Director
The key activities for banks create risks such as credit, liquidity and funding maturity mismatch alongside market risks, both in terms of traded and non-traded. Banks accept these risks and need to have good knowledge, controls and governance to manage them. This video delves into these areas in more depth.
The key activities for banks create risks such as credit, liquidity and funding maturity mismatch alongside market risks, both in terms of traded and non-traded. Banks accept these risks and need to have good knowledge, controls and governance to manage them. This video delves into these areas in more depth.
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7 mins 1 sec
This video considers the main risks that banks run in the hope of making a profit, while, at all times, controlling and managing those risks. It is the decisions to take financial risk that sets banks (and building societies) apart from other types of company. In manufacturing terms, financial risk is the product that bank “manufacture”.
Key learning objectives:
Outline the principal risks to which banks are typically exposed
Define solvency risks
Define liquidity and funding risks
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Risk can be described as the effect of uncertainty on a bank’s objectives and can lead to both positive and negative outcomes. In much of finance, risk is seen as some form of volatility along the path to a known outcome.
Non-financial risks are a consequence of doing business, e.g. cyber security and customer data management, outsourcing and, increasingly, the emphasis on climate change risks. These risks typically arise not from what banks do, but how they do it.
This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.