Distinguishing Risk: A Conversation on Banking Book vs Trading Book
In the context of banking and regulatory capital management, it is essential to distinguish between the banking book and the trading book, as each carries distinct types of risk and is subject to different regulatory treatments under the Basel framework. Interest Rate Risk in the Banking Book (IRRBB) IRRBB refers to the current or anticipated…
Read article Risk Identification and Risk Management in Banking: A Strategic Imperative
IntroductionThe banking business is inherently exposed to a wide range of risks that can adversely affect its financial health, operational integrity, and reputation. These risks—if not properly identified and managed—can lead to substantial losses and systemic instability. Risk identification is the foundational step in a bank’s risk management process, serving as the basis for proactive…
Read article The Strategic Importance of Risk Management in Organizational Success
IntroductionRisk management is an essential discipline that enables organizations to systematically identify, assess, and address potential threats and uncertainties. By doing so, it safeguards organizational assets, supports strategic decision-making, and enhances resilience. Far from being merely a defensive mechanism, effective risk management serves as a proactive tool for achieving sustainable growth, maintaining regulatory compliance, and…
Read article Interrelationship Between Risk, Capital, and Return
IntroductionIn the realm of finance and investment, the interrelationship among risk, capital, and return forms the cornerstone of strategic decision-making. The risk–return spectrum—also referred to as the risk–return trade-off or risk–reward relationship—highlights the principle that the potential for higher returns is intrinsically linked to a higher level of risk. Conversely, investments with lower risk profiles…
Read article Foundations of Risk and the Basic Risk Management Framework
IntroductionRisk, in the context of business and organizational operations, refers to the potential for loss, damage, or adverse consequences resulting from uncertain events or conditions. It signifies the possibility that undesirable outcomes may impact various facets of an organization, including its financial performance, operational continuity, regulatory compliance, and reputation. To address these uncertainties effectively, organizations…
The threshold limit for Small Business Customers increased to align with the Basel III framework: RBI
In order to protect depositors from the risk of a bank becoming insolvent, the banking regulator has prescribed banks and other authorised financial institutions to fund themselves with a minimum amount of capital (CAR) in terms of Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure…
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