There are many different bank risk classifications.
Differing from their underlying criteria, these classifications give rise to the fact that they all clearly consider credit and interest rate risks to be major for banks.
Classification of bank risks:
Sphere of action of risks
External risks (international, country, republican, regional):
- credit risks
- percentage risks
- currency risks
- market risks
- risks of financial services
- other risks
- insurance risks
- risks of natural disasters
- legal (legislative) risks
- competitive risks
- political risks
- social risks
- economic risks
- financial risks
- risks of the translation
- organizational risks
- branch risks
- other risks
Solvency of the client
List of clients of bank
|Scales of risks
Private (from individual transactions)
|Degree (risk level)
|Risk allocation over time
- last (retrospective)
|Nature of accounting of transactions
|Possibility of regulation
Internal banking risks arise from the activities of the banks themselves and depend on the transactions carried out.
Accordingly, bank risks are divided by:
- related to assets (credit, currency, market, settlement, leasing, factoring, cash, correspondent account risk, financing and investment, etc.)
- related to the bank 's liabilities (risks on deposit and other deposit transactions, on attracted interbank loans)
- the managements of bank of the assets and liabilities (percentage risk, risk of unbalanced liquidity, insolvency, risks of structure of the capital, leverage, insufficiency of the capital of bank) connected with quality
- Risk-related financial services (operational, technological, innovation, strategic, accounting, administrative, abuse, security).
External risks in combination are usually also characterized by a spatial aspect, meaning that different (regions) republics), different countries or groups of countries at each given moment have a special combination and a specific measure of the severity of external risks, which make the region or country particularly attractive or unattractive in terms of banking activities.
The term "country (regional) risk" refers only to this aspect, but does not content a separate type of risk on an equal footing with financial, economic, political and other external risks.
Risks of client composition are related to marketing of banking services and contacts with the public.
The variety of requirements of a small, medium and large customer inevitably determines the degree of risk itself.
So, the small borrower depends more on the accidents of the market economy.
At the same time, significant loans issued to one large customer or group of related customers often cause bank bankruptcy.
The degree of bank risk, as can be seen from the classification, is defined by three concepts: full, moderate and low risks.
Total risk implies losses equal to bank investments in the transaction.
Thus, a doubtful or lost loan has a full, i.e. 100%, risk.
The profit bank does not receive, is in an unacceptable or critical risk zone.
Moderate risk (up to 30%) occurs if a small part of the principal or interest on the loan is not returned, if only a part of the amount on the bank 's financial and other transactions is lost.
The risk is within the acceptable range.
The Bank makes a profit to cover its losses and have revenues.
Low risk is a minor risk that allows the bank not only to cover losses, but also to obtain high revenues.
Finally, the risks are open and closed. Open risks cannot or are weakly preventable and minimised, but closed risks, on the contrary, give good opportunities for this.
Risks can also be divided by type. The type of bank depends on the set of risks characteristic of it.
This should be understood in the sense that although all banks have balance sheet and off-balance sheet risks, financial services risks and external risks, their combination, main zones, sizes and priorities will be developed differently depending on the priority specialization of banks, and therefore, to characterize each type of banking activity differently.
Thus, for banks widely engaged in accumulation of free funds and their placement among other credit institutions, risks on deposit and deposit transactions and on possible non-return of interbank loans will be determined.
The degree of bank risk takes into account total, moderate and low risk depending on the location on the risk scale.
The degree of bank risk is characterized by the probability of an event leading to the loss of funds by the bank under this transaction.
It is expressed in percentages or defined coefficients.
A feature of finding the degree of bank risk is its individual value associated with taking on a particular risk for a particular bank transaction.
In many ways, it is determined by the subjective position of each bank.
The classification given and the elements underlying the economic classification are intended not so much to list all types of bank risks, but rather to demonstrate the existence of a certain system that allows banks not to miss certain varieties in determining the aggregate size of risks in the commercial and production sphere.