Risks in Banking Business for JAIIB Exam

Table of content

Risks in Banking Business: The topic of risks in the banking business is one of the most important topics for the aspirants of JAIIB exam. The JAIIB exam is held twice a year. In this blog, we will be discussing the various types of risks in banking business.

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What’s there in Risks in Banking Business E-Book

Aim
Learning Objectives
Introduction
What is Risk?
Types of Risk
Credit Risk
Liquidity Risk
Interest Rate Risk
Market Risk
Country Risk
Solvency Risk
Operational Risk

Introduction

Banks are always faced with risk due to the nature of the business conducted by them. Banks or financial institutions not avoiding risk tend to become stagnant over time and are unable to cater to the credit requirements of the society while banks that take excessive risk most of the time end up being overburdened.

What is Risk?

Risk is defined as an unplanned event that has financial implications resulting in a loss for business or reduced earnings. It can also be defined as a condition in which the possibility of obtaining an undesirable outcome is high.

Types of Risk

The various types of risk in the banking business are as follows:

Credit Risk
Liquidity Risk
Interest Rate Risk
Market Risk
Country Risk
Solvency Risk
Operational Risk

Credit Risk

Credit risk is the most common of all the risks in the banking business and also the one causing the most losses in terms of revenue. For example, if a small number of important customers of a bank default in their payments, it could lead to a large loss for the bank as a whole.

Liquidity Risk

Liquidity risk refers to the risk that arises due to the funding of long-term assets with short term liabilities. There is a requirement of liquidity for banks for these reasons:

It acts as a cushion to replace net outflows of the funds (funding risk).
To compensate for non-receipt of funds that are expected to be received as inflow (time risk)

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Conclusion

This blog was all about Risks in Banking Business for JAIIB Exam. We hope that it will prove beneficial to the candidates for exam preparation. For more updates, stay connected with Oliveboard.

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