Value at Risk (VaR) and Duration: Distinct Measures of Financial Risk
Value at Risk (VaR) and Duration are both widely used financial risk measures; however, they assess different dimensions of risk. While VaR provides a general estimate of potential losses in a portfolio over a specified time horizon, Duration specifically measures the sensitivity of bond prices to changes in interest rates. Understanding both is essential for…
Read article
Credit Risk Mitigation: Strategies for Strengthening Financial Stability and Lending Resilience
Credit risk mitigation refers to the strategic measures and techniques employed by lenders to reduce potential financial losses resulting from borrower defaults. These practices are essential for safeguarding institutional capital, enhancing portfolio quality, and maintaining long-term financial stability. Effective credit risk mitigation involves comprehensive risk assessment, prudent loan structuring, and proactive monitoring and management. Key…
Read article
Funding and Regulatory Aspects of Reserve Assets
Reserve assets are critical components of a nation’s financial system, playing a central role in maintaining economic stability, supporting international trade, and ensuring confidence in the national currency. Managed primarily by central banks and regulatory authorities such as the Reserve Bank of India (RBI), these assets include foreign currency holdings, gold reserves, Special Drawing Rights…
Read article
Regulatory Environment for International Equity and Debt Products
IntroductionInternational equity and debt products offer investors opportunities to diversify their portfolios and gain exposure to global financial markets. These investment vehicles, however, operate within complex regulatory frameworks designed to protect investors and ensure transparency and compliance. This article outlines the key features of international equity and debt products and the regulatory environment governing them,…
Read article Liquidity Risk Monitoring Tools – Net Stable Funding Ratio (NSFR)
The Net Stable Funding Ratio (NSFR) is a key component of the Basel III liquidity risk management framework, designed to promote long-term funding stability in banks. It complements the Liquidity Coverage Ratio (LCR) by addressing structural liquidity risk over a one-year horizon, thereby reducing banks’ reliance on volatile short-term funding. Purpose of the NSFR The…
Key Aspects of the Basel III Liquidity Coverage Ratio (LCR) Framework
RBI on Monday July 21, 2025 through notification announced that “it has been decided to permit banks to reckon Government securities as Level 1 HQLA* under FALLCR** within the mandatory SLR requirement up to 16 percent of their NDTL, under Basel III Framework on Liquidity Standards. Consequently, the total HQLA carve-out from the mandatory SLR,…
Read article