Summary Risk Management in Banking

Summary RMB
Risk Management in Banking




2023/2024




Chapter 1....................................................................................................................................................... 3

Chapter 2....................................................................................................................................................... 6

,Chapter 3....................................................................................................................................................... 8

Chapter 4..................................................................................................................................................... 11

Chapter 5..................................................................................................................................................... 18

Chapter 6..................................................................................................................................................... 21

Chapter 7..................................................................................................................................................... 26

Chapter 8..................................................................................................................................................... 29

, Chapter 1

Banks offer three core banking services
 Deposit collection
 Payment arrangement
 Loan underwriting

Financial services offered by banks
 Cash management  handle cash collection and payments for a
company and invest any temporary cash surplus
 Asset management  brokerage services (buying and selling
securities) and investment banking (advising as well as offering
financing options)
 Risk management

Banks play central role in facilitating economic activity through:
 Financial intermediation  channel savings from depositors to
borrowers
 Asset transformation  create loans from deposits
 Money creation  through financial intermediation and asset
transformation

Deposit collection
 Accepting cash or money (deposits) from individuals and businesses
for safekeeping in a bank account
 Example: savings account

Payment services
 Accepting and making payments on behalf of the customers using
their bank accounts
 Example: debit cards, electronic banking

Loan underwriting
 Evaluating and deciding whether a customer (borrower) is eligible to
receive credit and then extending a loan or credit to the customer
 Example: consumer loans, mortgage loans

Main source of revenue and profit to a bank
 Interest that the bank receives from the borrowers – interest it pays
to borrowers  interest rate margin