund (IMF) defines funding liquidity as “the ability of a solvent institution to make agreed-upon payments in a timely fashion”. According to the IMF, funding liquidity is the ability lending agency agrees payment with immediacy. Funding liquidity is the availability of credit to finance the purchase of financial assets for a business…
A bankruptcy remote entity is a special-purpose vehicle (“SPV”) that is formed to hold a defined group of assets and to protect them from being administered as property of a bankruptcy estate. The corporate documents of bankruptcy remote like memorandum association and article association may also attempt to create disablements to a bankruptcy filing. For…
Stress test is a process or simulation technique that evaluates an institutions reaction to different crisis situations. Stress testing and capital planning are increasingly linked to many risk management processes that require coordination across risk, treasury, and financial planning and analysis functions. Banks have been using stress tests to evaluate their potential vulnerability to certain…
In banking jargon the word ‘spread’ is used in issuance of corporate bonds,interest levied on loans and in foreign exchange transactions. In foreign exchange transactions the difference between the buying rate and selling rate is referred as spread or margin. The term ‘credit spread’ is used in the fixed income corporate bonds and bank loans.…
Risk management and capital Management are two sides of the same coin. Both of these indicate that the sufficient capital contribution in the business provides stable resources to help the owner to absorb any losses arising from the risks in a business. The objective of Capital management as well as its risk appetite is to…
In the financial market many investors prefer for investments in bond portfolio which can provide them the decent yields with a lower level of volatility than equities. Further, the bonds issued by corporates offer with a higher income than the money market funds or bank instruments. However, the volatility in interest rate in the financial…
In simple words the bank capital is the difference between a bank’s assets and liabilities. However, Banking regulators all over the word have their own definition of regulatory capital of banks in closer alignment with Basel Framework. The core banking regulatory framework across the banking sector consists of international standards enacted by the Basel Committee…