Risk Management in Banks SBI EDX

 With the introduction of the basel 3 accords after the 2007-2009 crisis some new concepts such as Leverage Ratio, Liquidity Coverage Ration or LCR, Net Stable Funding Ration NSFR, SIB or Systematically Important banks, and the capital buffers emerged.  BCBS Origin and Role Basel is a city in Switzerland. Where the representatives of G10 countries got together in 1974 to form BCBS- Basel Comittee on Banking Supervision. The trigger for setting up BCBS was the failure of Herstatt bank in Germany.  There were two main objectives for setting up BCBS:- 1. To enhance financial stability by improving the quality of banking supervision by central banks.  2. To monitor and ensure capital adequacy of the banks. To achieve these objectives BCBS releases accords which are known as Bassel accords. Today BCBS comprises of 45 members from 28 jurisdictions.  Basel Accords The primary risk that the banks face is the non-repayment or default on loan by a borrower and is called c...

 Risk Vs Uncertainty Risk is part of uncertainty which can be measured so basically risk is a subset of uncertainty. The biggest risk is not taking any risk. In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking any risks." -Mark Zuckerberg Facebook Risk-Reward Ratio But can we keep taking higher and higher risk to keep getting higher and higher returns.  Banks need to take risks to get returns. But they should be able to identify, measure, monitor and control the type and amount of risks they are taking. Please note we are talking about managing risk not avoiding it. Banks fix the maximum amount of risk they are willing to take by defining the risk apatite. This is one of the most critical jobs in risk management. Banks struggle in defining their risk apatite.  Relationship between risk and capital Capital is extremely important for resiliency and stability of banks. We need to conserve capital, banks need to be recapitali...

 Risk management in banks is of global importance - How risk is managed by banks - Understand components of risk management in banks - Equip learners with tools for identification, assesment and mitigation of risks Banks are continuously reorienting their approach to risk management in line with global best practices and standards issues by Basel Comittee on Banking supervision (BCBS).  WEEK SECTION TOPICS COVERED 0 Introduction   ·          About SBICRM ·          About the Course ·          Navigating in edX ·          Discussion  Forum ·          Course Curriculum  1 Module I: Risk & Capital ·          Welcome to Week &     Lesson Plan ·          What is Risk? ·...