A Study of Banking Risk Management

Banking Risk Management by Michael AK CCBI Chartered Banker MCBI GSFP

Chapter List

Current Banks and overview of banks ............................... Pg 2

Key banking failures and banking and financial crises ............ Pg 6

Operational security, auditing and regulations ................... Pg 7

Risk management overview and principles ............................ Pg 9

Credit risk management and ways in which banks manage this risk. ........................................................................... Pg 10

Managing risk and future banking, AI ..............................Pg 14

Risk culture, risk governance and incentive programmes .................................................................. ...........Pg 19

Current Banks and overview of banks

Current banks have an asymmetric information approach profit maximization and transaction cost financial structure.

Aggregate supply and demand analysis understanding financial market behavior However, challenger banks (NatWest, Hallifax and Barclays) are vulnerable to financial crisis, arising from market risk, financial risk, security risk, risks associated with lending propositions. Future banks will be less vulnerable to these risks and will adopt an approach that focuses on customer’s profits tied to the financial structure. Risks influenced by current trends include changes in buying habits and interest rates due to economy, COVID and cost of living crisis i.e. Wells Fargo incentive program employees sign up existing clients meaning program implementation failure leading to internal control failure. The above-mentioned trends will shape future banking forcing harsher regulations and restrictions.

Bank’s shareholders want stable earnings for banks and a high capital return. The bank’s board of directors establish risk management, oversee internal control framework procedures and determine principal risks nature and bank ability to achieve long-term strategic objectives.

Present regulations include Basel I ordinary paid-up share capital is Tier 1 capital classed. Basel I and subsequent tiers will give rise to other Basel regulations affecting future banking.

Financial products include: credit cards (capital one, MasterCard), derivatives (options financial product or right by contract to buy/sell a financial instrument for a specified amount despite the price being previously fixed at a future date assigned, stocks, futures).

Current retail banking (HSBC, Lloyds, Santander), mortgages (Scottish widows, Nationwide, Aldermore) equity