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…
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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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How are Credit metrics and credit migration risk use in financial analysis?
In this article, we’ll explain what credit migration risk and credit metrics are, and how to incorporate them into the financial analysis of companies by lenders and investors. Credit Migration risks: Credit ratings for public companies or Governments are similar to credit scores for individuals. These ratings for the long-term and short-term are provided by…
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Interest rate risk definition and impact on banking book
Interest rate risk is the potential for investment losses that can be prompted by a move upward in the prevailing rates for new debt instruments. Interest rate changes can affect many investments, but it impacts the value of bonds and other fixed-income securities most directly. As interest rates rise bond prices fall, and vice versa.…
Regulatory Basel III Framework on Liquidity Standards for reckoning Liquidity Coverage Ratio (LCR)
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,…
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