StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

The Issue of Credit Risk - Essay Example

Cite this document
Summary
The paper "The Issue of Credit Risk" is a brilliant example of an essay on finance and accounting. Credit risk is a risk that arises following a potential that a borrower will fail to honor their obligation to repay the loan as per the agreed time and terms. For banks, loans that they give to customers are the main source of credit risk. …
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER91.2% of users find it useful
The Issue of Credit Risk
Read Text Preview

Extract of sample "The Issue of Credit Risk"

The paper "The Issue of Credit Risk" is a brilliant example of an essay on finance and accounting. Credit risk is a risk that arises following a potential that a borrower will fail to honor their obligation to repay the loan as per the agreed time and terms. For banks, loans that they give to customers are the main source of credit risk. There is usually the risk that customers might default in paying the loans. Other sources might be off as well as on the balance sheet. Off-balance sheet causes may include commitments on loans, letters of unfunded credit and lines of credit.

A reduction in the required rate of return (RRR) may be used as a way of preventing credit risk. This has been indicated by Bloomberg news concerning the Peoples Bank of China (PBOC), showing their system-wide wide cut in RRR since May 2012, as a way of preventing credit risks, following a decreasing debt ratio of China as decreasing from 209 percent to 125 percent by end of 2008 (Bloomberg 2014). The news shows RRR as being flexible in that it can be reduced in one month and increased in the next month, lowering it in sections and holding it constant in other sections. PBOC is seen to have reduced RRR in the banks in rural areas and thus lowering the ratio for small renders and injecting liquidity into some other banks using other new financial tools like facility for medium-term lending and pledged supplementary lending (Bloomberg 2014). However, there is a danger of the easier credit flowing to areas that are economically less productive, which arises out of reducing RRR across the board. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(The Issue of Credit Risk Essay Example | Topics and Well Written Essays - 250 words, n.d.)
The Issue of Credit Risk Essay Example | Topics and Well Written Essays - 250 words. https://studentshare.org/finance-accounting/1885936-financial-institutions
(The Issue of Credit Risk Essay Example | Topics and Well Written Essays - 250 Words)
The Issue of Credit Risk Essay Example | Topics and Well Written Essays - 250 Words. https://studentshare.org/finance-accounting/1885936-financial-institutions.
“The Issue of Credit Risk Essay Example | Topics and Well Written Essays - 250 Words”. https://studentshare.org/finance-accounting/1885936-financial-institutions.
  • Cited: 0 times

CHECK THESE SAMPLES OF The Issue of Credit Risk

Risk Management in Indian Banking

The reason for nationalization was to give the government more control of credit delivery (Mokashi, 2008).... … risk Management in Banking: A Study on Indian BankingOverview of Banking in IndiaCurrently, India has 96 scheduled commercial banks (SCBs), with the government of India holding a stake, 38 foreign banks and 31 private banks (Jaminaran, 2008).... They risk Management in Banking: A Study on Indian BankingOverview of Banking in IndiaCurrently, India has 96 scheduled commercial banks (SCBs), with the government of India holding a stake, 38 foreign banks and 31 private banks (Jaminaran, 2008)....
22 Pages (5500 words) Assignment

The Role of Securitization during the On-Going Financial Crisis

The started in July 2007, with the credit crunch, with the credit squeeze, when a loss of confidence by the US investors in the worth of Sub-prime resulted in a liquidity crisis, which in turn led to federal bank bringing in an increased amount of capital into monetary markets....
14 Pages (3500 words) Essay

Market and Credit Risks Measurements

Part 2 discusses the credit risk and thoroughly examines its management in the current financial markets based upon the modern methods of credit risk exposure, risk factors, its pricing and incorporation in the instruments, and making the credit markets viable and feasible.... Market risk is the genre term of any sort of risk associated with the nature, quantum, working, and outcomes of a market, whereas the credit risk refers to that signified element of risk which is hidden in a derivative transaction (Chand Sooran 2007)....
14 Pages (3500 words) Report

Political and Economic Risks of Nuclear Power Generation

This paper focuses on economic and political risk associated with implementation of a nuclear energy plant in Khakariastan.... Without government backing, a private investor would have to do with a high risk/ low reward project which may not be economically viable (Beck, 1994)....
7 Pages (1750 words) Assignment

Role of Financial Engineering in Organisations, Link between Operational, Credit, and Systemic Risks

risk management systems are established to deal with cases of GFC in brand organizations.... risk management systems are established to deal with cases of GFC in brand organizations.... The cycle of events that triggered the global financial crisis was propelled by poor risk management models.... The ISO31000:2009 risk management model was established to standardize the approach to risks allowing companies to attain resilience....
12 Pages (3000 words) Essay

Why a Crisis Started in the United States in 2007 Spread So Rapidly to the Rest of the World

The past financial panics and crisis, most notable, the Asian Banking Crisis of 1997, Russian Crisis of 1998 and the most recent Global Credit Crunch of 2007 give good lessons to banks and other lending agencies to be more proactive with The Issue of Credit Risk management and need to have a global system of regulation.... Causes of the global financial crisis in 2007 The financial crisis, especially the credit risk in the banking sector is not a new phenomenon....
7 Pages (1750 words) Coursework

Causes of the Global Financial Crisis of 2008

The past financial panics and disasters, most notable, the Wall Street Crash in 1929, OPEC oil crisis of 1973, Black Monday in 1987, Asian Banking Crisis of 1997, Russian Crisis of 1998, Dot-com Bubble crisis of 2000 and the most recent Global Credit Crunch of 2008 (Ghon, 2008) which give lessons to banks and other lending agencies to be more proactive with The Issue of Credit Risk management.... the issue of losses in the housing sector in the U.... The financial crisis, especially the credit risk in the banking sector is not a new phenomenon....
7 Pages (1750 words) Case Study

The Culture of Easy Credit Australia

For instance, the risk management team is trained in the best way to assessing the clients to establish the risk involved in the process of issuing credits to the clients.... The company personnel can include risk analysts, mathematicians, and statisticians.... risk management in the company is critical as it assists in avoiding defaults associated with the customers who fail to pay their credit facilities.... Considering the challenges related to the nature of the services the company offers to the customers, risk management expertise is important in ensuring the success of the company....
12 Pages (3000 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us